Do Creative Economies Increase Economic Opportunities?

Presented by Ric Kolenda

Do Creative Economies Increase Economic Opportunities?

A Very Preliminary Exploration the Relationships between Inequality, Social Mobility and the Creative Economy

45th Conference, Miami

April 8-11, 2015 Dept. of Geography & Planning

Inequality: 2014 Buzzword of the Year Inequality [i-ni-ˈkwä-ləә-tē] ◗  Growth in income inequality over time & place ◗  Growth in wealth inequality over time & place ◗  Stagnation of social mobility over time & place

Dept. of Geography & Planning

The Zeitgeist: Influential Works Piketty‘s Capital in the Twenty-First

Century

Reich’s film Inequality for All

The Equality of Opportunity Project

Fed Chair Yellen’s Remarks to the Boston FRB

President Obama’s 2015 State of the Union address


Thomas Piketty “The history of the distribution of wealth has always

been deeply political, and it cannot be reduced to purely economic mechanisms.

“…the resurgence of inequality after 1980 is due largely to the political shifts of the past several decades, especially in regard to taxation and finance.”

Piketty, 2014


Federal Reserve Board Chair Janet Yellen “The extent of and continuing increase in inequality in

the United States greatly concern me.

“The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression.”

Yellen, Conference on Economic Opportunity of Inequality, October 2014


President Obama “Will we accept an economy where only a few of us

do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort? ”

President Barack Obama, State of the Union address, January 2015


Why Worry about Inequality? A little is good… ◗  It creates incentives

But a lot is bad… ◗  …for economic growth ◗  …for social stability ◗  …and especially for those left at

the bottom


“At extreme levels, income inequality can harm sustained economic

growth over long periods.

The U.S. is approaching that threshold.”

- S&P Capital IQ, 2014

Richard Florida “…although the broad structural transformation of

our economy splits the labor market and increases the wage gap between major classes, it has only a modest effect on income inequality broadly.

“In fact, the least-skilled and lowest-paid workers…are actually economically better off in more affluent and knowledge-based regions…even if the gap is wider.

Florida, 2011 (emphasis added)


Inequality & Social Mobility


Inequality may affect upward mobility…

…and lack of upward mobility may lead to inequality

…but given high levels of inequality, increasing upward mobility will almost certainly decrease inequality.


Upward Mobility in the 50 Biggest Cities

(Chetty et al.) Dept. of Geography & Planning

Creative Class Cities


(Florida, 2004)

All Cities Not Created Unequal Big cities more unequal by income

Some cities are much more unequal than others ◗  SF vs. Miami ◗  SF – high incomes are very high ◗  Miami – low incomes very low

(Berube, Brookings Institution) Dept. of Geography & Planning

The Geography of Intergenerational Social Mobility in the U.S. What explains the differences?

High mobility areas have: ◗  less residential segregation ◗  less income inequality ◗  better primary schools ◗  greater social capital ◗  greater family stability

(Chetty et al.) Dept. of Geography & Planning

Connecting the Dots


Why Creative Economies? Sociall mobility is a function of capital endowments… ◗  Of physical capital, ◗  economic capital, ◗  human capital, ◗  social capital, ◗  and creative capital?

Creative capital may be the most universal endowment

So, can creative economies increase social mobility?


Hypostheses: Metro-Level Characteristics

Characteristic Relationship Source Residential segregation - Chetty et al., 2014 Income inequality - Chetty et al., 2014 School quality + Chetty et al., 2014 Social capital - Chetty et al., 2014 Family structure + Chetty et al., 2014


Hypostheses: Metro-Level Characteristics

Characteristic Relationship Source Residential segregation - Chetty et al., 2014 Income inequality - Chetty et al., 2014 School quality + Chetty et al., 2014 Social capital - Chetty et al., 2014 Family structure + Chetty et al., 2014 Creative economy + Florida, 2011 Business dynamics + Yellen, 2014


Hypostheses: Metro-Level Controls

Characteristic Source Metropolitan area size (population) Berube & Holmes,

2014 Racial composition (pct. Black & pct. White) Pew, 2012; Chetty

et al., 2014


Economic Mobility Across Generations A majority of Americans exceed their parents’ family income and

wealth

The extent of their absolute mobility gains not always enough to move them to a different rung of the economic ladder

The persistence of the black-white mobility gap undercuts the ideal of equality of opportunity

(The Pew Charitable Trusts Economic Mobility Project)


