I went looking for some explanation for the rural-vs.-urban divide and came upon the work of Harvard economist Edward Glaeser, author of “
What are the major indices of this divide between urban and rural America? Is the divide increasing?
Throughout the world, people in cities earn more than people in rural, low density areas, and they also pay more for housing costs. This pay gulf is much higher in developing world countries, like India and China, than in the U.S. Urbanites typically have somewhat more active social lives, at least along some dimensions. They tend to visit more bars, museums and restaurants. City-dwellers drive less and take public transportation more, but their commutes last longer, because of congestion. Public transportation also involves hefty time fixed costs, like getting to and from the metro. As the recent election illustrates, urbanites are also more politically liberal.
Perhaps the most troubling division to me is the gap in prime aged joblessness between urban and rural America. That gap is widening perilously. In 1980, only about nine percent of men between 25 and 54 were jobless in both urban and rural America. Today, the jobless rate is about 15 percent in America’s metropolitan areas, which is slightly below the national average, and about 19 percent outside of metropolitan America. The 50 year growth in joblessness among prime aged males may be America’s largest social problem, and that problem is most acute in lower density parts of the country. Kentucky, for example, is the state with the highest jobless rate among prime aged males according to the Current Population Survey.
Why do cities make people richer?
Economists call the benefits of cities “agglomeration economies,” which is a catch-all phrase meant to include a wide range of benefits, particularly reduced transport costs for goods, people and ideas. Historically, the big advantage of cities was proximity to customers, inputs and transportation technologies. New York, Boston and Baltimore grew up in the shadow of their ports. Chicago had railroads and the Great Lakes. Pittsburgh had access to coal mines. Over the course of the 20th century, these transportation-linked advantages disappeared. Urban manufacturing largely disappeared as well, and the 1970s saw a post-industrial urban crisis.
But cities have other advantages. They enable workers to search over a wider range of firms, and to hop from one firm to another in case of a crisis. They enable service providers to reach their customers, and customers to access a dizzying range of service providers. Perhaps most importantly they enable the spread of ideas and new information.
An old result of mine is that workers who come to cities don’t experience immediate wage bursts, but rather wage gains that accrue over time. Year after year, month after month urbanites slowly get richer. These results recently have been confirmed with vastly better data by Diego Puga. This fact is most compatible with the view that cities are forges of human capital that enable us to get smart by being around other smart people.
The role of cities as engines for learning explains why they have become more, not less, successful over time. [Twenty-five] years ago, many prognosticators predicted that communications technology would make cities obsolete. I thought that this was wrong then and I think so now. Globalization and new technologies have radically increased the returns to being smart and we are social species that get smart by being around other smart people. In a world with more complicated ideas, it is easier for those ideas to get lost in translation. Face-to-face contact makes it easier to communicate difficult sparks of knowledge. Just look at Google, which should be able to do long distance working better than anyone. They brought their workers together in the Googleplex and bought hundreds of thousands of square feet in downtown Manhattan.
(In Part 2, which I will post later today, Glaeser explains how we know cities — and not self-selecting city dwellers — are responsible for the city phenomenon and what the federal government should be doing about it.)