What the Six Californias Initiative Tells Us About Greece
Fiscal Transfers and Open Borders Create Weird Migrations
Greece is in the title. And I promise I’ll have something to say about that. But to get there, I’ll actually talk about California for most of this post. Only when we get to the end will it become clear how this relates to Greece.
Last year, there was an attempt in California to get a proposal on the ballot to split the state into six smaller states. The proposal failed to make it onto the ballot, but it led to some interesting conversations about why we draw borders where we do. Recently, I ran across the “Six Californias” proposal again, and got to thinking: what if California really had broken apart? What might have happened? Would there have been implications for migration?
So today I’m going to imagine that California splits into six states, and explore what that would mean for migration. But first, as usual, a brief digression on the theoretical question that actually interests nerds like me.
Measuring Migration in a Lumpy World
Courgeau’s K
As I got thinking about the question, I realized it’s actually a neat chance to get into a classic problem in migration studies. If I define every square meter of the country as a “region,” then almost every single non-bedridden person in the nation will migrate numerous times every day: so we could have a huge migration rate! But if we define the whole globe as a region, then the migration rate will be extremely small: just a few dozen people have “migrated” beyond the Earth.
In a sense, we can pick the migration rate we want simply based on how we choose to measure it.
Demographers have found workarounds for this problem. Probably the best solution is the use of a number called “Courgeau’s k”, which is a meaningless number in itself equal to the slop of a regression line between several migration estimates for variously sized regions at various times. Courgeau’s k, then, doesn’t readily relate to any real-world migrant experience, but does allow us to compare migration intensity across countries, regardless of how they define their regions of interest. It can be thought of as an abstract represention of the “fundamental migration propensity” for a given population.
But while theoretically interesting, Courgeau’s k, as I mentioned, can’t be readily translated into any kind of migration rate. It doesn’t mean much for you and me, and it doesn’t tell us anything about a single country at a single time: it only has meaning when compared to other time periods or other countries.
So I have two central questions. First of all, given Courgeau’s k, if we redrew California’s internal administrative borders, would measured migration change? Second, if we changed California’s internal borders, is it possible that we might actually alter Courgeau’s k? In other words: might political borders actually mean something? Now of course, to answer these questions, I’ll have to characterize California’s migration regions.
California’s Migration Profile
Defining Six Californias
Normally, the process of defining sub-state migration regions is a real pain. Partly because it involves lots of Google grunt work to learn about the regions in question, and partly because, no matter how you define regions, somebody gets peeved that you lumped them in with That Other County, who are clearly scum-sucking mouth-breathers (see: Louisville).
Thankfully, I don’t have to do that this time. California has chopped itself up very neatly.
These new states aren’t even remotely evenly drawn. You can get details on just how lopsided they are in terms of population, income, public finance, and other factors here.
But what if this had actually happened? People move within California all the time. California is a state with fairly significant net out-migration, but maybe it’s geographically isolated. Freed of all the baggage of the rest of the state, might some of the new California states have managed to get strongly positive net migration?
California’s Migration Profile
California’s Interstate Migration
In order to estimate the domestic net migration rate for each of the Six Californias, I use ACS County-to-County Flows data from 2008–2012, simply because it’s the most recently such data that I had available. For now, let’s assume these trends would carry forward into the immediate post-segmentation future. It turns out that there is no region in California with positive interstate migration versus the rest of the nation. However, once we split up California into 6 states and treat the migration flows among them as interstate migration flows, the story changes: some regions gain substantially, others lose.
The more rural, poorer Californias tend to draw migrants, while the richer, more urban Californias tend to lose them.
These flows are pretty substantial. West California (essentially Los Angeles) would have one of the 10 most negative migration rates of any state in the nation. Meanwhile, Jefferson would have a positive migration rate similar to Texas or Florida. In other words, the California sub-states are not only as big as other states in many cases, but have comparable variation in migration flows.
California’s Migration Profile
California’s International Migration
International migration has nearly the mirror-image pattern as interstate migration. Jefferson, Central, and North California all lag behind, while Silicon Valley and West California lead the way with above-average international net migration.
But however we draw the lines in California, it doesn’t change international migration, provided that merely redrawing the lines won’t alter the global Courgeau’s k or the appeal of migration to California.
