A New Algorithm to Efficiently Match U.S. Census Records and Balance Representativity with Match Quality
We introduce a record linkage algorithm that allows one to (1) efficiently match hundreds of millions of records based not just on demographic characteristics but also name similarity, (2) make statistical choices regarding the trade-off between match quality and representativity and (3) automatically generate a ground truth of true and false matches, suitable for training purposes, based on networked family relationships. Given the recent availability of hundreds of millions of digitized census records, this algorithm significantly reduces computational costs to researchers while allowing them to tailor their matching design towards their research question at hand (e.g. prioritizing external validity over match quality). Applied to U.S Census Records from 1850 to 1940, the algorithm produces two sets of matches, one designed for representativity and one designed to maximize the number of matched individuals. At the same level of accuracy as commonly used methods, the algorithm tends to have a higher level of representativity and a larger pool of matches. The algorithm also allows one to match harder-to-match groups with less bias (e.g. women whose names tend to change over time due to marriage).
Growth Through Diversification in Hermosillo
In this report, we study Hermosillo’s economic performance and assess critical issues affecting the city’s ability to achieve stronger economic growth. Although Hermosillo is far from experiencing economic stagnation, it fell behind other cities that managed to become successful economic hubs between 2010 and 2020. The main reason behind this trailing growth is Hermosillo’s relatively low diversification and investment dynamics, especially in the manufacturing sector. We apply growth diagnostic testing on various potential constraints to economic growth: logistics, electricity, water, human capital, housing, and transportation. Although none of them have directly constrained economic growth in the past, some are explicit threats to increasing growth in the future, thus catching up with high-performing peers. Electricity, human capital, and logistics are comparative advantages, while water, housing, and transportation are threats.
In 2025, Mexico is expected to start a new period in its economic history marked by the promise of nearshoring and a new presidential administration. In the past, Mexico has gone through milestones that heavily impacted its economic development path, like the establishment of NAFTA and the China Shock (Hanson, 2010). The rise of Northern Mexico and other regions like El Bajío as global manufacturing hubs has resulted from greater integration with the North American market. This has brought foreign direct investments (FDI) targeted at establishing manufacturing sites primarily to cater to US demand and exports to the rest of the world. Mexico holds high expectations that nearshoring will bring opportunities of the same or greater magnitude. In that context, Hermosillo stands out as a city with the potential to exploit those opportunities and enhance its economic transformation. It is crucial to analyze its binding constraints for economic growth, comparative advantages, and potential concerns to understand how well-positioned Hermosillo is to take advantage of this momentum.
Following the introduction and a methodological overview, the report is divided into four main sections. Section 3 provides a growth perspective on Hermosillo; Section 4 presents an analysis of growth constraints; Section 5 explains the local diversification challenge in detail; and Section 6 describes strategic policy areas to accelerate growth that result from this growth diagnostic analysis.
How Wyoming’s Exodus of Young Adults Holds Back Economic Diversification
Wyoming is a rural Mountain West state with a high Gross State Product (GSP) per capita, foremostly driven by its fossil fuel sector. The state’s longstanding strengths in resource extraction provide much of its livelihood, including both its private earnings and public finances. Its other industries are comparatively much smaller, but Wyoming would benefit from their expansion in order to smooth out resource-related shocks going forward. Importantly, Wyoming should think on a big scale when considering such opportunities. Middling, business-as-usual growth in its non-resource sectors will not fundamentally do much to insulate Wyoming’s economy against resource busts.
One category of diversification opportunities to consider are those in industries tied to the natural endowments of the land. Wyoming generally does well in these sectors, but prospects of further expansion are either highly uncertain or limited in scale. Some of the most promising opportunities are in new energy and critical minerals, but these carry significant technological uncertainty and/or modest income potential. Transformative growth in agriculture is likely to be difficult because Wyoming faces hard constraints on its water consumption, and its tourism income per capita is already among the very highest of any US states. Adding value to raw materials is a commonly-discussed strategy that, in practice, does not work well in the modern economy because raw materials are often easily traded over long distances.
While it is therefore vital for Wyoming to pursue economic activities related to its natural endowments, it must also look to its advanced services and manufacturing sectors. Wyoming is a severe laggard in these industries versus other states, and serious action is needed to generate the large pools of skilled labor that they need to succeed. There is widespread recognition that Wyoming is behind on this matter, and the state has made critical investments in education to bridge this gap. The missing ingredient, however, is keeping young people and families in the state. By the time people born in Wyoming reach their thirties, nearly two thirds have left – one of the highest rates in the country. Without access to this workforce, it is exceedingly difficult for the Wyoming economy to diversify.
