Two Cents (or maybe a nickel) on Texas

Texas is doing well relative to the country.  Its jobs creation rate is second only to North Dakota, a state whose population is smaller than Austin’s.  It has large in-migration because of jobs, and as one blogger points out, wages are rising faster in Texas than [most] other states, so one cannot credibly make the argument that its success is entirely a “race to the bottom outcome.”  The fact that Texas only relies a little more than average on construction for its employment base shows that its job performance is not the result of an unsustainable housing construction boom of the Arizona, Florida, Nevada and Central California variety.

In an ideal world, we would run some regressions explaining Texas’ growth, but we haven’t sufficiently up-to-date data to do that.  We do know that some things matter in general for growth: climate (which I don’t think even Rick Perry is claiming credit for); fraction of the population with a BA, and, if I may refer to work I did five years ago, availability of air transportation.

Texas does well in two out of three indicators: since World War II, people and jobs have moved to warmer places such as Texas, and Dallas is a hub for two airlines and Houston is a hub for one.  Texas is below average, however, in the share of adults with BAs and graduate degrees.

So why is Texas doing well?  First, it has managed to maintain its state and local government spending far better than most other states, and has not had the negative stimulus arising from massive layoffs. Over the past decade, government job growth in Texas has outpaced private sector job growth by about 2 to 1.

Second, Texas has among the most stringent consumer protection laws in finance in the country–likely arising from a long-standing Western mistrust of bankers.  As a consequents, consumers were essentially forbidden from using their homes as piggy banks.  As Mike Konczal shows, this means Texans have far less debt to pay off (it also shows how we in California are still in the soup).  So “heavy-handed” regulation helped keep Texas out of trouble.

Finally, it is simply easier to develop everything in Texas–housing, businesses, etc.  This is the one part of the conservative view of Texas that I buy–as one Los Angeles planner said to me, it takes 18 months in LA to do what it takes six weeks to do in Dallas.  LA doesn’t even have by-right zoning.  It is here where I think Texas has an enormous advantage for business development over California.

That said, California has a greater share of people with BA’s than Texas.  Part of the reason why may be that well-educated people, who can afford to live in a place that takes environmental protection seriously, do so.    There is actually some good reason for California’s stringent environmental rules–the air quality here, while much better than it used to be, is still not good enough.  Of the ten cities with the worst air quality in the country, six are in California.  But the cities with the worst air quality outside of California are Houston and Dallas; someday voters in those cities are going to demand better.  I do think California can do a better job of protecting its environment while making business development easier, but that is the subject of another post.

About Richard K. Green 102 Articles

Affiliation: University of Southern California

Richard K. Green, Ph.D., is the Director of the USC Lusk Center for Real Estate. He holds the Lusk Chair in Real Estate and is Professor in the School of Policy, Planning, and Development and the Marshall School of Business at the University of Southern California.

Prior to joining the USC faculty, Dr. Green spent four years as the Oliver T. Carr, Jr., Chair of Real Estate Finance at The George Washington University School of Business. He was Director of the Center for Washington Area Studies and the Center for Real Estate and Urban Studies at that institution. Dr. Green also taught real estate finance and economics courses for 12 years at the University of Wisconsin-Madison, where he was Wangard Faculty Scholar and Chair of Real Estate and Urban Land Economics. He also has been principal economist and director of financial strategy and policy analysis at Freddie Mac.

His research addresses housing markets, housing policy, tax policy, transportation, mortgage finance and urban growth. He is a member of two academic journal editorial boards, and a reviewer for several others.

His work is published in a number of journals including the American Economic Review, Journal of Economic Perspectives, Journal of Real Estate Finance and Economics, Journal of Urban Economics, Land Economics, Regional Science and Urban Economics, Real Estate Economics, Housing Policy Debate, Journal of Housing Economics, and Urban Studies.

His book with Stephen Malpezzi, A Primer on U.S. Housing Markets and Housing Policy, is used at universities throughout the country. His work has been cited or he has been quoted in the New York Times, The Wall Street Journal, The Washington Post, the Christian Science Monitor, the Los Angeles Times, Newsweek and the Economist, as well as other outlets.

Dr. Green earned his Ph.D. and M.S. in economics from the University of Wisconsin-Madison. He earned his A.B. in economics from Harvard University.

Visit: Real Estate and Urban Economics Blog

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