In the decades after World War II and up into the 1980s, the US economy experienced regional convergence: that is, the economies and incomes in poorer regions (like the US South) tended to grow more quickly than the economies of richer regions (like the US North). But in the 1980s, this pattern of regional convergence slowed down.
He cites interesting papers on the topic by Peter Ganong and Daniel W. Shoag as well as by Elisa Giannone.
Also relevant is the paper by Ryan A. Decker and others, cited by Tyler Cowen.
One could probably tell a similar story for global convergence. A few countries are at the frontier, pushing out the cutting edge, but most are just receiving positive externality windfalls from collapses in costs of certain technologies developed elsewhere (e.g., cell phones).
One past driver of regional convergence was domestic factor price equalization. It average wages near Detroit were too high, and wages in Mississippi were much lower, and worker quality was similar, and the economies of scale and agglomeration of putting all production in Detroit didn’t make up for the wage differential, then production will spread out a little, which would tend to level the distribution and cause ‘convergence’.
But extend that logic globally and if you’re going to move at all, Mississippi is not nearly as attractive as even-lower wage spots around the world.
In American history, something like this happened:
1. Spreading out of labor to cheaper factors of production” (i.e., the unfarmed lands in the Westward Expansion)
2. Spreading out of manufacturing factors of production to reach that western labor that was now cheaper because made surplus by farm mechanization.
3. Manufacturing-driven regional convergence.
4. Globalization, increasing economies of scale and agglomeration, cheap transport, and automation arresting this process and creating similarly “regional surplus” labor since cheap domestic regions lose their comparative advantage.
5. Proximate services, interactive coordination, human capital, and organizational capital becoming much more economically important.
6. Re-centralization of the labor force into a few lucky major hubs where the key sectoral “interactive coordination human networks” happened to be located during the critical period of economic transition.
(e.g., why is Silicon Valley in the Bay Area? Dumb Luck. In 1956, Bill Shockley moved from Bell Labs in New Jersey to be close to his sick mom in his hometown of Palo Alto and because he missed the nicer weather. He founded his company in Mountain View, a big mutiny led to the founding of Fairchild, and then almost every major semiconductor company for years was based out of that area because they were all intellectual descendants of Shockley and needed to stick around to maintain access to the skilled workforce which consisted of all the other intellectual descendants of Shockley. The rest is history. But the point is, it’s just far too hard to re-coordinate somewhere else despite all the costs of trying to live and work there, so the best and brightest looking for lucrative employment are mostly stuck.)
Well what happened in the ’80’s that plausibly could have triggered a deceleration? Ummm…maybe could it be that federal debt started to explode about then? Mortgaging the future into the non-productive/non-competitive sector of the economy might get you algae blooms, but they are blooms on a cess pool. I’m guessing convergence will resume in earnest once somebody gets around to chopping some federal spending and getting the tax exempt half of the economy to start paying their share.
They don’t seem to address family issues. It’s harder to move when one breadwinner still has a job. Not to mention, with two breadwinners, there is no built in childcare at the new location which is more disruptive to the children.
In addition, broken families with more father involvement with children means needing to stay in the area after the divorce. And with single parents there is more need to remain close to extended family.
I wonder how the change in the willingness of men to be geographic bachelors to support their family impacts this reduction in convergence.
I’ve recently run across another reason for weaker mobility recently that seems to be important, but nobody seem to be thinking about it. Weaker growth since the 1980s has meant that people have less job security. But generally, firms lay people off on a LIFO ( last in:first out ) basis. Consequently, people worried about job security are less likely to change jobs than they use to because it would put them at the front of the line for being laid off when hard times hit and hard times are more likely with weak growth.