The Housing Chronicles Blog: Has mobility really declined due to the recession?

Friday, December 10, 2010

Has mobility really declined due to the recession?

For a couple of years we've been hearing that one reason unemployment is elevated is because people can't move because they're stuck in their homes.

The thinking was that without the historical social mobility that has allowed the U.S. economy to constantly re-invent itself that the right people couldn't move to the right jobs.

Or so it seemed.

However, according to a recent paper by Greg Kaplan and Sam Schulhofer-Wohl and available online at the National Bureau of Economic Research, the decline in interstate social mobility has been steadily occurring since the mid 90s and is not specifically related at all to the Great Recession. From their summary:

We show that the significant drop in the annual interstate migration rate between the 2005 and 2006 Current Population Surveys is a statistical artifact. The Census Bureau’s imputation procedure for dealing with missing data before the 2006 survey year inflated the estimated interstate migration rate. An undocumented change in the procedure corrected the problem for the 2006 and later surveys, thus reducing the estimated migration rate.

The change in imputation procedures explains 90 percent of the reported decrease in interstate migration between 2005 and 2006, and 42 percent of the decrease between 2000 (the recent high-water mark) and 2010. After we remove the effect of the change in procedures, we find that the annual interstate migration rate follows a smooth downward trend from 1996 to 2010. The 2007–2009 recession is not associated with any additional decrease in interstate migration relative to trend.

A related story in Newsweek posits that the decline is likely due to changes resulting from the information age and a service-based economy than anything else:

The decline, which is often attributed to early recession troubles with selling homes or paying for moves, is a “statistical artifact,” according to a report published by the National Bureau of Economic Research. It’s 90 percent attributable, the study claims, to a 2006 change in the way the bureau estimates missing data. Once the change is corrected for, the steep drop in moving rates disappears. Interstate migration is indeed falling, says University of Pennsylvania professor Greg Kaplan, who coauthored the study. But the trend is decades old and, says Kaplan, may be “an optimal response” to the information economy, where work is no longer as regionally diverse.

If you want to read the entire study, it is available for download for $5 at the NBER Web site.

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