Economic performance is a key driver of domestic in-migration. Economists have studied the sources of economic growth for centuries, and the question remains central today. In general, economists tend to agree on the importance of good institutions and economic policies. Pro-growth institutions include protection of private property rights, democratic forms of government and open trade.[49]
The idea that free markets generally best promote economic growth is a central theme in development economics. Economic freedom is associated with economic growth, well-being and entrepreneurship. The Fraser Institute in Canada has studied this closely for years and publishes a ranking called Economic Freedom in North America. Michigan ranks 32nd among the states.[50] Previous Mackinac Center research analyzing the impact of economic freedom at the city level found “positive connections between economic liberty and outcomes that many policymakers profess to want, such as low unemployment rates and population growth.”[51]
Greater economic freedom raises incomes and employment rates, leading to higher in-migration.[52] Research on labor market freedom has found that “a 1 percentage point increase in the overall labor market freedom index results in a 2.8 percent increase in the gross in-migration rate.”[53] Michigan’s labor market freedom ranking was 40th of the states in 2022, prior to the repeal of its decade-old right-to-work law in 2023.[54]
Economists have looked at sources of differential economic performance among states and regions in the United States. They find self-employment and entrepreneurship are key to a thriving economy; however, they also find that governmental efforts to increase skills and talents or attract certain types of industries are generally ineffective.[55]
The types of industries in an area can also affect how quickly and consistently the area grows economically. Fostering relatively strong performance in any mix of industries appears to be more important than attracting businesses in booming industries. “[S]tate employment growth that results from having a larger share of nationally fast-growing industries leads to less net in-migration compared to growth that results from each industry in the state growing faster than its national average,” one pair of researchers found.[56] This suggests policymakers should aim for policies that produce widespread and steady growth rather than targeting a few industries, markets or companies for special treatment.
This is consistent with the general caution in the literature against attempting to use development policy to copy successful cities or regions.[57] As a group of economists argue in a 2008 paper, “[E]xamples of successful clustering reveal how little government can contribute to a cluster’s performance. […] This does not leave much policy choice; in fact, facilitation and tax reduction (along with simplification of the regulatory burden for start-ups) may suffice.”[58]