The belief that people follow jobs dominated economic development until the emergence of the knowledge based economy in the late 1990s. Today, it is often argued that highly skilled workers behave differently, because they can choose where they prefer to live, and businesses will follow them there. A recent study by Ostbye et al. found that both dynamics might be true: people attract jobs and jobs attract people.
The authors identified four rules of attraction in the economy with regards to population change and the labor market.
First, as a general rule, both people and jobs will consider natural and cultural landmarks when deciding where to move.
Second, jobs attract people when the economy as a whole is observed. This was demonstrated by the fact that the growth of job density was followed by the growth of population density but not the other way around.
Third, the opposite is true when the economy is split into highly skilled jobs and less-skilled jobs. In this case, people attract jobs: the growth of highly skilled people density was followed by the growth of highly skilled job density and the same can be said about the density of less-skilled people and less-skilled jobs as well.
Fourth, jobs also attract jobs when the economy is split into highly skilled and less-skilled jobs. This dynamic, however, is weakened if there is a competition for land. Highly skilled people and businesses are able to outbid everyone else and by doing so push them into a different location. Therefore, in some cases, the growth of the knowledge based industry leads to the relocation of the rest of the economy in the long run.
And where do these dynamics lead in the economy? To centralization and inequality mostly. Only a select few regions have the cultural and/or natural landmarks, the number of workers and businesses, and enough land to have a fully-formed knowledge-based economy. The United States serves as a typical example: only 19 out of 364 metropolitan areas have such an economy and the rest of them are slowly left behind.
The authors conclude that there is a need for different economic development policies. Economic logic might dictate directing highly skilled people and jobs to already expensive regions but that might lead to increasing inequality and populist uprisings. Instead, policies should focus on balancing geographic inequality to change the fortune of less advantaged regions and people.
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Contributed by Bence Juhasz