YOUR LOT IN LIFE MAY WELL BE DETERMINED VERY EARLY ON–by the place from whence you came. A new Harvard Kennedy School (HKS) faculty research working paper suggests that people’s locations are highly persistent and that (randomly) moving to a richer location has large effects on educational and economic prospects for generations. “The Causal Effect of Place: Evidence from Japanese-American Internment” is co-authored by HKS assistant professor Daniel Shoag.
“There are huge differences in economic outcomes across places in the U.S. (for income, education, inequality, etc.),” Shoag writes. “We don't know how much of this is causal though, because different people live in different places. In other words, it's hard to answer how much your economic outcomes would be different if you or your grandparent’s immigration ship landed in Baltimore or Boston. This is an important question for understanding how local economies work. It’s also an important question to understand when we're thinking about where to resettle refugee populations.”
To examine the question, Shoag and co-author Nicholas Carollo analyzed a rich and unique set of data on more than 100,000 Japanese- Americans who were interned during World War II.
“These people, who were mostly U.S. citizens, had their locations randomized for several years. Internees were assigned to seven different states. Due to property confiscations and other problems, many wound up staying. This randomization of location, thankfully, doesn't happen very often,” Shoag writes.
“Moreover, this is a good situation to study the impact of location because this population was tracked down in the mid-1990s for redress payments. This means that, not only do we have good data on people before the randomization, we can learn about outcomes for people and their descendants 50 years later.”
Shoag and Carollo found that location has a large impact on all types of economic and social outcomes – from education and income to socioeconomic status and political values. The difference in incomes for virtually identical people assigned to the best and worse locations is still 11% decades later, and there is a nearly 5 percentage point difference in the likelihood of finishing college. This research may impact future policy discussions about how best to deal with refugee populations – within the United States and elsewhere.
“This research suggests that families resettled in better areas will have better outcomes for generations. This matters beyond just refugees, though, as many government policies enable or impede migration,” Shoag concludes. “What we're finding is that location really matters over long periods and that people get stuck in both good and bad locations. This should help us think about the consequences of those policies.”
Daniel Shoag is an assistant professor of public policy at Harvard Kennedy School and an affiliate of the Taubman Center for State and Local Government. His research focuses on fiscal policy, state and local pension plans, and regional macroeconomics.