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Where do young workers want to live?

Tracking ‘Go-Getters’Across America

BY TATE WATKINSMercatus Center at George Mason University

AND BRUCE YANDLEClemson University

n The Americans: The Democratic Experience, histori-an Daniel Boorstin describes a set of remarkablepeople who shaped the economy during the 100years following the U.S. Civil War. Those entre-preneurs, inventors, and innovators, whomBoorstin dubs “go-getters,” were in the vanguard ofbooming economic growth and development of the

20th century.We believe that a similar group will likewise shape the 21st

century United States. Where will these new go-getters locate?Will they move to areas where returns to investment in humancapital are highest? Will they choose areas with lower taxes andless burdensome regulation? Will they seek greater personalfreedom? Do go-getters who already live in the United Statesbehave like those immigrating from abroad? To answer thesequestions, we examined domestic and immigrant migrationpatterns of young people in the prime years of their workinglives, presumably the builders of future economies. We thenseek to explain their migration decisions to the 50 states.

We discovered that emerging knowledge economies andhigh levels of economic freedom do indeed attract go-getters.Personal freedom and a creative environment are also impor-tant factors. Most consequential, however, is evidence thatdomestic and international migrants behave very differentlywhen deciding where to locate in the United States. Youngdomestic movers appear to value economic freedom, diversi-ty, and cultural environment most highly. Young interna-tional immigrants seem to seek emerging knowledgeeconomies and high levels of personal freedom.

Based on our statistical findings, we offer inferences as towhy the behaviors of the two groups differ. We also assess therelative weight of limited government as revealed by freedomindexes in determining migration decisions.

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TateWatkins is a research associate at theMercatusCenter at GeorgeMasonUniversity.

Bruce Yandle is Professor of Economics Emeritus at Clemson University,Distinguished Adjunct Professor at the Mercatus Center at George MasonUniversity, and senior fellow at PERC.

WHY DO THEY MOVE?

Researchers have studied migration patterns at length andhypothesized about the determinants of those patterns.Invariably, researchers seeking to model movers include argu-ments that relate to income, costs, and the benefits associatedwith alternative destinations. Charles Tiebout in 1962 expand-ed those considerations to include the public sector, arguingthat people revealed their preferences for public goods and theirassociated socialized costs by “voting with their feet,” a topicthat relates directly to economic growth and change.

Scholars have combined Tiebout’s seminal argument withmore orthodox variables to model movement. But no one hasused freedom indexes paired with knowledge economy indi-cators as principal determinants of migration patterns acrossthe 50 states. Nor has anyone employed personal freedomindexes with freedom and knowledge indexes in an effort todecipher those patterns. Including those elements distin-guishes our research.

Much recent economic research focuses on the emergenceof a new knowledge sector that supposedly will serve as astrong foundation of economic growth. As this sector hasbecome a crucial and large slice of the economy, researchershave developed indexes and rankings for cities, states, andcountries that measure knowledge economy performance.Similarly, economic freedom indexes are now popular toolsamong economists and political scientists.

We argue that migrants carefully weigh benefits and costsof moving from one location to another. They evaluate typi-cal economic benefits, such as income, as well as other factorsthat influence quality of life. For some, access to performingarts, vibrant cities, and cultural activities are as important aslower taxes and less oppressive regulation. Others may be moreinfluenced by the availability of employment in high tech-nology enterprises. To these arguments we add a third:migrants consider how much personal freedom they willhave in competing locations and how they will be burdenedand benefited by the government sector in their new location.

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All of these factors are considered by both domestic andinternational migrants.

