Sunday, June 06, 2010

Modeling Talent Migration

While every place complains about it, few regions suffer from brain drain. People leave all the time, but that doesn't mean that your hometown is dumber as a result. As for population decline, it could make your city smarter. From the perspective of economic development, what's the definition of brain drain? Ball State University economics professor Michael Hicks offers a model:

In counties that randomly got high skilled industries like manufacturing or finance there will not be enough workers. Those industries would like to go to places where there are enough skilled workers, but everywhere is exactly the same. So, the high skilled workers in other counties, who are dissatisfied with low skilled jobs at home, leave for high skilled industries elsewhere. Thus cities are born. Places with the bad luck to have low skill industries end up with lower level of human capital, the first indication of brain drain.

Imagine another scenario. Instead of randomly plopping industries into each county, we'll give each place an identical mix of industries with enough jobs for each worker. Then, we will randomly shock each county with different levels of unemployment at different times. Small and temporary differences in unemployment have no effect, but when one place has high or persistent unemployment people move elsewhere to find jobs. But here's the trick. We know from a long history, that the people who move for economic reasons have, on average, higher levels of human capital than those who stay. (Don't believe me? Look at Ireland in the 20th century).

In both cases, migration causes brain drain and exacerbates the human capital differences between regions. The effects are long lasting due to intergenerational persistence of human capital. So, what to do?

The first case is the pull of the city. The second case is the push of a broken regional economy. Both explain the bulk of talent migration. I'm interested in the relocations that are the exceptions, such as the sustained white flight from California (hat tip Aaron Renn). During the 1990s, California was a decreasingly attractive destination. During the 2000s, California pushed out human capital in droves and other cities in the West benefited. This is the trend of geographic arbitrage that I see transforming America's talent landscape.

The primary push-pull factors of migration should make obvious the misapplication of Richard Florida's Creative Class model. The economic geography described is the pull of the city. It doesn't speak to the push of economic collapse. However, I think it aptly applies to the residual migration of geographic arbitrage opportunities. That's a story for another post.

It wasn’t the full back-and-forth dialogue I wanted. If it had been, I would have cited some data about how rare it is for formerly rural kids to return and inspire real economic development. For example, in their book Hollowing Out the Middle, Patrick Carr and Maria Kefalas examine the uneven outcomes of various efforts to lure the “creative class” back to rural states. And I would have added that something else is wanted along with the education we must provide.

I’m no policy wonk, but I do know that there is some empirical evidence that place-based approaches, which pair local curriculums with community development efforts, might help. Or that regional partnerships and school district cooperatives can be used to achieve economies of scale that allow rural communities and schools to develop and fund local solutions to the twinned issues of economic decline and outmigration.

But the lack of any policy suggestion was disheartening, especially from a local boy, someone who should know what the rural “brain drain” is doing to his home state. My purpose here is certainly not to bash Governor Wise. I do, however, want to point up what our exchange suggests—that we rural education activists probably need to do more education and to be more active.

The lack of a policy suggestion doesn't surprise me. The former governor of West Virginia, Bob Wise, first has to help state residents understand the problem. Place-based approaches can make your community more attractive (amenities migration). However, the policy won't make cities less attractive to graduates. And if the regional economy is pushing out people, then your cool rural town initiative won't keep talent from leaving.

In "Hollowing Out the Middle", Carr and Kefalas do not focus on outmigration. Instead, they suggest investing in those who stick around town. Governor Wise supports this approach but also realizes that doing so will fuel more outmigration. That leaves strategies to increase inmigration, which doesn't look all that promising. So, rural communities return to the tried and true failures of talent retention and recycle false hope.

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