Migration and the North-South Divide

Lead Research Organisation: London School of Economics & Pol Sci
Department Name: Centre for Economic Performance

Abstract

Some parts of the UK have persistently higher unemployment rates than others - Figure 1 in the Case for Support shows the unemployment rate in 2011 and 1981 in the largest cities. Although some parts of the South perform poorly and some parts of the North perform well, it is remarkable how marked is the 'North-South' divide in the level and persistence of unemployment. It is often argued that migration is the main force that would be expected to equalize economic opportunity across areas - with people moving from disadvantaged to more advantaged areas thus reducing the competition for jobs in high unemployment areas and increasing it in low unemployment areas. According to this view, the persistence in unemployment is primarily caused by a weak migration response and that the solution to the North-South divide is policies to increase migration rates. But in fact, the migration response in the UK is quite strong -Figure 2 in the Case for Support shows that areas with a poorly performing labour market in 1981 had significantly lower subsequent population growth than areas with relatively low unemployment in 1981. Putting these two pieces of information based on Figures 1 and 2 together makes it clear that migration is failing to equalize economic opportunity across areas and we need a better understanding of why. This project aims to do just that.

First, it may be that migration alters the mix of the population in the area moved out of and not in a way that improves the economic prospects of those who are left behind. For example, it may be that more educated individuals are more mobile geographically so that migration from deprived areas acts to depress the skill base there. Our project will use Understanding Society, its predecessor (the British Household Panel Survey) and the Birth Cohort Studies to investigate how individual migration decisions respond to economic opportunity and how this responsiveness varies across different types of individuals. Using the Birth Cohort Studies with their very detailed information on both educational attainment and on non-cognitive skills, we will be able to provide much better evidence of the types of people who move in response to economic opportunity e.g. are more 'dynamic' individuals more mobile as is sometimes claimed?

Secondly, it may be that whilst individuals facing economic hardship are more likely to move out of an area, they may nevertheless be compelled to return to the support of their wider family who may live in an area with no greater economic opportunity than the one they moved out of. Using our data sets one can also investigate the destinations of those who move because of economic shocks.

Finally, the project will also help us to understand the channels by which economic opportunity affects migration decisions. Much discussion assumes it is directly through the labour market. But it is possible that economic shocks to an area cause a deterioration in non-economic aspects of the neighbourhood e.g. because of a rise in crime or a fall in the level of amenities offered. Using the reasons for moving and questions about satisfaction with neighbourhood in Understanding Society and the BHPS the project will disentangle the economic and non-economic channels.

The project will lead to academic research papers to publish in leading peer-reviewed journals. But we also hope to influence the debate around regional policy and how regional inequalities can be reduced. We will write accessible summaries for more popular outlets such as the CEP's Centrepiece magazine and the LSE Public Policy blogs. We will work with our non-academic partners to disseminate the research widely across the country. We will engage with stakeholders through our partners Manchester New Economy and RBS and use the conduit of the What Works Centre, (a partnership between the LSE, government departments, ARUP and the Centre for Cities) as a vehicle for disemmination.

Planned Impact

Our proposed research will have both scientific and policy impacts.

We will ensure scientific impact in the following ways:

1. Our methodology for investigating the impact of economic shocks on migration will be an improvement over much of the existing literature. Most of that literature treats the level of economic opportunity in an area (measured, perhaps, by the unemployment rate) as exogenous. We will seek to use an instrumental variable approach (detailed in the case for support) to provide causal estimates, something rare in the existing literature.

2. The quality of the data with which we can work allows us to answer interesting and important questions that have been largely intractable to date. For example, using the rich data on cognitive and non-cognitive skills available in the Birth Cohort Studies, we can provide evidence on the types on individuals who are most likely to migrate in response to economic shocks. And using the information in Understanding Society and the BHPS on satisfaction with neighbourhood and the reasons for migration we can investigate the channel by which economic shocks affect migration.