Empirically, young Wyomingites and families overwhelmingly leave the state in favor of larger cities. University of Wyoming graduates especially are attracted to large cities a few hours’ drive away from Laramie, Wyoming (where the University of Wyoming is located). These destinations include Fort Collins and Denver. Even if it wanted to, Wyoming could not wave a magic wand to create a large urban metropolis overnight, and it is therefore necessary to understand what specifically attracts young adults and families to these big cities instead of Wyoming towns so that the latter can compete better.
The evidence shows that housing is a surprisingly important factor related to migration decisions on which Wyoming underperforms. Young adults fresh out of university often prefer to live in centrally-located apartments, so that they are close to jobs, restaurants, and friends. Wyoming towns, however, lack dense multi-family housing in their downtown cores as compared to other US towns with very similar overall population. This lack of dense downtown housing suitable for young people contributes to an overall housing supply deficiency, thereby driving up housing prices across the board. It also entails depressed foot traffic in downtowns, leading to fewer customers for local businesses and ultimately fewer urban amenities like restaurants versus Colorado communities – a key result given that surveyed University of Wyoming students report that restaurants are their top desired urban amenity.
The main reason there is not denser housing in Wyoming downtowns is because strict regulations have illegalized them. A plethora of restrictions exist around issues like minimum lot sizes, maximum building heights, minimum parking space requirements, maximum dwellings per unit of area, and more. Studies show that Wyoming is more overregulated than other communities when it comes to restrictions on housing density. Other places successfully leave these decisions to the free market rather than government, and Wyoming could remove these restrictions to increase its supply of housing for young people at no cost. There is additionally a lack of funding for arterial infrastructure in Wyoming, such as water and sewage lines, which drives up development costs.
A general lack of funding for community assets arguably also affects young peoples’ and families’ migration decisions. There is evidence that community demand for investment outstrips supply in water and transport infrastructure, and that many counties use allotted sales tax expansions (“Penny Taxes”) very frequently. One way Wyoming could direct more funding to its local communities is via an expanded grants management system; Wyoming gets less federal grant funding per person than other rural US states, and based on interviews this is tied to a lack of dedicated staff who can navigate the significant overhead associated with following and applying for grants.
Overall, while Wyoming is currently a laggard on advanced service and manufacturing industries there are concrete steps it could take to compete better by retaining more of its young people. Wyoming’s Pathways to Prosperity economic development project has already enacted a number of changes to support that outcome, but more can be done. With denser downtowns and more funding for community assets, Wyoming would bolster both its economic and cultural vitality by keeping its young people and leveraging them to obtain growth in new industries.
Related project: Pathways to Prosperity in Wyoming
Escaping from Hardship, Searching for Comfort: Climate Matching in Refugees’ Destination Choices
Do refugees settle in destinations that are ecologically similar to their origins? We assess the relevance of “climate matching” theories of migration for Venezuelan refugees in South America. Leveraging social media data, we build and validate the first local bilateral matrix of Venezuelan flows across the region. We measure bilateral ecological similarities in terms of temperature, precipitation, elevation, and distance to the coastline. Performing Poisson Pseudo-Maximum Likelihood gravity models of migration, we show that Venezuelan flows are more likely between ecologically similar areas. Model predictions explain independent measurements of Venezuelans’ settlement choices at both bilateral and destination levels.
Green Growth Opportunities for Hermosillo: Supplying the Global Energy Transition
As the world decarbonizes, demand for products that enable the green transition will increase rapidly. Solar panels and wind turbines will be needed to generate renewable energy, and critical minerals like copper and lithium will be required for wiring and batteries. Many other products and services within supply chains for such “green products” have a similar dynamic but are less widely known. While reducing carbon emissions often comes in conflict with economic development goals, producing the products that enable the world to decarbonize presents a significant opportunity for places to diversify their economies and generate income for their citizens.
This section analyzes Hermosillo’s opportunities to produce green products. We analyze the industries which produce these green products and Hermosillo’s capabilities in those industries in the most granular detail that data currently allows. We find not only that Hermosillo can produce products needed for the green transition and thus capture new sources of income for its people and businesses, but also that many of these products are good stepping stones for future economic activities. In the process of learning how to produce these products, Hermosillo can better enable further diversification opportunities. We classify these opportunities accordingly, along both the intensive margin –– industries in which Hermosillo already has a revealed comparative advantage –– and the extensive margin, in which it does not.
