Thursday, July 14, 2016

Housing: Part 166 - A great paper on migration patterns and housing supply

Here (pdf) is a great paper from Peter Ganong and Daniel Shoag with several interesting empirical findings regarding migration patterns.

They find empirical confirmation of many of the patterns I have been covering here.  And they find that the reversal of historical migration patterns toward income opportunities is responsible for creating income inequality.  High income workers still retain the historical migration pattern because their higher incomes provide a higher return on the payment they have to make for housing - the gatekeeper to opportunity in a closed access city.  For low income workers, the return to tapping into productive labor markets isn't high enough to cover the cost of limited access housing, so they are induced to migrate away from income opportunities.

Here is Figure 6 from their paper.  In past periods, all of these regressions would have positive slopes.  In other words, workers migrate to places with higher income potential.  But, in the recent period, the regression with migration and gross incomes for low skilled workers has a negative slope.  Yet the regression for incomes net of housing expenses remains similar to the historical norm.

Housing expense is the dominant issue of our time, and it is the dominant issue directing the migration of low income workers.

What we called a housing bubble was actually a refugee crisis.  Migration patterns explain what happened much better than banking activities.  Blaming the housing bubble on bankers is like blaming illegal immigration on coyotes.  We impose desperation and exclusion on people, then when the context those people face is invariably peppered with incivilities and difficulties, we demonize the very agents who are trying to facilitate access to opportunity despite all of our efforts to deny it.

5 comments:

  1. Another great post.

    I hate to say it, but conventional or mainstream US macroeconomists have been hauling out the megaphones to bash protectionism or minimum wages, but duct-tape their pie-holes on property zoning and related housing costs.

    So here we go: Encourage immigration, encourage imports, no minimum wage, but heavy and stipulative and restrictive property zoning wherever people want to live.

    What could go wrong?

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  2. keep banging the drum, Kevin. this is a crucial issue

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  3. keep banging the drum, Kevin. this is a crucial issue

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  4. Zoning creates privilege in ways that race could never accomplish. If a part opposition nation is going to be preserved, privilege must be rooted out and eliminated. The problem is: what kind of privilege detector do you have? If it has built in blinders it can't do a very good job. The result is an accumulation of privilege and resentment that you don't even have the slightest clue why it's there. Then you have a conflagration.

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    1. A proposition nation.

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