Correlation Table – Relative Mobility


Absolute Mobility

Crea0vity Index

Crea0ve Class Share

Bus Dynamics -‐ Entry

Bus Dynamics – Jobs Pct. Black Pct. White

Racial Segrega0o

n

Economic Segrega0o

n

95/20 Income Ra0o

Social Capital City Size

Absolute Mobility 1.00 Crea3vity Index 0.04 1.00 Crea3ve Class Share -‐0.05 0.67 1.00 Bus Dynamics -‐ Entry -‐0.04 0.36 0.19 1.00 Bus Dynamics – Jobs -‐0.10 0.16 0.00 0.70 1.00 Pct. Black -‐0.68 -‐0.14 0.02 -‐0.04 -‐0.04 1.00 Pct. White 0.22 -‐0.03 0.01 -‐0.38 -‐0.42 -‐0.28 1.00 Racial Segrega3on -‐0.27 -‐0.01 0.07 -‐0.22 -‐0.23 0.35 0.13 1.00 Economic Segrega3on -‐0.26 0.34 0.38 0.18 0.12 0.25 -‐0.30 0.41 1.00 95/20 Income Ra3o -‐0.40 0.18 0.23 0.16 0.18 0.35 -‐0.37 0.15 0.30 1.00 Social Capital 0.10 0.08 0.19 -‐0.48 -‐0.50 -‐0.03 0.69 0.22 -‐0.10 -‐0.18 1.00 City Size -‐0.10 0.44 0.33 0.49 0.28 0.08 -‐0.24 0.28 0.41 0.09 -‐0.20 1.00

Rela0ve Mobility

Crea0vity Index

Crea0ve Class Share

Bus Dynamics -‐

Entry

Bus Dynamics – Jobs Pct. Black Pct. White

Racial Segrega0o

n

Economic Segrega0o

n

95/20 Income Ra0o

Social Capital City Size

Rela3ve Mobility 1.00 Crea3vity Index -‐0.18 1.00 Crea3ve Class Share 0.00 0.67 1.00 Bus Dynamics -‐ Entry -‐0.41 0.36 0.19 1.00 Bus Dynamics – Jobs -‐0.40 0.16 0.00 0.70 1.00 Pct. Black 0.64 -‐0.14 0.02 -‐0.04 -‐0.04 1.00 Pct. White 0.21 -‐0.03 0.01 -‐0.38 -‐0.42 -‐0.28 1.00 Racial Segrega3on 0.59 -‐0.01 0.07 -‐0.22 -‐0.23 0.35 0.13 1.00 Economic Segrega3on 0.21 0.34 0.38 0.18 0.12 0.25 -‐0.30 0.41 1.00 95/20 Income Ra3o 0.18 0.18 0.23 0.16 0.18 0.35 -‐0.37 0.15 0.30 1.00 Social Capital 0.31 0.08 0.19 -‐0.48 -‐0.50 -‐0.03 0.69 0.22 -‐0.10 -‐0.18 1.00 City Size -‐0.02 0.44 0.33 0.49 0.28 0.08 -‐0.24 0.28 0.41 0.09 -‐0.20 1.00

Correlation Table – Relative Mobility


OLS Regression - Absolute Mobility

Dept. of Geography & Planning Robust standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

Findings – Absolute Mobility No significant correlations with creative class variables

Race & income inequality were highly significant & positive ◗  Including % White

Social capital was somewhat significant & positive

Job reallocation was somewhat significant, but negative


Findings – Relative Mobility No significant correlations with creative class variables

Race, racial segregation & income inequality were highly significant & negative ◗  Including % White

Economic segregation was somewhat significant

Social capital was not significant

Business dynamics variables were both significant & negative ◗  Involuntary job changes?


Conclusions Persistent importance of race

Inequality matters

Business dynamics are positive (mostly) ◗  Involuntary job changes?

Creative class variables not clearly explanatory


Still to Add… Data to add: ◗  Means of top & bottom

income groups ◗  Education variables (K-12) ◗  Family structure ◗  Business exits

Other models: ◗  Bivariate regressions ◗  Top 50 or 100 MSAs ◗  Lagged variables

Other Variables to explore ◗  Wage & income inequality

variables (Florida, 2011) ◗  Unionization (Florida, 2011) ◗  Human capital/ skills

(college grads) (Florida, 2011)

◗  Poverty (Florida, 2011) ◗  Density (Florida, 2011) ◗  Net migration (Moretti, 2012) ◗  Cost of living (Moretti, 2012) ◗  Social safety net (Joy, 2015)


Inequality Is Not a Deterministic Process

“There are powerful forces pushing alternately in the direction of rising or shrinking inequality. Which one dominates depends on the institutions and policies that societies choose to adopt.”

(Piketty & Saez)

Do Creative Economies Increase Economic Opportunities?

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