Conventional wisdom says that Georgia, Texas, and the southwestern states have an economic leg up on the northeast because these states are blessed with warm weather, low taxes, and right-to-work laws. Well, the weather’s nice in southern California, but people and businesses are moving to Houston, where the temperature hovers above 90 degrees 99 days a year.
Ok, so maybe it’s not the weather. But what about taxes and other business costs? After all, low taxes and energy costs means it costs less to make something. That’s true, but those cost factors should translate into higher per capita productivity and wages. But Georgia’s per capita state products in 2009 was $36,700 compared to Connecticut’s $58,000.
So why does the south have an edge? Housing. Georgia, Texas, and other growth areas “have built hundreds of thousand of homes despite having low housing prices. Connecticut, Massachusetts, and New York have high prices but far less construction,” Edward L. Glaeser wrote in a recent New York Times article.
What accounts for the difference? Regulations. According to Glaeser, “A rich body of research shows that regulation, which is intense in the Northeast and California but lax in the Sun Belt, explains why housing is supplied so readily down South. The future shape of America is being driven not by quality of life or economic success but by the obscure rules regulating local land use.”
