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Working Papers
New Mexico’s Economy Over Time and Space
This report examines New Mexico’s economy over more than a century to inform statewide and regional economic development efforts. By mapping both long-term trajectories and recent changes, the analysis is […]
This report examines New Mexico’s economy over more than a century to inform statewide and regional economic development efforts. By mapping both long-term trajectories and recent changes, the analysis is designed to support effective strategies for state and local leaders as they seek to address persistent challenges, respond to new risks, and leverage unique opportunities across the state’s diverse economies.
Long-Term Perspective (1900–2020)
The first section of this report provides an overview of New Mexico’s longer-term growth path to understand how the past influences the present and future of the state economy. New Mexico’s population never accelerated like some of its neighbors and peers. Slowdowns and uneven growth meant that New Mexico never attracted people in the way that Arizona, Colorado, or Utah did. Recent population growth has been the slowest in the last 120 years for New Mexico, indicating important economic problems that have made people “vote with their feet” to leave the state. Population growth and migration patterns are always co-evolving with what is happening in the state economy. Early in the 20th century, New Mexico’s economy was centered on agriculture, and over the next century, New Mexico saw a uniquely precipitous drop in employment in this sector. New Mexico missed early waves of manufacturing-led industrialization that benefited other states. This likely indicates a limit on how much manufacturing growth is possible moving forward, as the state has fewer latent capabilities and assets than other states that historically had larger manufacturing sectors. Mining, including the extraction of oil and gas, grew to be a critical part of the New Mexican economy and government revenues, but never accounted for more than 10% of jobs. Government activity also grew to be a uniquely large part of the state economy in New Mexico because of both state and federal funding.
Beneath the long-term statewide trends, New Mexico’s economy is striking for the variation of economic performance and drivers across the state. From a long-term perspective, many rural areas are still responding to major economic shocks to their sources of tradable income that often happened many decades ago. In an ideal world, major urban hubs would absorb the outmigration from regions that are losing population. However, as rural communities navigate these challenges, urban areas have not been in a strong enough position to absorb displaced populations from other parts of the state or in-migration from other states. As the state economy has evolved from industries that are rooted in place (such as agriculture and mining) to industries that thrive in more urban settings (such as professional services), the weaknesses of urban economies in New Mexico in comparison to other states stand out.
Medium and Short-Term Perspective (1997-2024)
Several of the challenges of New Mexico over the long-term have continued to play out over the last 25 years. New Mexico’s per capita growth has been relatively low, and its income level has fallen further behind other states, especially within the region. The period of 2005-17 was exceptionally weak, marked by several years of per capita contraction that cannot be explained by national patterns. Arguably, the most important problem over 2005-17 was that state and local government activity followed a procyclical pattern that made the downturn worse when fiscal policy could have been designed to partially offset the pain of the downturn. The decline in the state government activity appears to be driven by a significant drop in tax collection that was only partially cushioned by increased federal spending at the time. While New Mexico is now enjoying a period of more robust growth, an economic upswing since 2018 has yet to offset the effects of a prolonged stagnation. Past dynamics suggest that today’s “boom” in growth will likely be followed by a period of “bust”. Whether the current higher growth trajectory should be expected to continue hinges on the sustainability of current growth drivers and the potential for others to emerge.
Again, beneath these state patterns, there is significant variation in economic performance across New Mexico’s regions. A few urban counties, most of all Bernalillo County, drive the state’s overall economic activity, and their growth has lagged national trends. Counties across the state have growth patterns that are largely uncorrelated with each other. One can see the effects of state-level downturns across many counties, but state growth does not translate equally in all counties. In fact, some counties have grown in a negatively correlated way with statewide growth over the last 25 years. Depending on their local economic drivers, some counties are currently growing rapidly — for example, Lea and Eddy counties, which benefit directly from current oil and gas expansion in the Permian Basin. Several rural counties have seen growth, driven by different sectors in recent years, even as they face long-term pressures. Meanwhile, several urban economies are struggling to absorb population and labor. A deep dive into Albuquerque’s growth finds that an undersupply of housing is the most binding constraint today.
