In chapter 2 (free PDF) of his book Let Their People Come, economist Lant Pritchett develops a theory of “optimal” populations of regions and argues that, if technological or political shocks cause sudden reductions in these desired populations, and people can emigrate to other regions, then those regions become “ghost” regions — shadows of their former selves, but still doing fine. On the other hand, if people don’t have realistic emigration options after a shock results in a reduction of the optimal population, then the region becomes a “zombie” region — and it is very difficult to recover.
Quoting from the chapter:
The notion of the “perfect mobility” equilibrium or “unconstrained desired” population of a given geographic region is easy to define: “Given the current and expected future economic (policy, institutional, technological) and political and geographic circumstances, how many people would live in a given spatial territory in the long run if there were perfect mobility?” One could define the “optimal” population as the “unconstrained desired population with the best possible policies and institutions” (which does not assume that these “best possible” policies or institutions are homogenous across countries). This distinctionis important because the “unconstrained desired” population of a
region could change very fast (say, due to a civil war or disastrous economic policies), even though the “optimal” population has not changed. In this case, the obvious solution is to stick to “fix policies” or “resolve the conflict” so that the desired and optimal populations move closer. But technological shifts in the world economy can change the optimal populations—even with the best possible policies and institutions. For instance, once sea transport was possible, the (relative, or perhaps absolute) optimal population of regions that thrived on overland commerce declined and those near the coast increased.
Changes in desired populations do not create many pressures for labor mobility if they are small or very gradual. Changes in desired populations might be small or gradual if either (1) the economic fundamentals of the desired population do not change or (2) the mobility of goods or other factors
(capital, trade) can compensate for shifts in region-specific labor demand. Labor mobility is not a big deal for Antarctica because no substantial human populations ever moved there; its attractiveness for human populations has not changed. But the classic counterexample is a regional gold rush—first, people
do not want to be there; then gold is discovered, and many people want to be there; and then, when the gold is mined out, people want to leave. The existence of “ghost towns” even in prospering countries—places that were once booming and attracting migration that subsequently declined and even disappeared—suggest that there is variability to optimal populations.
But even if there are regional shocks, there might not be large variations in the desired population if the mobility of other factors can compensate. Suppose a region attracts population because it relies on one type of economic activity and then some natural or economic shock makes that activity no longer viable. There is no longer any reason for people to be there as opposed to any other place—but they are there. One possibility is that new activities are created and resources (capital) flow to that place and people sustain roughly their same living standards but change their activities. Certainly, in the story
of many of the major cities of the world, the original reason for the city’s location has long since ceased to be relevant (for example, fortification, transport linkages) but the city continues to thrive. Yet there are two other possibilities. One is that new resources do not flow in and the optimal population falls and people leave. The other possibility is that the optimal population falls, perhaps
dramatically, but people are not allowed to leave for more attractive locations due to barriers to labor mobility, and hence all the adjustment to the variability in the optimal population of regions is forced onto real wages and living standards.
Suppose that a realistic feature of a model of the international or interregional economy are region-specific “shocks” that produce, even after all accommodating changes in capital stocks and goods, large persistent changes in regional labor demand. The simplest possible “supply–demand” diagram illustrates the possibilities.
If there are region-specific shocks to long-run labor demand and population mobility is allowed, then the regional supply of labor is elastic in the long run. In this case, one should observe large variability across regions in the growth rates of populations and relatively small variability in the interregional growth of real wages. In this case, large negative region-specific shocks to labor demand can create “ghosts”—regions that consistently lose population (either absolutely or just relatively) (figure 2-1).
If there are region-specific shocks to labor demand but population mobility is restricted and hence the regional supply of labor is inelastic, then the forces will be accommodated with large variability in the growth of wages (and incomes) across regions but relatively small variability in populations. The consequence of a distribution of large region-specific changes in labor demand and restrictions on labor mobility is that there will be regions that experience large, persistent, positive shocks to labor demand and become boom towns. But there are also geographic regions that will experience large, persistent, negative shocks. Because desired (and optimal) populations can fall much faster than the actual population, this will create situations in which the actual population will vastly exceed its new “desired” level.
- If the negative shock is large enough and population movements are allowed, these regions will become actual ghosts.
- If the negative shock is large and other regions prevent labor mobility, then potential ghost countries become unrealized ghosts or “zombie” countries (zombies are the living dead) because nothing, besides out-migration, can prevent an extended and permanent fall in wages.