Sprawl and Economic Mobility: A Comment

Last week the Equality of Opportunity Project released a report about inequality in the United States. Many people have picked up on this report from the NY Times front page story about the findings. This is an important and interesting piece of research that focuses on how tax expenditures affect intergenerational economic mobility. What this research does not do is relate the findings to urban sprawl, though some other people have. See here, here, here and here. 

In the EOP report, the authors use Commuting Zones, which are similar but not identical to Metropolitan Statistical Areas, to evaluate intergenerational mobility. They found that tax expenditures play some role, and that:

Although tax policies may account for some of the variation in outcomes across areas, much variation remained to be explained. To understand what is driving this variation and better isolate the effects of the tax expenditures themselves, we considered other sets of factors that have been proposed in prior work. Here, we found significant correlations between intergenerational mobility and income inequality, economic and racial residential segregation, measures of K-12 school quality (such as test scores and high school dropout rates), social capital indices, and measures of family structure (such as the Summary of Project Findings, July 2013 fraction of single parents in an area). In particular, areas with a smaller middle class had lower rates of upward mobility.

The results show that Atlanta has poor economic mobility. You can see the city rankings here, and keep in mind these are county level data reported at the Commuting Zone aggregation. This is why you have New York and Newark reported differently as they are two Commuting Zones but the same Metropolitan Statistical Area.

The Atlanta case has been used to argue against sprawl (see links above). Yet the best performing cities (CZs) in the study are sprawling, too. Sorting the 100 largest cities we see that Bakersfield, California performs best, followed by Santa Barbara and Salt Lake City. Bakersfield is a poster child for sprawl. New York, paragon of density, performs above average in the EOP research but the city remains very segregated. Richard Green's quick analysis suggests that density is positively related with EOP metrics, but city size is negatively correlated. This presents a conundrum for causality but perhaps suggests something else is at play. For instance, density may not cause economic mobility but rather places with economic mobility and vibrancy also represent better employment pools and more productive workers. This might lead to higher land prices (firms find it more desirable to be there) and more intensive use of space. There are many reasons to suspect that density is an effect, not a cause.

But let's get back to the example in the NY Times, which seems to have gotten everyone thinking about Atlanta in the first place. Here is the first paragraph:

ATLANTA – Stacey Calvin spends almost as much time commuting to her job — on a bus, two trains and another bus — as she does working part-time at a day care center. She knows exactly where to board the train and which stairwells to use at the stations so that she has the best chance of getting to work on time in the morning and making it home to greet her three children after school.

This opening misleads the reader as to what the report says as the report does not look at any transportation or land use variables. But does this unfortunate situation for Ms. Calvin represent a problem with sprawl? I don't see it. She lives in an area with lots of transport choices, including buses and trains. She even considered moving but decided against it. It strikes me that the real problem is that she--for whatever reason--is working a common, part-time job so far away. Why? I have a hard time believing that there is not an equivalent or better part-time job available closer than two bus rides and two train rides away. Of course, a job is more than a paycheck for many people, but that's a different set of issues than sprawl.

We know that social contacts are critical for job searches, and this was measured in the EOP report. Concentrated poverty and social isolation creates a vicious spiral of greater isolation because social networks contract. This is not necessarily a transportation and land use problem. Better cities will benefit everybody, but at least from the EOP report we can't claim any type of causal relationship between sprawl and economic mobility. You can construct a plausible scenario where a sprawled metro where each worker has a car offers the greatest economic mobility because households are not limited to employment only where transit goes.

Overall, the results from the EOP study are provocative, and the relationship between metropolitan spatial structure and economic performance needs much more research. These types of questions require time-series analysis, however, as snapshot correlations really don't mean anything and will provide evidence for whatever point of view is desired. What I suspect is likely the case is that the value or cost of sprawl on economic mobility depends greatly on when the data are measured. What holds true now may not be at all the same as what was true forty years ago. I also suspect there are multiple equilibria for optimal city size and form.

Hipsturbia: The Colocation of Consumption and Housing

The New York Times offered up a new trend piece about "Creating Hipsturbia." The thrust of the piece is that traditionally unhip suburbs such as Hastings-on-Hudson, New York are attracting young families away from traditionally hip places in Brooklyn. As this is a trend piece in the New York Times the entirety of evidence is quite likely a few of the author's friends who have made such a move. But the trend (as it is) described does offer some interesting bits about urban economics and the spatial distributions of activities.