Implications for Economic Strategy and Policy
New Mexico is building on several strengths in its economic development strategy. Recent successes, including major business investments in Albuquerque and Las Cruces and the expansion of universal childcare and tuition-free college, mark important steps forward. The state has channeled a great part of its oil and gas windfalls into permanent funds, ensuring increased reserves for use in education, early childhood, and future flexibility. Annual distributions from these reserves now account for major shares of education spending, and they are projected to become an even larger part of the state budget. New Mexico has also had some success in targeting sectors for investment attraction and in a public push in site development and site readiness for investment. The state also faces new and recurring stressors, and this report has several implications for strategy moving forward. As federal funds recede, the state’s reserves are increasingly needed to offset cuts in healthcare, higher education, and other urgent areas, narrowing available fiscal space for new priorities. New Mexico has improved its ability to save revenues generated during the current resource boom, but it will also have to navigate spending tradeoffs. We suggest more deployment of the state’s fiscal resources to expand regional capacity to attract investment and actions to better address housing supply constraints in urban areas — both of which are small budget items in relation to existing priorities but with large potential gains. While New Mexico is moving in the right direction by targeting sectors and identifying key sites for development, the diversity of regional challenges and opportunities calls for greater regional tailoring. County-by-county analyses of diversification opportunities, using economic complexity methods, are available in this online repository. As for addressing labor supply constraints, investments in childcare and higher education effectively target long-term pressures on talent retention and attraction. However, the principal obstacle remains housing. There are state and local actions that can be taken to allow housing supply to better meet growing demand.
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Working Papers
Women at Work: A Systematic Diagnostic of Female Saudi Employment Gains in Saudi Arabia
Saudi Arabia has witnessed a paradox where high demand for labor did not translate into high labor force participation for Saudi women. Despite possessing higher educational attainment than men, Saudi […]Saudi Arabia has witnessed a paradox where high demand for labor did not translate into high labor force participation for Saudi women. Despite possessing higher educational attainment than men, Saudi women historically faced lower participation rates, higher unemployment, and concentration in lower-paying sectors. This paper examines the paradoxical surge in Saudi women’s employment during a period of economic weakness following the 2014 oil price shock and 2020 pandemic. The study documents unprecedented employment gains driven primarily by new labor market entrants, particularly women with high school education or less, who diversified beyond traditional education and health sectors into retail, construction, manufacturing, and food services. Through empirical analysis of policy reforms implemented between 2016-2022, the paper identifies three key drivers of Saudi women’s employment gains: the removal of legal and social barriers (including workspace requirements and driving restrictions), wage subsidies during COVID-19, and increases in the Nitaqat de facto minimum wage for Saudi workers. While these gains represent historic progress, the analysis reveals concerning trends, including a widening gender wage gap and questions regarding the sustainability of subsidy-dependent employment growth. The paper highlights the need to balance short-term policy interventions to increase women’s entry into the workforce with long-term diversification efforts that align women’s skills and wage expectations with market demands to ensure sustainable and equitable employment outcomes.
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Working Papers
Raising the Bar: A Poverty Line for Global Inclusion
The first of the Sustainable Development Goals adopted by the United Nations in 2015 is “End poverty in all its forms everywhere,” which implies moving beyond “extreme poverty” to an […]The first of the Sustainable Development Goals adopted by the United Nations in 2015 is “End poverty in all its forms everywhere,” which implies moving beyond “extreme poverty” to an array of poverty lines. This raises the obvious question: to complement the dollar-a-day (now P$2.15) global lower-bound poverty line, what is the global upper-bound poverty line (GUBPL)? We propose, empirically estimate, and defend a GUBPL based on two criteria. First, the global poverty line is an absolute level of material wellbeing and treats the world’s people and households equally, not relative to birthplace, residence or citizenship. Second, the distinctive property that separates the standard poverty measures (Foster, Greer, Thorbecke 1984) is that gains in household income/consumption above the poverty line count for exactly zero in reducing poverty. Our second criteria is that a GUBPL should be set at a high enough level of income/consumption that zero gains, while not literally true, is a “close enough” approximation. Our two empirical approaches, based on completely different material wellbeing indicators, both suggest a GUBPL in the range of P$19 to P$40 per person per day. This range for a GUBPL is consistent with a variety of considerations, like national poverty lines and achievement of basics and is consistent with the new World Bank “prosperity gap” standard. A GUBPL of P$21.5 has a nice “focal point” appeal as it is exactly ten times the current global lower bound of P$2.15. A poverty line of P$21.5 makes “development as poverty reduction” an inclusive and ambitious global vision, compatible with existing and future development goals.