California’s Migration Profile
Total Migration Rates in the Six Californias
However you slice up the pie, using these state net migration figures from 2008–2012 will give you the same total migration rate. And the result is that, when we include intra-state, interstate, and international migration, all of California is a gaining region.
Well, except for West California. The reason is fairly obvious: West California (Los Angeles) fails to appeal to domestic migrants. For every 3 migrants it gains from anywhere else in the nation (the other 5 Californias or other states), it loses 4 migrants. Central California has a similarly poor replacement rate with the domestic states other than California, but manages to gain people from the other 5 Californias, especially Silicon Valley and West California. Silicon Valley, meanwhile, loses people to the other 5 Californias at about the same rate as West California, but manages to be more appealing to the rest of the nation while drawing in more immigrants as well.
On the other hand, Jefferson could expect to see significant inflows of migrants. Most of these migrants would come from other parts of California: Jefferson actually loses people to the rest of the nation, and has the lowest international migration rate in California. But thanks to Jefferson’s remarkable ability to poach migrants from the other Californias, these longer-range weaknesses are offset.
Migration With Changing Fiscal Transfers
Direct Impact on Nationwide Gross Migration Rates
If California split into six pieces and migration patterns stayed about the same, then we could expect the nationwide in-state migration rate to fall from 3.16% to 2.96%. That’s pretty significant, and would accelerate a trend we’ve been seeing for some time. On the other hand, interstate migration would jump up from 2.28% to 2.49%, a level we haven’t seen since 2006 in this country. I’ll tell you, if interstate migration jumps to 2.49% next year, there will be news coverage. That’s a big change.
Think for a moment how weird that is. I assumed no change in any migration flows. The average distance of migration was unchanged. The data was identical. I just changed what I considered to be “interstate” migration.
Relatively small changes in how we specify migration regions can cause large changes in observed data.
But maybe there’s more to this story. I mean, in the most extreme case, California would break apart and suddenly have wholly separate taxation and spending regimes, new laws, and numerous other policy shocks. This would create some changes that might themselves induce migration.
Migration With Changing Fiscal Transfers
Indirect Impact of Border Changes
With border changes come policy changes. Those policy changes will, in large part, be determined by certain fiscal realities. Governments can’t spend beyond their means forever.
Using data provided here, I’ve done some back of the envelope calculations on revenues and spending in each state. I’ll spare you the gory details and cut to the chase: South California, West California, and North California, by my calculations, could pretty much maintain their government services and tax levels as they are. Adjustments there would likely be fairly minor.
But in Jefferson, Central California, and Silicon Valley, segmentation would create massive policy questions. For example, I estimate that Jefferson’s government spending is probably about double what it could afford. That means the new State of Jefferson would have to either double its taxes, or slash its social services. Either result is likely to fuel out-migration. In other words, Jefferson’s high migration rate may not be sustainable. Who knows what Jefferson’s migration profile would look like in a post-adjustment world, but certainly the short run outlook is very negative. If Jefferson left California, Californians might just leave Jefferson. But the state had such high migration beforehand, that might not be catastrophic.
Central California meanwhile has an even more severe fiscal imbalance, and less positive migration flows. The jarring fiscal adjustments that would be necessary to balance out Central California’s public finances would almost certainly be accompanied by outflows, and the long-run outlook for the region (especially if water rights became more challenging to acquire) would almost assuredly be negative. Segmentation might mean partial depopulation of Central California.
Silicon Valley, on the other hand, could almost double its government spending, or massively slash its taxes. These policy changes would probably have little direct impact on the main source of migration strength for the state, international migration. But the newfound largesse of the state, or its status as a tax haven surrounded by higher-tax Californias, would almost certainly be substantial enough to slow the tide of out-migration to other parts of California.
When networks of fiscal support are broken up and migration is free, the old subsidy balance has to right itself through changes in fiscal policy, and those changes will induce migration. This isn’t the usual taxes-and-migration argument, by the way. My argument here isn’t that low taxes or big school spending create migration in the long run: it’s that massive, uncompensated shocks create migration. Silicon Valley taxpayers get a huge free lunch when unburdened of Central California, while Jeffersonians get shackled with new fiscal chains. Tax and spending changes in this case occur without offsets, because the former offsets occurred in different, now-unconnected regions. Such massive shocks almost certainly impact migration decisions. If changes in political climate, cultural norms, and regulatory systems come at the same time, then it’s hard to imagine not having big, lopsided migration flows.