As a bit of background, for all of the interest and cheerleading that cities are revitalizing because people want to live downtown, what is actually happening to metropolitan economies is more complex. Here is one example from this morning's Detroit Free Press about downtown Detroit's revitalization. The DFP story highlights that downtowns across the US are growing (or not) and generating lots of economic activity. Yet there are two distinct forces affecting city regions, which is why downtown areas can be doing seemingly okay while our regions continue to sprawl and any benefits from growth are inequitably distributed. What is happening is that within metropolitan economies forces of production continue to disperse while forces of consumption are concentrating in the center of regions. Production is decentralizing away from urban centers to elsewhere in the region or world to places where firms can minimize land and transportation costs while maintaining access to an adequate labor pool. This is happening with firms, as well, which is known as firm fragmentation. As an example, Amazon.com has been praised as a market leader for moving its headquarters to downtown Seattle, but most of Amazon.com's employment and real estate growth is actually through fulfillment centers and warehouses located on the urban fringe (like this in Texas, more here on distribution centers generally).

Consumption, on the other hand, is concentrating. People of means want certain types of retail, recreation, dining and other discretionary activity bundles. Households value such activity bundles as part of their location decisions along with commuting costs, housing size, schools and other things. What the "Hipsturbia" article highlights, however, is that many of the people who value a "hip" consumption bundle are the same people who produce the hip places. From the story:

“I don’t think we need to be in Brooklyn,” said Marie Labropoulos, who recently moved to Westchester County and opened a shop, Kalliste, selling artisanal vegan soap in Dobbs Ferry. “We’re bringing Brooklyn with us.”

I have no idea how big the market is for artisanal vegan soap, even in Brooklyn. But by bringing Brooklyn with them these migrants are creating new consumption bundles. There are two important aspects of this. First, there are positive externalities associated with opening a artisanal vegan soap store beyond clean people. The store creates a hip vibe that makes other hipsters more willing to move to these places. Perhaps someone will be more willing to open a store that sells only things made of tofu nearby. A virtuous cycle of hipness is created. Second, consumption preferences are valued as part of an overall household budget. A bigger house and better public schools are a trade off for less access to your optimal consumption bundle, but if you bring your store with you commuting costs may not change.

None of these are new observations, and again, no one is claiming that a New York Times trend piece is any evidence of an actual trend. What these anecdotes represent are a confirmation of fairly conventional understandings of household location decisions but with the key differences that consumption preferences and colocation of households and consumption amenities are under considered by planners, economists and researchers. Consumption activities are also quite local in scale (such as retail and dining, though things like museums require a larger market), so individual neighborhoods can become quite desirable while nearby areas remain unloved. More interesting is the potential colocation of households and consumption as many households are also providers of the consumption activities. If what you value is vegan soap or gluten-free muffins or craft beer and it happens that you are in the business of providing those things, then you can pretty much locate anywhere there is a market, including commuter towns on the outskirts of the city. When producers and consumers are one in the same we don't really know (yet) if the decentralization of production or the centralization of consumption will be dominant for location decisions. It may be that the suburbanization of consumption will follow the suburbanization of production.

Why is American Mobility Declining?

Timothy Taylor discusses new data from the US Census that describes the decline in mobility across regions in the United States. It is evident that Americans are less likely to move to new metropolitan areas than at any point since WWII. There are strong economic implications associated with this as households staying put may lose out on employment, wage and productivity opportunities that can only be realized by moving. Here are Taylor's thoughts on why people are moving less (he is citing a paper by Molloy, Smith and Wozniak): 

Molloy, Smith, and Wozniak consider possible long-term explanations for a declining rate of mobility, like the possibility that an aging population less likely to move. As they put it: "However, these differences across groups are not useful in explaining why migration has fallen in recent decades. The decrease in migration does not seem to be driven by demographic or socioeconomic trends, because migration rates have fallen for nearly every subpopulation ..."

