Friday, April 29, 2011

Root Causes Of Outmigration

Attacking a policy is easy. Just say it will result in an exodus. Then cherry pick the data and hold a press conference. Be sure to appeal to popular opinion on the matter. Remember, everyone is fretting about brain drain. Your policy will stop people from leaving. Mission accomplished.

I read or hear about the above scenario playing out at least once a week, all over the country. The models of migration are laughably bad. They always get the job done. Planet Money (NPR) recently did a story debunking the myth of higher taxes forcing out the rich:

But just because there are people moving out of New York and California and New Jersey, you can't automatically blame taxes. A lot of those low-tax states have sunny weather, cheap land and relatively healthier economies. It's a complex equation.

What researchers needed was a natural experiment to tease out the influence of taxes. And they found just such an experiment, in Chris Christie's home state of New Jersey.

In 1994, New Jersey increased taxes on income over $500,000 by 2.6 percent. And what happened?

"The vast, vast majority just don't respond to the tax. They stay put," says sociologist Charles Varner of Princeton University.

I emphasized the part of the passage about devising a natural experiment. Whenever a politician invokes the red herring of outmigration, that's what I do. Every state has outmigration, even low-tax ones. Where do those people go when they leave? Every state has inmigration, even high-tax ones. From whence did they move?

Tax rates can explain some of the relocation. In some cases, I'm sure it makes a difference. But the residual (the error of the model) is huge. The migration of thousands (sometimes tens-of-thousands) is left to the imagination.

Geographers, by training, are sensitive to the information left out of any picture (i.e. map). When politicians tell migration tales, they omit (sometimes strategically) the bulk of what is happening. What sort of data is buried beneath the "map" the speaker made?

Talent gurus such as Richard Florida are guilty of the same kind of omissions. What they see is real enough. But the view is too narrow for purposes of policy discussion. Instead, you appeal to common sense. Brain drain is a problem. Locals are intolerant of newcomers. Taxes are too high. And we go round and round hunting snipe.

I've blogged about natural experiments. If you are a policy analyst, journalist, politician, or concerned citizen; give it a read. Devise your own the next time someone gets on a soapbox about outmigration.

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