Why Has Regional Income Convergence in the U.S. Declined? Peter - - PowerPoint PPT Presentation

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Why Has Regional Income Convergence in the U.S. Declined? Peter - - PowerPoint PPT Presentation

Oct 30, 2023 185 likes •485 views

Why Has Regional Income Convergence in the U.S. Declined? Peter Ganong (UChicago) and Daniel Shoag (Harvard) July 2016 Change in Log Income Per Capita 1940-1960, Coef: -.488 SE: .019 2 MS AL AR ND SD OK KY KS NC GA NM NE TN SC

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SLIDE 1

Why Has Regional Income Convergence in the U.S. Declined?

Peter Ganong (UChicago) and Daniel Shoag (Harvard) July 2016

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SLIDE 2

AL AZ AR CA CO CT DE FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

1 1.5 2 5 6 7 Log Income Per Capita, 1940

1940-1960, Coef: -.488 SE: .019

Change in Log Income Per Capita

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SLIDE 3

AL AZ AR CA CO CT DE FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

1 1.5 2 5 6 7 Log Income Per Capita, 1940

1940-1960, Coef: -.488 SE: .019

AL AZ AR CA CO CT DE FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

.4 .9 1.4 9.4 10.2 Log Income Per Capita, 1990

1990-2010, Coef: -.198 SE: .057

Change in Log Income Per Capita

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SLIDE 4
  • .6
  • .4
  • .2

1950 1980 2010 Coef: dInc = b*inc_t-20

Timeseries of Coefficients - Convergence

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SLIDE 5

AL AZ AR CA CO CT DE FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

.5 1 5 6 7 Log Income, 1940

1940-1960, Coef: .33 SE: .07

Change in Log Population

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SLIDE 6

AL AZ AR CA CO CT DE FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

.5 1 5 6 7 Log Income, 1940

1940-1960, Coef: .33 SE: .07

AL AZ AR CA CO CT DE FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

.5 1 Change in Log Population, 1990-2010 9.4 10.2 Log Income, 1990

1990-2010, Coef: -.09 SE: .12

Change in Log Population

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SLIDE 7
  • .6
  • .4
  • .2

.2 .4 1950 1980 2010 Coef: dInc = b*inc_t-20 Coef: dPop = b*inc_t-20

Timeseries of Coefficients - Convergence and Pop

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SLIDE 8
  • .6
  • .4
  • .2

.2 .4 1950 1980 2010 Coef: dInc = b*inc_t-20 Coef: dPop = b*inc_t-20

Timeseries of Coefficients - Convergence and Pop

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SLIDE 9
  • .6
  • .4
  • .2

.2 .4 1950 1980 2010 Coef: dInc = b*inc_t-20 Coef: dPop = b*inc_t-20

Timeseries of Coefficients - Convergence and Pop

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SLIDE 10

Outline

1 Facts About Housing Prices 2 How Does Housing Supply Affect Convergence? New Measure of

Supply Restrictions

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SLIDE 11

Outline

1 Facts About Housing Prices ◮ Differences in Housing Prices Have Grown Relative to Differences in

Incomes

◮ Housing Prices Have Lowered the Returns to Living in Productive

Places For Unskilled Workers

◮ Migration Flows Respond to Skill-Specific Gains Net of Housing Prices 2 How Does Housing Supply Affect Convergence? New Measure of

Supply Restrictions

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SLIDE 12

Differences in Housing Prices

AL AR AZ CA CO CT DE FL GA IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY

10.5 11 11.5 12

Log Housing Value, 1960

9.2 9.4 9.6 9.8 10

Log Income Per Cap, 1960 1960, Coef: .95 SE: .08

AL AR AZ CA CO CT DE FL GA IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY

11.5 12 12.5 13

Log Housing Value, 2010

10.3 10.5 10.7 10.9 11.1

Log Income Per Cap, 2010 2010, Coef: 2.04 SE: .25

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SLIDE 13

Changes in Returns to Migration

.5 1 1.5 Coef 1940 1960 1970 1980 1990 2000 2010 Unskilled HH Skilled HH

Effect of $1 of Statewide Inc on Skill-Specific Inc Net of Housing

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Migration Flows – 2000

  • 4

4 8 Net Migration as % Pop 10.8 11 11.2 11.4 11.6 11.8 Log Nominal Income Low Skill Coef: -2.17 SE: 1.00

  • 4

4 8 Net Migration as % Pop 10.8 11 11.2 11.4 11.6 11.8 Log Nominal Income High Skill Coef: 4.07 SE: .69

  • 4

4 8 Net Migration as % Pop 10.4 10.6 10.8 11 11.2 Log (Inc-Housing Cost) for Low Skill Low Skill Coef: 4.30 SE: 2.00

  • 4

4 8 Net Migration as % Pop 11 11.2 11.4 11.6 11.8 Log (Inc-Housing Cost) for High Skill High Skill Coef: 4.71 SE: .89

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SLIDE 15

Outline

1 Facts About Housing Prices 2 How Does Housing Supply Affect Convergence? New Measure of

Supply Restrictions

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SLIDE 16

A New Regulation Measure

Construction

◮ Number of hits per capita from state appeals courts for “land use” ◮ Omnibus measure. Captures many different anti-development tactics.

