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Economic SYNOPSES short essays and reports on the economic issues of the day 2004 ■ Number 24 Metropolitan Growth: Sun Belt vs. Snow Belt Rubén Hernández-Murillo or more than a century, cities in the United States with reveals no significant correlation between skill levels and subsemore skilled residents have grown faster than comparable quent population growth, perhaps, in part, because the Sun Belt cities with fewer educated people.1 The reasons why the receives a disproportionate share of the immigrant population. relationship between skills and population growth is so persistent The same pattern arises if, instead of population growth, one are not clearly understood. One explanation proposes that skills examines employment growth, as measured by the change in the (measured by the percentage of residents with a bachelor’s degree) number of employed civilians aged 16 years or older. The correfoster growth because an educated population is an indicator of lation between employment growth in the 1990s in Snow Belt favorable quality of life, which attracts more people to a city. An metropolitan areas and the initial level of skills is 0.39, whereas alternative explanation argues that having skilled residents allows the correlation is only 0.03 in Sun Belt metropolitan areas. cities to grow because educated people adapt more easily to a One caveat—which we can call the Las Vegas explanation— constantly evolving economy. The latter explanation views skills is that relatively low-skilled service workers comprise a large share as a production amenity, whereas the first views skills as a conof a Sun Belt metropolitan area’s permanent population, even sumption amenity. though the share of college-educated people in the city at any Recent evidence suggests that productivity drives most of the given time—including tourists and snowbirds—may be actually connection between skills and growth, especially in metropolitan quite high. ■ areas, supporting the production amenity explanation. Economists 1 Glaeser, Edward L. “Why Does Schooling Generate Economic Growth?” Edward Glaeser and Albert Saiz have found that education levels Economics Letters, 1994, 44(3), pp. 333-37. have a positive impact on the growth of wages and housing prices, 2 Glaeser, Edward L. and Saiz, Albert. “The Rise of the Skilled City.” NBER as a result of rising productivity. If skills are merely consumption Working Paper No. 10191, National Bureau of Economic Research, 2003. amenities, they argue, then wages would decline following migra3 Bureau of Labor Statistics. “Warm Areas Continue Hottest Job Growth.” Issues tion to a city.2 in Labor Statistics, May 1997. Interestingly, the relationship between skills and city growth does not hold among all types of cities. In the latter part of the 20th century, cities with warm and dry Population Growth in Cold MSAs climates have dominated the list of the fastest growing (Average January Temperature under 408F in 1961-90) metropolitan areas, in terms of both population and log (Pop 2000) – log (Pop 1990) employment growth.3 A favorable climate, especially since 0.450 the advent of air conditioning, seems to have spurred 0.400 growth in such areas without relying on a high level of 0.350 education in the local population. The correlation between 0.300 skills and growth, however, seems to be more important 0.250 in cold and wet metropolitan areas (the Snow Belt) than 0.200 in warm and dry locations (the Sun Belt). Line of Best Fit 0.150 The chart presents the correlation between the fraction 0.100 of residents aged 25 years or older with college degrees as 0.050 of 1990 and population growth in 155 Snow Belt metro0.000 politan areas over the 1990-2000 decade. The correlation between skills and population growth is 0.52 and the –0.050 relationship is statistically significant. The line of best fit –0.100 0.000 0.050 0.100 0.150 0.200 0.250 0.300 in the chart suggests that, as the fraction of people with Share of Residents with Bachelors’ Degree in 1990 bachelor’s degrees increases by 1 percent, population NOTE: Data are from the U.S. Census Bureau. growth in the following decade increases by 1.2 percent. A similar exercise among Sun Belt metropolitan areas F Views expressed do not necessarily reflect official positions of the Federal Reserve System. research.stlouisfed.org