Migration With Changing Fiscal Transfers
The Greek Migration Crisis
The above chart shows migration flows to and from Greece as reported by the OECD. The inflow column reflects Greece’s reported inflows from the entire world, while the outflow column reflects only other OECD countries’ reported inflows from Greece. In other words, outflows are probably understated. But even with those understated outflows, the trend is clear.
Once an immigrant-destination country, Greece now experiences net emigration.
The change is large and rapid. In 2005, Greece received about 4.5 times as many immigrants as it had emigrants. But by 2012, emigrants outnumbered immigrants by a factor of 3.
The reasons why are obvious: while all of Europe was economically weak, Greece was the weakest. Most increases in emigrants were bound for Germany, a much stronger economy.
But there’s a changing implied transfer union at work here as well. During its boom years in the 2000s, Greece benefited from a kind of “quiet transfer” through beneficial interest rates. This subsidy from the more credit-worthy countries of Europe (like Germany) enabled Greece to provide its people with a “free lunch” as we call it in economics, or an uncompensated gain. However, while in a tax transfer the offset for that gain occurs in a different location, in a credit transfer the offset for that gain occurs in a different time.
Greece’s time came. Creditors began to call in debts, and the implied transfer collapsed. Now, Greece faces an uncompensated loss. Raise taxes, cut spending: no gains for anyone in the short run. Again, in the long run, I’m agnostic about the best course to take (I’m not a macroeconomist by any stretch of the imagination). But in the short run, the reality is that Greece has the short end of the stick no matter what they do, and so we can consider that Greece faces a kind of inevitable, immutable negative shock.
What might happen with such a shock? Exactly what is happening: fewer people will be attracted to Greece as long as new shocks continue to occur and uncertainty about the future persists, and more Greeks will leave as the cost-benefit balance of Greek residency shifts. We see that already in Greece, and, once we have 2013 and 2014 data, it won’t surprise me if the trend gets even bigger.
A negative fiscal shock will always and everywhere lead to a short-term outflow of people.
In the long run, I don’t know what Greece’s equilibrium level of migration will be. Globally, it’s still a fairly high-income country. It’s still a gateway to the EU. It’s still geographically close to many troubled nations. Maybe it will experience an Iceland-style recovery. Maybe it will limp along for decades. Its long-run rate of migration will depend on those kinds of factors, and so remains uncertain.
Migration With Changing Fiscal Transfers
Conclusion
Whether the subdivision of California, or the slow-motion collapse of Greece, we can spot economic and fiscal shocks very easily in migration data. While migration certainly has large contingent, historical, and personal components (and may also be impacted by things like the weather), the reality is that people make largely economic decisions about where to live and work. In California, an active transfer union supports high migration into poorer, more rural areas. In Greece, a collapsing credit transfer system supported migration into a weak economy. When these systems break down, the shocks to migration are easy to predict. In a world where many economic variables are so debated and seemingly uncertain and hard to forecast, migration during times of economic extremity is simple. Likewise, changes in borders can alter observed migration rates, but can also alter the propensity to migrate. If newly-drawn jurisdictions have the ability to create fiscal and economic shocks, then a changing number of jurisdictions changes the spatial allocation of shocks, which in turn can alter the intensity of migration. In other words, for all you migration nerds out there, Courgeau’s k may be less reliable than you thought.
PS- I mentioned Iceland. Following my logic, we should expect Iceland to have a very positive migration balance in the boom years, then go deeply negative during its crisis, and then turn sharply more positive in recent years. Is that what actually happened?
High migration from 2005–2008. Then a reversal in 2009–2011 due to falling inflows (though still above historic norms) and rising outflows (way above historic norms). As Iceland recovers, outflows have returned to nearer-normal levels, and inflows have stabilized. Badabing, badaboom.
Got to the next post, on migration in the Eurozone.
See my last post, on the long-term history of Kentucky’s migration.
Start my series on migration from the beginning.
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I’m a graduate of the George Washington University’s Elliott School with an MA in International Trade and Investment Policy, and an economist at USDA’s Foreign Agricultural Service. I like to learn about migration, the cotton industry, airplanes, trade policy, space, Africa, and faith.
My posts are not endorsed by and do not in any way represent the opinions of the United States government or any branch, department, agency, or division of it. My writing represents exclusively my own opinions. I did not receive any financial support or remuneration from any party for this research. More’s the pity.
