In his latest Bloomberg Businessweek column, Charles Kenny discusses the importance of internal migration to economic development:
We’ve covered Ganong and Shoag’s work in previous posts here and here. It suggests that the decline in convergence is largely due to a slowdown in migration from poor to rich states. The slowdown in internal migration reflects higher house prices in America’s most productive areas, prices that are out of reach for increasing numbers of would-be migrants. Ganong and Shoag find that the higher house prices reflect tightening land use restrictions. Relaxing such restrictions and building additional housing in richer areas would both increase economic growth and reduce income disparities.
While Congress can’t force local authorities to scrap inefficient land use restrictions, Kenny sees one way that federal policy might help:
This reminded me of Edward Glaeser’s recent column in the Boston Globe. Glaeser wants to reform the mortgage interest deduction but he worries that scrapping it all together might actually hurt some of America’s productive cities:
Whatever the solution to encouraging greater internal migration in the United States, Ganong and Shoag’s paper is something of a warning for rapidly urbanizing countries in the developing world. Rather than turning their richest regions into gated cities for the well-to-do, governments should do their best to make ample room for urban expansion. Doing so will keep housing affordable and encourage faster internal income convergence.