In the news.

Why is America’s center of gravity shifting South and West?

Ever since Florida surpassed New York as the third most populous state in the nation, journalists started to document the ways in which the South region of the United States began attracting young sun-lovers enthusiasts. Two factors have been identified as drivers of an apparent migration from the north towards the south. On one hand, real estate prices have been arguably one of the major causes for people heading south. On the other, employment growth and better job opportunities allegedly support decisions on moving out regionally. This article checks empirical data on those two factors to determine the effect on population growth of major cities in the United States. The conclusion, in spite of the statistical model limits, indicates that employment dynamic seems to drive a slightly higher level of influence in population growth when compared to housing costs.

Is it because of real estate prices?

The first factor some prominent people have identified is real estate prices. Professor Paul Krugman highlighted in his NYTimes commentary of August 24th, 2014 that the most probable reason for people heading south is housing costs, even over employment opportunities. From his perspective, employment has little effect on such a change given that wages and salaries are substantially lower in southern states when compared to the north. Whereas, housing costs are significantly lower in southern regions of the country. Professor Krugman asserts that “America’s center of gravity is shifting South and West.” He furthers his argument “by suggesting that the places Americans are leaving actually have higher productivity and more job opportunities than the places they’re going”.

By Catherine De Las Salas

By Catherine De Las Salas

Is it because of employment opportunities?

Otherwise, Patricia Cohen –also from the NYtimes- stresses the relevance of employment opportunities in cities like Denver in Colorado. In her article, the journalist unfolds the story of promising entrepreneurs immersed in an economically fertile environment. The opposite situation to that prosperous environment happens to locate northeast of the United States. Cohen writes that not only “in the Mountain West — but also in places as varied as Seattle and Portland, Ore., in the Northwest, and Atlanta and Orlando, Fla., in the Southeast — employers are hiring at a steady clip, housing prices are up, and consumers are spending more freely”. Her article focuses on contrasting the development of urban-like amenities and how those attractions lure entrepreneurs.

A brief statistical analysis of cross-sectional data.

At first glance, both factors seem to be contributing factors for having an effect on migration within states. However, although both articles are well documented, neither of those readings goes beyond anecdotal facts. So, confirming those very plausible anecdotes deserves a brief statistical analysis of cross-sectional data. For doing so, I took data on estimated population growth for the 71 major cities in the U.S. from 2010 to 2015 (U.S. Census Bureau), and regressed it on the average unemployment rate in 2015 (U.S. Bureau of Labor Statistics), median sale price of existing houses for the same year (National Association of Realtors), and the U.S. Census Bureau’s vacancy rate for the same year and cities (Despite that the latter regressor might be multicollinear with sale price of existing houses, its inclusion in the model aims at reinforcing a proxy for housing demand). The statistical level of significance for the regression is a 90 percent confidence interval.

Results.

The results show that, for these data sets and model, the unemployment rate has a bigger effect on population growth than vacancy rate and median home sale prices altogether. The regression yielded a significant coefficient of -2.78 change in population growth as unemployment decreases. In other words, the lower the unemployment rate, the greater the population growth. A brief revision of empirical evidence shows that, once the coefficients are standardized, unemployment rate causes a higher effect on the dependent variable. If we were to decide which of the two factors affects population growth greater, then we would have to conclude that employment opportunities do it largely.

Regression Results.

Regression Results.

By using these data sets and this model, the employment dynamic seems to drive a slightly higher level of influence in population growth, when compared to housing costs. The unemployment rate has a standardized effect of negative 56 percent. On the other hand, median sale price of houses pushes a standardized change effect of 23 percent. Likewise, vacancy rate causes in the model an estimated 24 percent change in population change. Standardized coefficients are a tool meant to allow for disentangling the combined effect of variables in a model. Thus, despite that the model explains only 35 percent of population growth, standardized coefficients give insights on both competing factors.

Limits of the analysis.

These estimates are not very reliable given that population growth variable mirrors a five years lapse while the other variables do so for one year. In technical words, the delta of the regressand is longer than the delta of the regressors. For this and many other reasons, it is hard to conclude that employment constitutes the primary motivation for people moving out south and west. Nonetheless, this regression sheds light onto a dichotomy that needs to be understood .

Leave a Reply