WSP05845

• File Number: 8507
• Description: Rio Grande Project
• State: CO
• Basin: Rio Grande
• Date: 7/1/1997
• Title: Water Management Study: Upper Rio Grande Basin part 2
• Water Supply Pro - Doc Type: Report/Study

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The Economic Setting

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growth in important ways.' Estimating the value of the area's amenities is a
difficult task that lies beyond the scope of this study, but other studies
provide some important insights regarding these values.

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One study (Greenwood et al. 1991) examined the patterns of migration
across the fifty states and attempted to determine the relative strength of
two primary motives workers and households have for moving: to earn a
higher wage (adjusted for differences among the states in the cost of living);
and to have access to the particular amenities of the individual states.
Workers tend to move from places with lower wages to places with higher
wages, all else being equal, and from places with lower levels of amenities to
places with higher levels. Hence, to attract and maintain a comparably
productive workforce, employers in places with lower levels of amenities
generally have to pay higher wages than firms in places with higher levels of
amenities. In general, the differential in wages between two states provides
an indirect measure of the differential in the value of the states' respective
amenities.

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Based on migration patterns for 1971-87, Greenwood et al. estimate the
amenity-related differential in wages for each state, relative to a national
average. They find that, on average, the amenity-related differential for
New Mexico is about 8-13 percent. In other words, the amenities of New
Mexico are sufficiently attractive to those who work in the state that, on
average, these workers would not relocate elsewhere in the U.S. unless they
received an increase in wages of more than 8-13 percent. In 1994 total wage-
and-salary earnings in the state exceeded $16 billion, and 8-13 percent of
this amount, approximately $1.3-2.1 billion, represents the annual value
that workers in the state place on those amenities that distinguish New

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. Amenities also play an increasingly important role in detennining the economic fortunes
of rural areas. A recent study of nonmetropolitan counties between the Mississippi River and
the Rockies, from Canada to Oklahoma found that those experiencing growth in jobs typically
are widely perceived to have above-average natural-resource amenities, whereas those
experiencing job declines typically had a high concentration in extractive industries
(Drabenstott and Smith 1996). These and numerous other findings support more general
observations, such as this one (Galston 1992):

"Absent heroic assumptions about the future location of manufacturing plants, there is no
possibility that routine production jobs can soak up excess rural workers in the 1990s as they
did to some extent in the 1970s.... During the 1980s,... [tlhe kinds of natural characteristics
regarded as 'amenity values' by retirees, vacationers, and certain businesses have emerged as
the chief new source ofruraJ comparative advantage. (We may speculate that this relative
advantage has been widened by declining amenities in many urban areas.) Rural places with
substantiallocational assets have commanded the lion's share of nonmetro population and
employment gains."

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