They freely admit that there is not yet an answer in the economic research as to why geographic mobility has been declining, but they offer some hypotheses.
For example, one argument is that migration was high in the post WWII years as part of a significant population shift to the South, a shift which has been diminishing every since. But this factor doesn't seem to be significant enough, given the observed data on interregional migration.
Another hypothesis is that there are more two-earner families, and so when one person loses a job the household may be more reluctant to relocate. But this argument faces the problem that "the percentage of households with two earners has been quite stable over the last 30 years."
Yet another possibility "is that technological advances have allowed for an expansion of telecommuting and flexible work schedules, reducing the need for workers to move for a job." However, the data on telecommuting doesn't show that it is a large enough factor to explain the decline in mobility.

And yet another possibility "is that locations have become less specialized in the types of goods and services produced, making the types of available jobs more similar across space. ... A related idea is that the distribution of amenities has become more homogeneous across locations, making residence in any particular city less attractive." This explanation may have some truth in it, but it's proven difficult to gather data that would allow it to be tested in any definitive way.
Finally, it may just be that many Americans are shifting their preferences away from being willing to move. Molloy, Smith and Wozniak present evidence that "the secular decline in geographic mobility appears to be specific to the U.S. experience, since internal mobility has neither fallen in most other European economies nor in Canada—with the United Kingdom as a notable exception."
Whatever the reason behind the decline in geographic mobility, there are implications for the economy if the workforce becomes less flexible and less willing to move from areas where the economy is weaker to where it is stronger. In addition, lower mobility has broad implications for what its like to live in America. People find it harder to envision their lives as involving a big move. Social networks are reshaped. When mobility drops, we become a country where you are less likely to end up living and working with people from other states, other counties, or even other parts of your own county.

I largely agree with these thoughts, and certainly agree that declining national mobility is problematic and is likely a causal factor in the current sluggish economy. The metropolitan regions that will thrive in the future are the ones that will attract immigrants, whether those immigrants are from around the country or around the world.

Declining mobility has been recognized in scholarship as a problem, and there are creative policy interventions proposed. One that I like is from Jens Ludwig and Steven Raphael at the Brookings Institute's Hamilton Project. They argue for a mobility bank to help pay for residential moves. Here is a link to their paper, and here is their abstract:

This paper proposes the creation of a “mobility bank” at a government cost of less than $1 billion per year to help finance the residential moves of U.S. workers relocating either to take offered jobs or to search for work, and to help them learn more about the employment options available in other parts of the country. Whereas those with college degrees and savings are much more likely to move in response to job loss and to improve their job market outcomes, those with less skills and no savings may have difficulty financing such transitions. The government should target mobility bank loans toward displaced, unemployed, and underemployed people in depressed areas of the country and should help to insure people against job-outcome uncertainty by making repayment terms contingent on the borrower’s post-move employment and income. This proposal extends government support for work-related moves that already are included in the U.S. tax code but that primarily benefit higher-income households. Calculations suggest that the benefits compare favorably with the costs from alternative federal efforts. Perhaps more importantly, our proposal helps address a persistent market failure that limits the ability of low-income families to borrow against future earnings to “invest” in job-promoting residential moves.

If it proves true that residential mobility is crucial to economic performance, then we need to consider policies that encourage mobility. What is described nationally by the Census and potentially solved by a mobility bank is an extension of the jobs-housing matching problems that planners deal with all the time.

Mapping the Growth of Manhattan

My colleague Vishaan Chakrabarti proposes to fill in New York Harbor in order to connect Manhattan to Governor's Island. Here is a NY Times story about his idea. While I don't really think this should be a priority for the city, it does have precedent and is interesting to think about. The above image shows the growth of the southern tip of Manhattan, and you can see that a substantial portion of the area is built on landfill. Considering the value of land in this area building more of it makes sense. Or made sense then, anyway. Now that employment in the area is shrinking and residential population is growing I don't think the economics of creating new land can justify new landfill. Consider that firms outbid households for real estate because they will either benefit from increased productivity, access to markets or can pass their costs on to consumers. Households seek to maximize their amenity value and reduce transport costs. In the case of lower Manhattan, financial firms--the richest firms in the world--are not outbidding households for these lands. So the commercial value is declining to the point that residential uses are more profitable. That doesn't suggest we need more land.

In any event, here is a link to a map of the Bridge's Survey of Manhattan from 1807. The grid is laid out (I believe this is the Commission that created the grid introduced in 1811 but am not positive) and the original features of the island are noticeable. You can also pan and zoom on the map, which is pretty cool.