International migrants, however, face a distinct set of con-straints when considering a move from a home country to oneof the U.S. states. There are visa requirements and security fil-ters that limit movement. The foreign migrant’s “ticket price”to move to a state is higher on average than that of a domes-tic mover; therefore, the international mover is less sensitiveto cost-of-living differences once in the domestic market.Living costs are a smaller share of the total cost of choosingone location versus another and can be offset by an increasein income, which is usually larger for foreign immigrants

relative to domestic movers.Foreigners also face more restrictive

cultural constraints than domesticmovers. Relatively drastic differences inlanguage and culture make it likely thatimmigrants will not assign great impor-tance to the types and quality of localmusic, food, and performing arts whenchoosing a location. To the recentlyarrived Pakistani, Ghanaian, orEcuadorian; California, Iowa, andVirginia are all an extreme cultural shiftfrom life at home. We believe immigrantsassign less importance to intra-U.S. fac-tors than domestic movers. In this sense,the foreign mover is more footloose.

OUR STATISTICAL

INVESTIGATION

We used a series of regression models toestimate go-getter immigration to the50 states by domestic and foreignmovers. We defined go-getters as peoplein the 25–39 year-old category and thenused Census Bureau data to examinepositive flows of this migrating groupfor the years 2004–2008. By definition,domestic movers relocate from one stateto another; international movers moveto a given state from abroad.

The scatter plot in Figure 1 mapsstate rankings for average net migra-tion rates for the years 2004–2008 fordomestic and foreign migration. Wehave divided the chart into four quad-rants to identify the stronger and weak-er migration patterns.

We note that foreign and domesticmovers are f locking to states in thesouthwest quadrant of the chart, manyof which are in the Sun Belt. Neithergroup is eagerly moving to states in thenortheast quadrant. Lots of interna-tionals are immigrating to highly pop-ulated states in the Northeast and to

California, but domestic movers are fleeing. Other states seemto be insulated from foreign immigrants but are appealing todomestic movers.

H-1B Visas Many foreign movers enter the United Statesunder temporary visa programs. One such visa is the H-1B,which allows highly skilled internationals to work in scienceand technology sectors for up to six years.

There is an annual cap on the number of laborers allowedunder the program. The limit was 140,000 in the 1990s andincreased to 195,000 for 2001–2003; it then fell to 65,000 in2004 and remains at that level. To obtain workers under the

program, potential employers must apply and pay a fee foreach worker employed. The H-1B program reduces the searchcost for both employer and employee. Workers sponsored byor employed at academic institutions, nonprofit researchorganizations, and government research organizations donot count against the cap.

The relative merits of the H-1B program, and others likeit, are fiercely debated. Domestic labor interests generallystrive to protect American workers from additional compe-tition and oppose temporary worker programs. Other partiesare concerned that increased restrictions encourage highlyskilled foreign workers to seek employment in other countries.There is an additional concern that the best and brightestinternational students enter the United States to study at topresearch universities, only to return home upon graduation— the “reverse brain drain.”

Recent research, however, suggests that many immigrantschoose to leave the United States for reasons unrelated to visastatus. Some return home for a perceived better quality of life,to live in a familiar culture, or for increasingly better job oppor-tunities abroad, many in China and India. Our analysis revealsthat foreign immigrants who do enter the United States seekwork in the emerging knowledge economy, and they desire highlevels of personal freedom. States should consider these factorsif they seek to quell or counter the reverse brain drain.

Indexes We used several indexes, along with other vari-ables, to explain migration patterns in our regression mod-els. Two of those indexes are the Knowledge Economy Index(kei), which we developed, and the Mercatus Overall FreedomIndex (ofi). We also later employed a component of the ofi,the Mercatus Personal Freedom Index.

The kei assesses the relative effectiveness of each state’sknowledge economy, the sector of the economy in which valuelies increasingly in ideas, services, information, technologicalinnovation, and relationships. Included in the index is infor-mation on educational attainment, research and development,and entrepreneurship. The ofi has two underlying components:the Economic Freedom Index, which measures items such asgovernment size and spending, and the Personal FreedomIndex, which measures state paternalism that restricts activi-ties such as alcohol consumption and Sunday retail sales.

