A popular policy proposal involves “placemaking” —strengthening the appeal of particular locations. Population centers can provide economic and noneconomic benefits to residents and can act as a draw to in-migration.[83] Places that successfully attract high-skilled workers tend to improve on non-job-related measures as well, as those new residents support amenities such as retail shopping options, reduced crime and environmental improvements.[84] These increases in amenities draw more high-skilled workers but also make those places less affordable for low-skill workers. This dynamic perpetuates the spatial sorting of low-skill and high-skill workers into separate localities.
Evaluating the effectiveness of placemaking policies, a pair of economists conclude, “Most large-scale place-oriented policies have had little discernable impact.”[85] Transportation infrastructure spending, for instance, is often directed toward places least likely to benefit from such investments. As the authors note, it is best to focus “transport spending to maximize its direct benefits, not according to its ability to enhance one place or another.”[86]
Further, certain targeted placemaking policies that do yield results “are expensive relative to their achievements.” Instead, the biggest constraint for placemaking is “the tendency of highly productive areas to restrict their own growth through restrictions on land use.”[87] As noted above, land-use restrictions significantly deter in-migration and hurt an area’s growth.
It is possible that localities can be stuck in an underperforming equilibrium. These places may see new developments, but they fail to rise to the level of generating positive multiplier effects. These notions are based on the idea of agglomeration economies, where a critical mass of residents and economic activity are needed to generate self-perpetuating gains. In practice, however, it’s not easy to identify which economic activity will produce a breakthrough in the underperforming equilibrium, and local efforts to attract certain sectors can become a zero-sum game. As one paper puts it, “[A]t this time, economists do not have enough information to reliably suggest strategies that can raise aggregate welfare via agglomeration forces.”[88]
Another paper reviews the literature on placemaking and finds mixed evidence on a variety of policies, such as enterprise zones and infrastructure spending. The authors identify unknowns in the research, especially regarding the distributional impact and the long-run self-sustainability of targeted places.[89] Others raise equity concerns, noting that subsidizing underperforming areas may make the location more attractive, but that the existing, lower-income residents may not benefit from the economic gains. Similarly, they show that in tight housing markets with restrictions on building, landlords, rather than residents, may capture any gains of a more attractive location.[90]
The evidence in favor of “quality of place” factors is strongest at the level of large cities. One study found a relationship between some of those factors and skill levels, but these benefits were much weaker for smaller cities.[91] A sample of Canadian localities showed a general ineffectiveness of marketing or “place branding,” specifically due to “overreliance on visual identities, poor communication … and overemphasis on presenting quality of life and affordability.”[92] In addition, it seems that well-educated workers tend to base their location decisions more on job-related factors like salary and career fit than on place-related factors like social welfare, urban amenities or public transportation infrastructure.[93]
The population growth in the Sunbelt over the past several decades has prompted researchers to assess the impact of sunniness as a desirable amenity. One paper found that population growth in southern states was driven by higher productivity and wages drawing workers and less restricted housing supply keeping down the cost of living; the weather itself was not a determining factor.[94] Other researchers disagree. One notes a general trend of people moving to places with cooler, less humid summers, even controlling for productivity; the Midwest is listed as one of the least likely regions to experience weather-related positive net migration.[95]
Considering the impact of natural amenities more broadly, one paper compares existing literature and finds that natural amenities do a better job predicting regional growth than job availability.[96] Another highlights the complementary roles of economic agglomeration effects and natural amenities: “On average, across both metropolitan and non-metropolitan areas, variation in productivity dominated in terms of explaining the differences in population growth across the natural amenity spectrum.” But in large cities, this study notes, natural amenities may outpace productivity as a determinant of population growth.[97]
For existing residents of rural places with natural amenities, influxes of in-migration tend to raise their wages, but these higher wages are fully offset by higher costs of living resulting from the increased population.[98]
Some studies evaluate nonmonetary factors influencing migration patterns of more educated individuals. A pair of authors find that places with initially more educated populations tend to attract even more educated individuals. Larger cities tend to draw these highly skilled college graduates. However, “Outside of poverty and the cost of living, which deter in-migration, the impact of metropolitan-level amenities in this study is relatively weak.”[99] On the other hand, one paper, comparing generational changes in migration patterns, finds Millenials more likely to move to high-density areas with more recreational, cultural, shopping and dining options.[100]
Another study points out, “Crime is a very salient disamenity.”[101] Beyond addressing crime, however, localities can do little to establish amenities that might attract highly skilled individuals. Instead, more-educated individuals view well-educated neighbors as the amenity itself. The amenities like restaurants and museums, or higher public spending, do not seem to matter as much.[102]