The most immediate green opportunity for Hermosillo lies in the mining of metals. Critical minerals required for the green transition, such as lithium and copper, are present in Sonora, but recent federal policy changes threaten expansion and productivity. The Government of Sonora needs to leverage its experience dealing with mining interests, environmental issues, and the demands of local communities to help co-produce mining policies which are both sustainable and productive. These can have positive spillovers in Hermosillo in the form of mining services growth and the location of mining company headquarters in the city, as in the past.
Overall, Hermosillo has opportunities to leverage the green transition to help diversify its economy, but it is not as well-positioned as its peers. Hermosillo will need to coordinate investment efforts in order to compete with peer cities, who are better positioned to take advantage of these opportunities today. Industries such as manufacturing of electronic components and semiconductors and manufacturing of plastics products are among the more feasible and attractive industries for Hermosillo to target for promotion. Coordinating the manufacturing of green inputs with efforts to take advantage of solar energy resources is a strong strategy for the city. Large solar parks will need to be constructed to harness the cities’ solar energy resources. By using the planned build-out of these industries as a source of final demand, Hermosillo may be able to out-compete peer cities in attracting a solar panel OEM, which would help diversify the city into electronic components and semiconductors, as well as into the manufacturing of electric generation equipment.
Green Growth Opportunities for Hermosillo: “Powershoring”
The process of global decarbonization offers significant growth opportunities for Hermosillo, given its outstanding solar power potential. As fossil fuels are relatively cheap to transport, they created an “energy flat world,” allowing industries to thrive in locations that are far away from energy sources. Renewable energy, however, is much more costly to transport. Because of this, energy-intensive industries are naturally incentivized to relocate to areas with competitive green energy in a decarbonizing world ––something known as “powershoring.” Powershoring is a green growth opportunity for Hermosillo; that is, a pathway for Hermosillo to accelerate its own economic growththrough helping the global economy to decarbonize. Powershoring is becoming an increasingly important opportunity as businesses face carbon taxes and other costs inconsuming fossil fuel energy, which come from both regulators and consumers.
Hermosillo’s powershoring strategy should involve both attracting new industries and exploring new growth opportunities for existing industries. On the intensive margin of existing industries, companies may expand by integrating renewable energy into their own consumption of renewable sources. Hermosillo can build on its strengths in the food and agricultural sectors. On the extensive margin of new industries, attractive opportunities arise in the chemicals manufacturing cluster, the glass and ceramics cluster, and the semiconductors and electronics cluster. The industries identified in these clusters can be targeted for potential investment promotion efforts, given their large energy demands. In this report, we provide initial observations on several of these industries from an investment promotion perspective.
To establish Hermosillo as a prime destination for industries seeking lower emissions, government and industry must work together on long- and short-term strategies. A significant obstacle is the intermittency of solar energy, which is subject to weather variability and the unavoidable reality that the sun does not shine at night. A current approach by companies is to use energy from the grid in combination with green energy certificates to offset resulting carbon emissions, but this practice is untenable for some end consumers. Over the longer-term, intermittency could be resolved through advances in battery storage and connections to neighboring regions, where wind power and other complementary renewable energy can be sourced. Since decarbonizing the grid is a long-term scenario, early movers can capitalize on opportunities through green industrial parks that provide a dedicated supply of renewable energy. The region’s energy infrastructure will need to evolve to ensure stability, but the short-term focus should be on industries that align with Hermosillo’s existing capabilities and renewable potential. Prioritizing sectors where processes are more easily electrified, and water needs are manageable appears to be the most logical place to begin a dynamic process of attracting and growing powershoring opportunities in Hermosillo.
Global Trends in Innovation Patterns: A Complexity Approach
Technological know-how in a country shapes its growth potential and competitiveness. Scientific publications, patents, and international trade data offer complementary insights into how ideas from science, technology, and production evolve, combine, and are transformed into capabilities. Analyzing their trajectories enables a more comprehensive and multifaceted understanding of the whole innovation process, from generating ideas to internationally commercializing products. We analyze the production patterns in these three domains, documenting the differences between advanced and emerging market economies. We find that future income, patenting, and publishing growth correlate with the economic complexity indices calculated from these domains. Capabilities embedded in the country also shape future diversification opportunities and make the innovation process path dependent. Lastly, we also show that diversification opportunities can be inferred across innovation domains.
