Why Do Some Cities Grow and Others Not?

In 1980, Austin, Texas, and Syracuse, New York, were roughly the same size. The Austin metro area had a population of about 590,000, and the Syracuse metro area had about 643,000 residents. By 2007, Austin’s population had increased by more than 1 million while Syracuse’s population had been stagnant. That same disparity exists when one examines the growth of employment and real personal income. Another disparity between the two areas is the tax burden. State and local taxes accounted for nearly 13 percent of personal income in Syracuse but only about 9 percent in Austin.

That is Professor Dean Stansel of Florida Gulf Coast University. He compares the growth outcomes in the 100 largest metropolitan areas in the United States, examining the ways in which taxes impact growth prospects. I have reproduced his Figure 1 below:

Dr. Stansel is careful not to over-state his case, writing:

There are clearly numerous other important factors that influence economic growth, and the correlation between taxes and growth found herein do[es] not prove that lower taxes cause higher growth.

But he cites a number of studies that do account for other factors and notes that his research is consistent with those papers.

In this older post, Harvard’s Edward Glaeser cites research making the case that cities with sunshine and little regulation tend to grow the fastest.