Climate Change and Migration
A Preview of my Wisconsin NPR Discussion with Larry Meiller
For 30 years now, I have been doing research on how different places (i.e Boston, Beijing, Phoenix, Las Vegas, Baltimore) compete to attract footloose people and employers (i.e the next Amazon HQ2). In a series of papers, I have studied where people migrate to (warmer Winter places), where educated power-couples move to (Big Cities) and how real estate prices adjust to reflect amenity differences across cities.
How will climate change affect this “spatial equilibrium”? Who will end up living where? My 2010 Climatopolis book explored this point in detail and so does my new 2021 Yale University Press book; Adapting to Climate Change. In this 2012 piece, we discuss migration in the developing world.
Think of a map of the United States. On this map, we see coastal cities such as San Francisco , Boston, and Los Angeles and NYC. We see cities in different regions. We see cities inland such as Las Vegas and Phoenix. Within each of these cities, there are neighborhoods. Think of a city you know well. Write down ten adjectives about the city as a whole and write down five adjectives for a specific neighborhood. Now ask yourself the following question; are the adjectives you wrote down; “common knowledge”? For example, Houston is humid during summer while San Francisco isn’t.
A basic point from real estate economics is; “location, location, location”. Take your list of 15 adjectives and divide them into “good features” and “bad features”. The more good features that the city and neighborhood you named has; the higher will be local real estate prices. Real estate prices adjust such that it is more expensive to purchase real estate in a place with more positive features such as Malibu, California.
In the language of urban economics, spatial real estate prices adjust so that few people want to migrate. A nasty place will feature low real estate prices. If there are 53,000 housing units located there who will choose to live there?
In a nation with 340 million people, each of us has our own ranking of where we want to live. Some people will want to live close to their grandmother. Some may love the mountains. Others may want to live in an immigrant friendly city. Some may have a special skill such as robotics such that only a few cities feature specialized firms hiring in this field. Each of us also faces a budget constraint. Even Jeff Bezos cannot afford to buy everything!
Taking the real estate prices as reported in Zillow or Redfin as given, each person selects the right housing product (both the home and location) that fits their needs and that they can afford. The people who choose to live in the “nasty place” featuring 53,000 homes will be those who find the price enticing enough to offset the place’s negative features. Rents adjust across locations so that the “marginal person” is just indifferent between living in the nasty place versus somewhere else.
How Does Climate Change Affect this Equilibrium?
As I discuss in this 2010 piece, a key issue here is how each location on a map’s physical attributes change. San Francisco has had wonderful summers. How much worse will its summers be in the year 2030, 2040, 2060? Given that we have to live somewhere, relative comparisons are key here. If San Francisco maintains its quality of life relative to Detroit in the upcoming decades, then San Francisco’s real estate price differential above Detroit’s will not get smaller and people who love amenities will not move from San Francisco to Detroit.
In contrast, if the Midwest now features warmer winters and if local adaptation efforts are successful —- for example —- home owners installing better air conditioning, local officials planting more trees to offset the urban heat island effect and efforts are taken to protect the area from increased natural disaster risk —- then the Midwest could gain population growth as people move to the region because it performs relatively better than other locations.
If a place anticipates that climate change will pose major challenges for its quality of life, it is not a passive victim here. As civil engineering makes progress, there are a huge number of possible adaptation strategies that can help a place to be resilient. I predict that there will be a huge growth in climate resilience jobs as young people specialize in such risk reduction endeavors. In 2021, I can’t name these future jobs but I know that capitalism will play a productive role. The aggregate demand for solutions induces innovation to solve such a problem. We have baldness medication for bald men because aggregate demand for a solution was so great! In a similar sense, climate change adaptation creates a constructive competition between areas to be “the champ”!
A key point is that this migration process will be gradual. People (especially middle aged people) do not like to move. Keep an eye on young, educated people. They move. When I taught at Johns Hopkins in Baltimore, very few students were planning to remain in Baltimore after they graduated. They were thinking about where to move to. Given that migration is an investment decision, young people will think about their future in a place before they bear the costs of moving there. A leading indicator concerning which places have a bright future can be found by studying where students from the top 50 U.S universities are moving to once they are done with their schooling (including graduate school).
New firms such as Jupiter and First Street Foundation supply information about emerging climate risks that different points on the map face. Economic logic predicts that people will take this information into account before they move and buy a home in a place. Buyer beware! This due diligence accelerates the pace of climate change adaptation.
A final point I want to raise is about the supply of housing. Suppose that a given point on a map such as Bozeman , Montana is deemed by climate scientists to face less climate risk than other points on the map. We will be better able to adapt to climate change if we build more housing there but will local authorities who control the zoning allow more housing to be built there? I believe that this is a key issue and I discuss this at length in my new book Adapting to Climate Change.
Finally, a note for academics. I have been working on these broad issues of the urban economics of climate change for 14 years now. Here is my first paper (written in 2007), titled Urban Growth and Climate Change. This was my “prequel” for my 2010 Climatopolis book. I am delighted that so many other scholars are now working on these issues. I am now working with Amine Ouazad and Luis Quintero on several new ideas related to the mortgage industry, insurance and public infrastructure investment in adaptation.
Urbanization in the developing world is a major ongoing development. In new research with Rajat Kochhar, Somik Lall, Vaidehi Tandel and Sahil Gandhi, we are exploring how natural disaster shocks impact different cities around the world. What role does economic development play in helping urbanites to withstand the harder punches that Mother Nature is now throwing? For the poor people in slums, what capacity and set of strategies do they have to protect themselves? We aren’t “passive victims” here. Many climate scientists under-estimate our capacity to cope with new threats. The climate scientists need to study some microeconomics and the economists need to study more climate science. There are gains to trade here!