3. Our strategy for ensuring quality in research is to subject it to peer scrutiny within the LSE when we are conducting it e.g. through presenting at the work-in-progress seminars and conferences that are run regularly. And, once complete we will circulate as a Discussion Paper and present at conferences and in seminars outside LSE.

4. By pairing an experienced researcher (Manning) with the early career researcher (Amior) we will augment the UK's base of research skills in the social sciences. We will make our files available to other researchers so they can build on our analysis.

With regional inequalities rising up the political agenda with Osborne's "Northern Powerhouse plans" in his 2015 budget,we have an ideal opportunity to engage non academic audiences, in particular regional policymakers, economic development practitioners and local political leaders with the new evidence from our work on the role of migration in mitigating or exaggerating regional inequalities in economic opportunity. We will be helped in this by partnering with Manchester New Economy and the Royal Bank of Scotland and gaining access to their extensive regional networks.

We will ensure policy impact in the following ways:

1. We will produce the results of our research in formats that are accessible and understandable to interested parties outside academia. The channels we will use for this include outlets like CEP's Centrepiece magazine, whose articles are always press-released, and the LSE public policy blogs. Any discussion papers will have non-technical executive summaries.

2. We will work with our non-academic partners to reach out to those interested in and formulating regional policy in the UK and, importantly, not just in London. Workshops are planned towards the beginning and end of the project and a non-technical report will be produced and distributed.

2. We will also take pro-active steps to engage with those interested in and formulating regional policy in the UK including thinktanks like the Centre for Cities and policy-makers. The interested policy-makers are likely to be in both Whitehall and perhaps more importantly, given the focus on regional inequalities, in the devolved administrations for whom we will organise workshops. The main conduit for this will be the What Works Centre, a partnership between the LSE, governments departments, ARUP and the Centre for Cities with whom we will organise further dissemination and workshops.

3. Ultimately we aspire to be able to influence regional policy in the UK. To this end we will use our research findings to assess the likely impact of different policies designed to alleviate regional inequalities. And, ideally, to suggest policies that might work and improve the quality of life in many parts of the UK.

