How can economists predict the impact of governments on an area’s population growth?
A recent Dialogue with the Fed event—Does the Number Matter? On Governments and Regional Economic Growth—Regional Economist Charles Gascon walked through a basic model of metropolitan statistical area (MSA) growth that controls for multiple variables, including size, climate and labor force.
“The climate matters a lot,” he said. “You can explain about 30% of the difference in population growth across the country based just on how warm it is in January and how cold it is in December, and how much rain you get, and how many days of sunshine you get.
“I mean, that's just the way the world works,” Gascon joked.
After controlling for all of those variables, Gascon factored in government variables as well: fiscal decentralization, competition and policy measures.
Gascon showed how 10 metro areas’ populations grew compared with the model’s prediction, noting that the growth of the St. Louis MSA has been slower than expected—even after accounting for the impact of governments on growth.
“St. Louis is in the sweet spot for kind of the right size for ideal population growth. It's about 2.5 million to 3 million people,” he said.
The model predicts that St. Louis should have experienced population growth of 12.4% over the last 17 years. However, its population grew by only 5%.