The kei measures the performances of state knowledgeeconomies by accounting for three components: knowledge,innovation, and entrepreneurship. It includes one indicatorfor each component. The first indicator is the weighted edu-cational attainment of the workforce. Advanced degrees areweighted heavier than bachelor’s degrees, which are weight-ed heavier than attainment levels below college degrees. Thesecond is private-sector spending on research and develop-ment, weighted by total worker earnings. The third is the rel-ative number of fast-growth firms, which we identified usingthe Inc. 500 and Deloitte Technology Fast 500 reports. Thislast indicator is a knowledge economy “marker species” thatsignals high-knowledge production. Table 1 presents the2008 kei state rankings by quintile.

Northeastern states, California and the Pacific Northwest,

Colorado, and the D.C. metro area states score highest on thekei. Each of those states has concentrations of highly edu-cated people and industry clusters based on services, tech-nology, or science. On the other end of the spectrum, statesin the South and Appalachia, as well as Indiana andOklahoma, have weak knowledge economies.

The ofi measures freedom across the 50 states. WilliamRuger and Jason Sorens, the index creators, claim that theirnotion of freedom is grounded in individual rights: citizensshould be allowed to act freely as long as they do not infringeupon the rights of others. The ofi uses 20 indicators groupedinto three policy dimensions: fiscal, regulatory, and pater-nalism. The authors develop weights and statistical treat-ments to determine each indicator’s final score. Table 2 pres-ents the ofi state rankings by quintile.

Interestingly, several of the top kei states are among thelowest ofi states. California, Washington, and mostNortheastern states have booming knowledge economiesbut extremely low levels of economic and personal freedom.However, Colorado, New Hampshire, and Virginia are in thetop quintile of both the kei and ofi.

Other Variables We used a variety of independent variablesin addition to the kei and ofi to estimate migration patterns.One is an updated version of Richard Florida’s state creativ-ity index, which he first developed in his 2002 book The Riseof the Creative Class. The Florida index uses four types of data:creative class concentration, high-tech industry concentration,patents per capita, and a diversity index based on the share ofa population that is gay. Per capita income is another variableincluded in our model. We also include a cost-of-living indexpublished in 2009 by the Missouri Economic Research and

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F i g u r e 1

State Rankings for International andDomestic Migration 2004–2008

NOTE: Lower rank indicates greater in-migration.

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Information Center. Average population for 2004–2008 isincluded as a control variable to adjust for scale.

THE RESULTS

Our resulting estimates for international migrants are strik-ingly different from the domestic migration estimates. Thenumber of domestic movers to a given state is associatedhighly with overall freedom, economic freedom, and creativ-ity. Of these, overall freedom is the dominant magnet.

Somewhat surprisingly, a robust knowledge economy doesnot appear to attract domestic migrants, but it is the mainattractor for international movers. Apparently, the variablescontained in the Knowledge Economy Index matter far morefor international migrants than domestic movers. The sta-tistical results confirm our assertion that foreign immigrantsdo not seek a specific creative or artistic environment, atleast not when considering nuances of American culture. Asmeasured by the creativity index, the cultural elements thatsignificantly move domestic migrants have no effect on theirinternational counterparts. Our results also show that inter-national movers are not deterred by a high cost of living,possibly confirming our conjecture that the relatively high“ticket price” and the potential for increased wages makecost-of-living differences negligible. Per capita income is a sta-

tistically insignificant measure, which suggests that the othervariables may proxy for income differences.

Personal Freedom We replaced the ofi with one of its compo-nents, the Mercatus Personal Freedom Index, to further exam-ine the apparent differences between migration determinantsof domestic and foreign movers. We then re-estimated ourmodels. The PFI accounts for half of the ofi. The results wereagain different for the two groups, but in a different manner.

Domestic movers assign little importance to cross-state dif-ferences in personal freedom restrictions, while the estimateindicates that international movers assign great importanceto avoiding such restrictions. The kei was again highly asso-ciated with international movement. Our results indicatethat international movers assign high values to knowledgeeconomy opportunities and to personal freedom. Evidentlythe United States still beckons as a land of opportunity for for-eign immigrants.

