NCPA - National Center for Policy Analysis


August 19, 2004

Possessing or attracting a large population of skilled, educated workers is the key to long-term economic success, according to a new paper from the National Bureau of Economic Research. Analyzing Boston's economic revival, the authors argue that a good skill base allows cities to reinvent themselves after negative economic shocks.

The researchers note that:

  • In 1980, Boston and Detroit looked a lot alike -- formerly great cities with shuttered manufacturing plants, declining populations, falling real estate prices and long, cold winters.
  • Today, Detroit continues its economic decline, while Boston is enjoying economic success and some population growth.

According to the paper, the different levels of education explain the different results. A 2000 survey found that half of Bostonians between 25 and 34 had college degrees, while Detroit did not have near that many. This allowed Boston to transform itself from a "dying manufacturing town" to a "vibrant information city." The authors observed that as the number of college graduates per capita doubles, the expected growth rate over the decade rises by roughly 4 percent.

The paper acknowledges that skills are not everything. Most notably, a warm, dry climate and an influx of immigrants can also be key ingredients for growth.

Source: Matthew Davis, "Education Level Drives City Growth," NBER Digest, June 2004; based upon: Edward Glaeser and Albert Saiz, "The Rise of the Skilled City," National Bureau of Economic Research, Working Paper No. 10191, December 2003.

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