Properties

◮ correlated with cross-sectional measures ⋆ American Institute of Planners, 1975 ⋆ Wharton Residential Land Use Regulatory Index, 2005 ◮ correlated with prices, conditional on state and year fixed effects

Look at patterns separately for low elasticity and high elasticity states

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SLIDE 17

1 2 3 Cases Per Million People 1940 1950 1960 1970 1980 1990 2000 2010

Land Use Cases Per Million People

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How Regulations Affect Convergence

The previous graphs split states at the median within each year. We can instead exploit the regulation measure to fix a cutoff level of regulation. Regs,t =Percentile{LandUseCasesst Popst } Ys,t = αt +αtRegs,t +βIncs,t +βhigh regInci,t−1 ×Regs,t +εs,t Dependent variables: log housing prices, population, human capital (growth accounting measure from a Mincerian regression), and income.

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SLIDE 19

How Regulations Affect Convergence

Dep Var lnphouse d lnpop d lnHumanCapital d lnInc Log Income 0.77*** (0.11) Log Income 0.83*** *Reg (0.26) N 384 Indicators for Year and Year*Reg in all specifications.

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SLIDE 20

How Regulations Affect Convergence

Dep Var lnphouse d lnpop d lnHumanCapital d lnInc Log Income 0.77*** 1.69** (0.11) (0.64) Log Income 0.83***

  • 1.88***

*Reg (0.26) (0.61) N 384 2,448 Indicators for Year and Year*Reg in all specifications.

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SLIDE 21

How Regulations Affect Convergence

Dep Var lnphouse d lnpop d lnHumanCapital d lnInc Log Income 0.77*** 1.69**

  • 0.043***

(0.11) (0.64) (0.007) Log Income 0.83***

  • 1.88***

0.040** *Reg (0.26) (0.61) (0.016) N 384 2,448 288 Indicators for Year and Year*Reg in all specifications.

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SLIDE 22

How Regulations Affect Convergence

Dep Var lnphouse d lnpop d lnHumanCapital d lnInc Log Income 0.77*** 1.69**

  • 0.043***
  • 2.03***

(0.11) (0.64) (0.007) (0.10) Log Income 0.83***

  • 1.88***

0.040** 1.30*** *Reg (0.26) (0.61) (0.016) (0.39) N 384 2,448 288 2,448 Indicators for Year and Year*Reg in all specifications.

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SLIDE 23

Regime One

Dep Var lnphouse d lnpop d lnHumanCapital d lnInc Log Income 0.77*** 1.69**

  • 0.043***
  • 2.03***

(0.11) (0.64) (0.007) (0.10) Log Income 0.83***

  • 1.88***

0.040** 1.30*** *Reg (0.26) (0.61) (0.016) (0.39) N 384 2,448 288 2,448 Indicators for Year and Year*Reg in all specifications.

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SLIDE 24

Regime Two

Dep Var lnphouse d lnpop d lnHumanCapital d lnInc Log Income 0.77*** 1.69**

  • 0.043***
  • 2.03***

(0.11) (0.64) (0.007) (0.10) Log Income 0.83***

  • 1.88***

0.040** 1.30*** *Reg (0.26) (0.61) (0.016) (0.39) N 384 2,448 288 2,448 Indicators for Year and Year*Reg in all specifications.

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SLIDE 25

Omitted Variable Bias

More generally, could there be a post-1980 shock that raised regulation levels and lowered convergence? Use pre-1980 measures of housing supply elasticity

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SLIDE 26

Omitted Variable Bias

Dep Var: Log Income Per Cap t - Log Income Per Cap t-20 Constraint: Regs in 2005 Regs in 1965 Buildable Land Pre Post Pre Post Pre Post Log Income

  • 1.93***
  • 1.80***
  • 2.05***
  • 1.97***
  • 2.49***
  • 1.20***

(0.11) (0.33) (0.15) (0.47) (0.06) (0.08) Log Income 0.22 2.01*** 0.20 1.91***

  • 0.09

0.71*** *Constraint (0.27) (0.66) (0.27) (0.69) (0.10) (0.17) N 1,248 1,200 1,248 1,200 8,413 9,194 Geo State State State State County County Indicators for Year and Year*Constraint in all specifications.

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SLIDE 27

Conclusion

Weakening of directed migration and convergence in last 30 years Directed migration drove convergence:

◮ Regional labor markets clear through skill-sorting rather than net

  • migration. Can be explained by supply shifts.

◮ Continued convergence in places with unconstrained supply

State-level panel measure for housing regulations.

◮ We are happy to share this with other researchers.

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SLIDE 28

Model Overview

Model with multiple skill types, endogenous migration, and potentially restricted housing supply. Proposition 1: Directed migration drives convergence Proposition 2: Housing prices affect migration differently by skill level

Substantive Expositional Regional labor demand is

Y = AL1−α

downward sloping Land is an Inferior Good within a City

U = cβ (h −H)1−β

Migration is Costly

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SLIDE 29

Simulation

Income Convergence Rate Mig Rate from South to North (Skilled & Unskilled) Reg ↑ Begins (Unanticipated) Reg ↑ Complete Mig Rate (Skilled) Mig Rate (Unskilled) Rate of Convergence / Migration t0 t1 t2 Time