In a paper published by the International Monetary Fund, researchers conclude that the rise of “superstar cities”, where high employment opportunities mix with high housing costs and demand, have contributed to a drop in interstate migration and a rise in national income inequality.
Based on data from the Census Bureau and Labor Departments, as well as the Zillow Home Value Database, researchers found that a “steep decline” in interstate migration, which fell by half from 1980 to 2016, can be attributed to “increasing differences” in home prices. These discourage people from leaving low-cost areas to pursue economic opportunity, but also provide fewer incentives for people in high-cost markets to move to areas with diminishing opportunities.
This has contributed to an uneven distribution of labor and wealth, the paper says, with skilled workers crowding into “superstar cities”, gentrifying them, and raising their home prices, while Americans in lower-cost communities are “left behind.”
But the authors of the IMF paper add a twist. The dynamic described above is “self-reinforcing,” they argue. “Gentrification accumulates over time as the ratio of skilled workers in the overall work force rises, further raising wage and home price inequality,” they write. “As well-paid workers cluster in high-productivity metro areas, lower earnings and less attractive amenities elsewhere reduce migration to poorer areas.”
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