Imagine a marginal resident of New York, for instance, who earns a high wage but also pays a lot in rent.
Our results do suggest that over time, the marginal resident required more and more compensation for living in the South.Emphasis once again mine.
Housing costs act as a lid of sorts, adjusting so that existing home supply is occupied, with the marginal resident indifferent between staying and going.
Because there are high levels of mobility within America, economists assume that real wages adjust across the economy so that the marginal resident of a city is indifferent between staying or moving out.
And if there's a big gap, then we'd assume that a migratory flow between the two cities would occur until the marginal resident is once again indifferent.
This isn't a smooth, frictionless process in the real world, but it's probably not a bad approximation for how things work.Now, in order for the marginal resident to be indifferent between high-wage San Jose and low-wage Phoenix, the cost of living must be very different in the two places.
Last decade, home prices rocketed up along the coasts, and a stream of households flowed from the coasts to cheaper Sunbelt cities, all part of the mechanics of leveling out big real wage gaps.While the marginal resident of Phoenix and San Jose is assumed to be indifferent between the two cities, however, there is still a real productivity gap.
Until the UN is run by residents of marginal seats they've got no reason to be.
By the same token, in a context of spatially concentrated income-earning opportunities and other urban functions, as well as limited purchasing power, accessibility to adequate means of connectivity with the rest of the urban fabric can be a determining factor in overcoming conditions of poverty for residents in physically marginal areas.
