The Texas Triangle
Ryan Avent writes about Texas’s strong growth, and the possibility that this strong growth will beget more growth:
Austins strength is pretty remarkable, as well, though I shouldnt be surprised given the way Texan metropolitan areas have held up, in terms of home construction and prices at least, throughout this crisis. Interstate migration doesnt necessarily imply anything about preferences; as Ive mentioned many times before, housing supply restrictions in high demand markets make housing there unaffordable, diverting people to places with loose supply and low home prices (Texas!). But agglomerations are powerful, and whatever advantages a growing place began with, it will eventually develop a serious attractive force when it reaches a large size.
Its surely a coincidence, but Californias population loss in 2008 due to domestic migration was almost exactly the same as Texas gain due to same about 140,000. With economies in California, Arizona, and Nevada withering, its not difficult to imagine a shift in population taking on its own momentum.
Agglomerations are indeed a powerful thing. A growing population fuels demand for more specialized services, which spurs the development of larger, more sophisticated and more efficient industries, which in turn attract more people. On the supply side, a growing city means a deepening labor pool, which makes the city more attractive to employers.
For the four large Texas metropolitan areas, the interesting question is, “What is the agglomeration?”
There are two possibilities here. One is that Houston, Dallas, Austin and San Antonio are just four large, independent metropolitan areas, each an independent agglomeration. If this is the case, the growth of one does not particularly benefit the others. On the contrary, the growth of one could hurt the others if they are competitors. If Houston and Dallas were vying to become major banking centers, for example, then a bank gained by Dallas would strengthen its banking industry in absolute terms and relative to Houston’s. Perhaps more importantly, a banking industry split between two competing cities would not enjoy the economies of scale or increasing returns of a banking industry concentrated in one or the other.
The other possibility is that the four metropolitan areas collectively comprise a single agglomeration. Texans have started talking up that idea the last few years (although most refer to it as the “Texas Triangle” rather than the “Texas Agglomeration”).
Fortunately for Texas (if not for its rivals), the latter appears to be the case. I just stumbled upon a 2004 report from the Dallas Fed’s Houston branch (!) which looked at the four cities’ concentrations of industry and concluded that they are complements, not competitors:
The Texas Triangle cities developed as economic complements, providing unique goods to the other Triangle cities and importing goods that represented strength elsewhere. Why is this important? First, it means that the Texas Triangle is in fact a megalopolis in the sense that we can add the pieces together with a minimum of duplication. It is spread over a triangular area of roughly 250 miles on each side. Second, it implies that despite traditional rivalries and competition among these cities, especially Houston and Dallas, they dont really overlap much in their economic roles. We could isolate only a few areas where meaningful rivalry might take placeoil and gas extraction and semiconductors (Austin and Dallas) and heavy construction (San Antonio and Houston).
By and large, however, one or two Triangle cities have such a secure niche in each export industry that others are unable to compete effectively. Given the lack of competition across cities, a cooperative effort at industrial recruitment and economic development programs makes sense, even though the cities are spread over an area as large and diverse as the Texas Triangle.
Put differently, the four Triangle cities export goods and services to one another. They largely export different goods and service, which means that Houston benefits when Dallas grows and vice versa. Houston’s growth provides Dallas firms a larger market for their “exports,” and a growing cluster of Dallas firms provide Houston with more specialized goods and services.
All four metropolitan areas are among the fastest growing in the country. Housing is cheap in all four metropolitan areas (although not in Austin proper), and cheap housing and lots of jobs explain some of that rapid growth. But it is probably also the case that each city is growing rapidly because the other three cities are growing rapidly, too.