F INAL THOUGHTS

Our research has focused on the use of two state indexes toexplain migration choices for go-getters, both domestic andforeign. We find that international immigrants respond pos-itively to the Knowledge Economy Index and to overall free-dom. Domestic movers are unaffected by the knowledgeindex but are attracted to overall freedom. The creativityindex significantly affects the domestic set, but has no influ-ence on foreign movers. We attribute this difference to thegroups’ dissimilar cultural preferences.

Our work examined the association between personal free-dom and state migration patterns. Here we found that inter-national movers are sensitive to personal freedom; domesticmovers are not. Domestic migrants are sensitive to the othercomponents of the overall freedom index: fiscal and regulatoryfreedom. Our research suggests that knowledge economy andfreedom indicators can explain what we have termed go-get-ter migration patterns, especially for international movers.

Go-getters will build and shape future economies. Stateswith abundant freedom and a burgeoning knowledge sectorwill attract the go-getters.

T a b l e 1

Knowledge Economy Index Rankings byQuintileTop California, Colorado, Connecticut,Maryland,Massachusetts,Quintile NewHampshire, NewJersey,Vermont,Virginia,Washington

Second Delaware, Hawaii, Illinois, Kansas,Michigan,Minnesota, NewYork,Quintile Oregon, Rhode Island, Utah

Third Alaska,Arizona, Georgia,Maine,Montana, Nebraska, North Carolina,Quintile North Dakota, Pennsylvania,Texas

Fourth Florida, Idaho, Iowa,Missouri, NewMexico, Ohio, South Carolina,Quintile South Dakota,Wisconsin,Wyoming,

Fifth Alabama,Arkansas, Indiana, Kentucky, Louisiana,Mississippi,Quintile Nevada, Oklahoma,Tennessee,West VirginiaNOTE: Top quintile is rated most knowledge economy–intensive.

T a b l e 2

Mercatus Overall Freedom Index Rankingsby QuintileTop Arizona, Colorado, Idaho,Missouri, New Hampshire, North Dakota,Quintile South Dakota,Tennessee,Texas,Virginia

Second Georgia, Indiana, Iowa, Kansas,Michigan,Montana, Oklahoma,Quintile Pennsylvania, Utah,Wyoming

Third Alabama,Arkansas, Delaware, Florida,Mississippi, Nebraska,Quintile Nevada, North Carolina, Oregon, South Carolina

Fourth Alaska, Kentucky, Louisiana,Maine,Minnesota, NewMexico, Ohio,Quintile Vermont,West Virginia,Wisconsin

Fifth California, Connecticut, Hawaii, Illinois,Maryland,Massachusetts,Quintile NewJersey, NewYork, Rhode Island,WashingtonNOTE: Top quintile is rated most free.

� “A Pure Theory of Local PublicExpenditures,” by Charles M.Tiebout. Journal of PoliticalEconomy, Vol. 64 (1956).

� “America’s Loss Is the World’sGain,” by Vivek Wadhwa, et al.Ewing Marion KauffmanFoundation, March 2009.

� “Building a KnowledgeEconomy Index for Fifty Stateswith a Focus on South Carolina,”by Tate Watkins. ClemsonUniversity Department ofEconomics M.A. Thesis, 2008.

� “Can Freedom and KnowledgeEconomy Indexes Explain Go-

Getter Migration Patterns?” byTate Watkins and Bruce Yandle.Journal of Regional Analysis andPolicy, forthcoming, 2010.

� “Freedom in the 50 States,” byWilliam P. Ruger and JasonSorens. Mercatus Center at GeorgeMason University, February 2009.

� The Americans: The DemocraticExperience, by Daniel Boorstin.New York: Random HousePublishers, 1974.

� The Rise of the Creative Class, byRichard Florida. New York: BasicBooks, 2002.

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