Economic freedom and migration: A metro area‐level analysis

Abstract

We examine the determinants of intra‐U.S. population migration at the metropolitan area level (MSA), with an emphasis on the presence of policies that are consistent with economic freedom. We are the first to produce a multivariate regression analysis of migration and economic freedom at the local level. Combining a 1993–2014 unbalanced panel of MSA‐to‐MSA migration data from the Internal Revenue Service with a new economic freedom index for U.S. metropolitan areas, we find that a 10% increase in economic freedom of a destination MSA, relative to the economic freedom of an origin MSA, was associated with a 27.4% increase in net migration from the origin MSA to the destination MSA. If we use mean net migration flows as a benchmark, we would expect a 10% increase in relative economic freedom to increase net migration to the destination MSA by 22 workers per year from each other MSA.

Business Regulations and Between-City Migration

“…The first is an OLS-based, two-city migration model. The second is a probit model of grouped migration-flow data, as used in similar studies on economic freedom and migration (Arif et al 2020). Because we only have the 2019 record of business regulations, these estimates do not contain a time-series element and should be considered indications of correlation, not causality.…”

“…To better capture the subset of migrants in the labor force, we use a second source of migration data: the 2019–2020 IRS county-to-county migration files on tax filers. These files were selected to allow us to compare our results with those of similar studies focused on individual-focused regulations (Arif et al 2020). While not all tax filers are currently employed, this subset is much more likely to be of working age and in the labor force than the set of respondents to the ACS surveys.…”

“…Regulations that affect individual well-being, known in the literature as economic freedom, have been shown to increase mobility, individuals are subject to changes in rules and laws beyond their individual circumstances (Arif et al 2020). Over three-quarters of households have at least one employed family member, and opportunities for employment may influence relocation decisions.…”

“…Many of these initial studies have focused on international or interstate mobility, but recently the literature has shifted toward investigating differences in economic freedom between smaller geographic areas, such as metro and nonmetro areas within regions have lower moving costs and instead show the influence of economic and demographic factors on migration (DeWaard and Ha 2019). Arif et al (2020) advance the study of migration between metropolitan areas in the United States by quantifying the relationship between economic freedom and net migration. They find that a 10 percent increase in relative economic freedom at the metropolitan level is associated with a twenty-two worker increase in between-metro net migration.…”

“…This study builds upon the work of Arif et al (2020) by researching the differences in the ease of doing business between cities and the influence these differences may have on migration. This extension is possible because of a new data set, DBNA that documents the regulatory environment of major metropolitan areas throughout the United States, Canada, and Mexico.…”