Innovation Policies Under Economic Complexity
Recent geopolitical challenges have revived the implementation of industrial and innovation policies. Ongoing discussions focus on supporting cutting-edge industries and strategic technologies but hardly pay attention to their impact on economic growth. In light of this, we discuss the design of innovation policies to address current development challenges while considering the complex nature of productive activities. Our approach conceives economic development and technological progress as a process of accumulation and diversification of knowledge. This process is limited by the tacit nature of knowledge and by countries’ binding constraints to growth. Consequently, effective innovation policies should be place-based and multidimensional, leveraging countries’ existing capabilities and addressing countries’ current problems. This contrasts policies that lead to economic efficiencies, such as copying other countries’ solutions to problems that countries do not currently have.
Diagnosing Wyoming’s Workforce Challenges
Wyoming is facing two distinct labor market challenges: in the short-term low workforce availability is a constraint while in the long-term job and wage growth have stagnated. Currently, Wyoming’s labor market is characterized by tightness and employers are struggling to fill positions. However, the current tightness of the labor market is not a phenomenon that is specific to Wyoming but instead is prevalent across the country. What sets Wyoming apart is the lack of growth in employment and wages over the long-term. Understanding these differing dynamics is important because policy responses may attempt to address the short-term issue without considering the underlying structural causes of the long-term dynamics. This will likely be ineffective and not lead to lasting change. For lasting change, the structural issues of the long-term dynamic need to be addressed.
An often-discussed solution is to increase the supply of training and education – this has merits in its own right but will not solve the long-term labor market challenge facing Wyoming. Only 38% of all jobs in Wyoming require tertiary education, the second lowest of any US state. Additionally, our analysis shows that the returns to a tertiary degree in Wyoming are significantly below those of its peers. Unsurprisingly, the lack of demand for tertiary-educated workers leads many young Wyomingites with a tertiary degree to leave the state. Overall, however, Wyoming has become an exporter of well-trained young people. Increasing the supply of tertiary education will not address the underlying structural issues facing the labor market.
A main driver of Wyoming’s lagging performance has been the comparatively low labor productivity in the state. Most of Wyoming’s industries have a lower output per worker than the respective national industry and pay lower wages on average. Industries that fall into this category cover 82.8% of all employment in Wyoming. The few industries in which Wyoming is more productive than the rest of the US are mostly related to natural resource extraction. Wage dynamics of occupations in the state exert a similar pattern where STEM-related occupations have not seen much growth, indicating low demand in the state.
To address the long-term issue, Wyoming needs to create the conditions for a more complex economy that can use the potential of its human capital instead of excessively relying on its natural resources. The challenge is to attract and grow competitive companies in industries with strong demand. A critical factor in doing so is scale. Many more knowledge-intensive industries tend to develop in places that are larger urban agglomerations. Wyoming should focus on the positive forces of agglomeration to develop these industries and make use of the productive potential it has. Creating the conditions for this includes place-based investments and an enabling regulatory framework. In Wyoming, housing regulations have been an important barrier preventing further agglomerations, but efforts are underway to address this barrier.
In the short-term, solutions that are focused on increasing the available labor pool within the state appear most promising in easing the current constraint. This is especially true when they address structural barriers that could persist after the labor market cools off. Our work documents specific recommendations within the areas of childcare, justice-involved individuals, higher education, and out-of-state workers (Section 3.2) that aim to increase the participation from these labor pools in Wyoming’s workforce. These are labor pools that are significant in size and have underutilized potential in terms of labor force participation within the state.
Related project: Pathways to Prosperity in Wyoming
From Products to Capabilities: Constructing a Genotypic Product Space
Economic development is a path-dependent process in which countries accumulate capabilities that allow them to move into more complex products and industries. Inspired by a theory of capabilities that explains which countries produce which products, these diversification dynamics have been studied in great detail in the literature on economic complexity analysis. However, so far, these capabilities have remained latent and inference is drawn from product spaces that reflect economic outcomes: which products are often exported in tandem. Borrowing a metaphor from biology, such analysis remains phenotypic in nature. In this paper we develop a methodology that allows economic complexity analysis to use capabilities directly. To do so, we interpret the capability requirements of industries as a genetic code that shows how capabilities map onto products. We apply this framework to construct a genotypic product space and to infer countries’ capability bases. These constructs can be used to determine which capabilities a country would still need to acquire if it were to diversify into a given industry. We show that this information is not just valuable in predicting future diversification paths and to advance our understanding of economic development, but also to design more concrete policy interventions that go beyond targeting products by identifying the underlying capability requirements.