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Working Papers
De Facto Openness to Immigration
Various factors influence why some countries are more open to immigration than others. Policy is only one of them. We design country-specifc measures of openness to immigration that aim to […]Various factors influence why some countries are more open to immigration than others. Policy is only one of them. We design country-specifc measures of openness to immigration that aim to capture de facto levels of openness to immigration, complementing existing de jure measures of immigration, based on enacted immigration laws and policy measures. We estimate these for 148 countries and three years (2000, 2010, and 2020). For a subset of countries, we also distinguish between openness towards tertiary-educated migrants and less than tertiary-educated migrants. Using the measures, we show that most places in the World today are closed to immigration, and a few regions are very open. The World became more open in the first decade of the millennium, an opening mainly driven by the Western World and the Gulf countries. Moreover, we show that other factors equal, countries that increased their openness to immigration, reduced their old-age dependency ratios, and experienced slower real wage growth, arguably a sign of relaxing labor and skill shortages.
Explore the country rankings in our interactive visualization website and learn more about the project, Leveraging the Global Talent Pool to Jumpstart Prosperity in Emerging Economies.
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Working Papers
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 […]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).
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Working Papers
How Wyoming’s Exodus of Young Adults Holds Back Economic Diversification
A missing ingredient to Wyoming’s diversification efforts 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.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 -
Working Papers
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 […]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.
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Journal Articles
Leaving Home: Cumulative Climate Shocks and Migration in Sub-Saharan Africa
Environmental and Resource Economics, 87, 321-345.
We combine a multi-country household panel dataset with high-resolution gridded precipitation data to investigate how cumulative climatic shocks affects the decision to leave the households in five sub-Saharan African countries. […]We combine a multi-country household panel dataset with high-resolution gridded precipitation data to investigate how cumulative climatic shocks affects the decision to leave the households in five sub-Saharan African countries. We find that while the effect of recent adverse weather shocks is on average modest, the cumulative effect of a persistent exposure to droughts over several years leads to a significant increase in the probability for a household member to leave the household. We speculate that this pattern can be indicative of increased migratory flows due to increase in the frequency of extremes. -
Working Papers
Supply-Side Economics of a Good Type: Supporting and Expanding South Africa’s Informal Economy
This paper argues that South Africa’s persistently high unemployment is in part explained by abnormally low levels of informal sector activity compared to other developing countries. Using cross-country data, it […]This paper argues that South Africa’s persistently high unemployment is in part explained by abnormally low levels of informal sector activity compared to other developing countries. Using cross-country data, it shows that South Africa is an outlier, with low informality and high unemployment relative to its income level. If South Africa had informality rates consistent with its income level, unemployment would be much lower at around 7% instead of over 25%. The paper explores regulatory barriers, spatial constraints, lack of infrastructure, and crime as key factors inhibiting the growth of the informal sector. To boost informal activity and employment, it recommends a firm-size based policy matrix addressing these constraints, with a focus on regulatory changes to expand market access, zero-rating of licensing fees, provision of critical infrastructure like storage facilities, and transport vouchers and subsidies to connect informal businesses to markets. Implementing such supply-side policy changes could demonstrate the employment potential of the informal sector and build momentum for broader deregulation.
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Journal Articles
A journey through time: the story behind ‘eight decades of changes in occupational tasks, computerization and the gender pay gap’
Industry and Innovation, 31
In this interview article, we embark on a fascinating journey through time alongside the winners of the 2023 DRUID Best Paper Award. DRUID, an annual research conference renowned as the […]
In this interview article, we embark on a fascinating journey through time alongside the winners of the 2023 DRUID Best Paper Award. DRUID, an annual research conference renowned as the hub of cutting-edge research on innovation and the dynamics of structural, institutional, and geographic change, bestows this award on the most innovative and exceptional conference submission. As longstanding allies of DRUID, Industry and Innovation offers an exclusive peek behind the curtains, unveiling the untold stories that underlie award-winning research.
In 2023, this coveted DRUID prize was awarded to a paper by Ljubica Nedelkoska, Shreyas Gadgin Matha, James McNerney, Andre Assumpcao, Dario Diodato, and Frank Neffke. Their work stands out through an impressive data collection effort and the exploration of a compelling and urgent research question – how technological change has impacted the gender pay gap. Throughout this interview, the author team takes us down memory lane, retelling the story behind their research project. On this journey through time, we trace the genesis of the authors’ innovative ideas and the intricate pathways they navigated in their quest to understand the past as a means of unravelling the future of work and its implications for gender inequality in the labour market. This journey not only takes us back in time but also points to potential avenues for future research and open questions that lie ahead.