Publications

10 25 50
 
Description The UK (like many other countries) has had persistent regional inequalities in economic opportunity for a very long time. In popular discourse this is often summarized as the 'North-South' divide, an over-simplification but one that does contain a germ of truth. There is renewed interest in this issue since the Brexit vote (and the election of Trump) because of the role that voters in 'left behind' areas seemed to play in both events. There are a number of areas where research under this project help us to understand these issues.
First, contrary to what is often thought, there is a strong response of population in the UK to economic opportunity. Areas with low employment rates (among the working-age population) have lower population growth than areas with high employment rates. Our research shows that the strength of this response is similar to that found in the US. But, while these population movements might be expected to equalize economic opportunity across areas, they fail to do so because the negative shocks hitting depressed areas are very persistent. As fast as population responds, another bad shock comes along so that the gap in economic opportunity is never closed.
Second, our research indicates that the main way in which population responds to economic opportunity is through in-migration. People are only slightly more likely to leave depressed than booming areas but when they do, they are much more likely to move to areas with good economic opportunities. This means that depressed areas end up with a much higher fraction of people who were born in those areas. We also find evidence that people prefer not to live in depressed areas not just because of the impact on job opportunities but because of the effect on crime and, possible, other amenities. And that it is the younger, better educated who are more likely to move.
Third, our research investigates the role and potential for greater commuting to reduced inequalities across areas. The UK is a relatively small country so that greater commuting might seem to offer hope in many (though not all) areas. As average commutes in the UK are short, there would seem to scope to increase it, possibly aided by improvements in infrastructure. Our research indicates, however, that gains from commuting are likely to be small because there are powerful economic forces producing only small variation in economic opportunity over areas to which individuals might commute.
Fourth, we develop an integrated model of commuting and residential location that can be used to think about the causes and consequences of regional inequalities that should be of use in other research on these questions. One of the appealing features of this analytical framework is that it can be used at any level of spatial aggregation - we show that it works well in the UK at both ward and Travel-to-Work Area level.
Exploitation Route After the Brexit Referendum there is a lot of potential interest in policies to address regional inequalities because voters in 'left behind' areas seem to have played an important role in that. And populist political movements in other countries seem to have a base in ex-industrial areas so this interest is not confined to the UK.
We hope that the analytical framework developed in this project can be used by other academics in their research into issues of regional inequalities.
But there is also a lot of potential interest outside academia. The UK government's Industrial Strategy has a strong regional dimension as do ideas about the 'Northern Powerhouse'. And the devolved administrations are also very interested in these issues.
While there is a lot of scope to take this work forward (and more research questions to be investigated), the ability of the main staff on this project to do this are currently limited by the fact that the Principal Investigator became Chair of the UK Migration Advisory Committee in November 2016 and this currently absorbs a lot of his time. There are some synergies with this project e.g. both have a link to the Industrial Strategy and we hope to convene a large-scale workshop on regional inequalities some time in 2018 bringing together academics and practitioners. Much work on industrial strategy and on the differential regional effects of Brexit is being undertaken in the Centre for Economic Performance at LSE by Machin, Dhingra et al via Brexit related and other projects and Manning's work and advice will feed into this.The CEP are currently working on developing better data to describe the geographic spread of industry, and associated variation in labour market patterns like problems of real wage stagnation and the rise of new types of work arrangements, including the gig economy. Attempts will be made to release reports describing the data, map the relevant metrics (including productivity, investment, employment and pay) so that policymakers and stakeholders could benchmark their own regions/sectors. CEP will also investigate trade and FDI impacts of Brexit, and the resulting implications for labour markets and consumers. This will include a deeper analysis of the sectoral and regional dimensions, and should be useful to inform the scope and form of industrial policy response that can be tailored to different regional needs. This analytical work will feed in to the project work that the What Works Centre for Local Economic Growth are planning to engage in with selected local areas.
Sectors Education,Government, Democracy and Justice

 
Description Reducing persistent regional inequalities is one of the central planks of the government's Industrial Strategy. On this theme I have talked with a wide range of stakeholders, including thinktanks like the Resolution Foundation (I spoke at a meeting of theirs on 'mobility matters' in June 2019 but I have also discussed the issue with economsits at the Bank of England. However I have been not been able to put as much time as I would have liked so far into developing this research strand and in disseminating the conclusions to non-academic audiences becasue of my current role as the Chair of the Migration Advisory Committee which is quite time-consuming. However I do want to return to this in the future.
First Year Of Impact 2016
Sector Government, Democracy and Justice
Impact Types Economic

 
Description Policy Discussion (Glasgow) 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact This was a policy roundtable at the University of Glasgow on 2 November 2016 organized in conjunction with the Royal Bank of Scotland, the David Hume Institute and Policy (Scotland). It brought together policymakers from the public sector (e.g. the Scottish Government's Chief Economist) and thinktanks, as well as some academics and economists from RBS. One aim of the roundtable was to provide an outline of the research we were doing on regional inequalities, the issues we thought were important, and the policies that we thought might address the issue. The other aim was for us to hear their perspectives on the same issue, both to guide research and the development of policy. We hope that the contacts established through this will be of use in carrying forward this area of research.
Year(s) Of Engagement Activity 2016
 
Description Policy Discussion (Manchester) 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Professional Practitioners
Results and Impact This was a policy roundtable in Manchester on 16 November 2016 organized in conjunction with New Economy. It brought together policymakers from t thinktanks, as well as some people working on the ground on local economic development. One aim of the roundtable was to provide an outline of the research we were doing on regional inequalities, the issues we thought were important, and the policies that we thought might address the issue. The other aim was for us to hear their perspectives on the same issue, both to guide research and the development of policy. We hope that the contacts established through this will be of use in carrying forward this area of research.
Year(s) Of Engagement Activity 2016