I am late to covering this excellent piece by David Leonhardt, but it is worth your attention. The core result is this:
Low-income children who grow up in Manhattan make less money as adults than similar low-income children who grow up elsewhere…It’s just that affluent Manhattan children don’t grow up to be quite as affluent as affluent children elsewhere.
To make the case of the affluent child concrete, if the Manhattan parents earn 400k a year, the child at age 26 averages 50k a year, compared to an average of 55k for comparable non-Manhattan kids at that same age. David considers a few hypotheses:
1. That effect is possibly diminishing as Manhattan improves, but the changes doesn’t yet show up in the data.
2. Perhaps Manhattan parents, or Manhattan itself, teach that money is not so important. For one thing, you get interested in culture there. Or maybe you want to become famous more than you want to become wealthy.
3. People who grew up in Manhattan are less likely to be married at a particular age.
4. Manhattan schools are less than perfect.
I would add a few hypotheses (not claims) of my own:
5. Manhattan is a selection of the most ambitious, highest-achieving individuals from elsewhere, and thus if you grow up there ambition and achievement seem to be especially forbidding prospects. Better not to try too hard. Recall David Hume on the “posts of honour” appearing to be filled?
6. Manhattan is a bad place, and bad things happen in bad places.
7. Manhattan families are more likely to spoil their children, create problems of moral hazard by promising or implying future support, and have less of an internal aspirational culture.
8. If you grow up there, Manhattan appears to be the center of the known universe and you are less likely to leave it in pursuit of higher earnings. Fewer people from New Jersey feel this same way, and so they end up in the region with the highest potential earnings for them; that is sometimes but not always New York City. (This mechanism also means Manhattan children are more likely to remain near their parents, see #7.)
9. A lot of Manhattan wealth is linked to finance and entertainment, and other superstar markets, which are maybe “less heritable” in terms of income than that small Midwestern furniture factory.