Enrico Moretti’s The New Geography of Jobs has been published. In today’s WSJ, Moretti has published this piece about differential migration rates across education groups. The more educated are more nimble in moving across cities.
In this blog entry, I would like to make a few points about his book. To state my biases upfront, I’m a huge fan of this book. Enrico is a friend of mine and I provided a blurb for the book’s back cover. Here is my blurb.
“Enrico Moretti’s superb book highlights why the study of economic geography is vital for understanding fundamental issues such as the root causes of rising income inequality, innovation, and job growth. For those who are curious about how the United States will continue to thrive in the global 21st century economy, I can think of no better book to read than The New Geography of Jobs.”
–Matthew E. Kahn, author of Climatopolis
What do Raleigh, Seattle and San Francisco all have in common? Thirty years ago would we have had such “nice thoughts” about each of these places? What has gone right in these places?
We all know that the skilled disproportionately live and work there. These are innovation hubs where exciting things go on. In an age where the U.S doesn’t manufacture much stuff anymore, these are the places to be.
Now, if you are not part of the Zuck’ s social network and you don’t have a STEM degree, how does this help you? Suppose you are a yoga instructor. Enrico Moretti has conducted important research measuring local multipliers. He finds that each of these high paying jobs creates 5 local non-trade jobs. High skill workers need to cluster near such service jobs to help provide the rich variety of services the Zuck expects. These jobs can’t be outsourced.
As the educated live together in close proximity, Moretti finds that high school graduates earn more in these cities (see page 98). In addition, there is a positive effect of living in a high % college educated city as life expectancy increases, divorce rates and crime rates declines, political participation and charitable contributions all rise in such cities relative to other cities with lower % college educated (see page 119) and Moretti has been one of the leaders of disentangling correlation versus causation here. Read his technical papers to see how he establishes these effects.
Enrico makes a strong case that geography matters more than ever. Despite the rise of the Internet and Facebook, he says that he learns the most from colleagues just down the hall from him as his interactions with them are more deep. I would like to be down the hall from him! As geography matters more than ever, the real estate windfall from this are the people who own the existing homes in the Raleigh and San Francisco — especially if they can pass laws making it hard for building new homes.
In this age of income inequality and reduced likelihood of “rising mobility”, here are a few questions to think about.
1. For the San Francisco employed (and well paid) yoga instructor is she jealous of her highly paid subjects such as the Zuck? Erzo Luttmer wrote a paper called “Neighbors as Negatives” that raises awkward social issues.
2. Does the Yoga instructor’s kids have any shot at being the next Zuck? If she believes that the answer is “no” does this have any social effects?
3. In the Raleighs and San Franciscos, do the educated use the public schools? Are they voting for high taxes and high services (i.e good schools)? In this case, they provide a positive spillover to the yoga instructors’ kids.
4. Moretti devotes most of his attention to the current generation but how do we create the next generation of Zucks? I would like to see a merger between Jim Heckman’s research agenda and Moretti’s research agenda. In Heckman’s work, I haven’t seen much discussion of geography and in Moretti’s work — I haven’t seen much discussion of skill formation and the factors that determine how large the next cohort of young skilled people will be.