Why has Bozeman Resisted the Growing Urban-Rural Divide?

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As Bozeman residents are extremely aware, Bozeman is one of the fastest growing cities in the country, and is in fact the fastest growing of its size. Likewise, the Gallatin County economy is the country’s strongest of its size in terms of job growth (although wage growth has remained stubbornly sluggish).

What is interesting about Bozeman’s growth is that it goes against the grain of America’s geographic economic trends. The story of the last few decades has been a significantly widening gap between rural and urban counties, in terms of both economic and population growth. If you peruse the list of fastest-growing counties by state over the 2010s, most of the counties in the same ballpark as Gallatin in terms of growth are either suburbs of large cities or metropolitan themselves. Bozeman has no large cities within a commuting distance, so its breakneck growth is highly unusual.

So why has Bozeman bucked the national trend? There is no doubt a myriad of reasons, but I believe that a combination of two factors stand out. One is Montana State University, a school with many strong STEM programs (Science, Technology, Engineering, Mathematics) that provide a steady stream of high-skilled workers in a relatively low-cost area (relative to places like Silicon Valley, that is). A Brookings Institution analysis from 2015 found that the average Bachelor’s degree holder adds $278,000 in consumption to a local economy relative to a high school graduate over the course of a lifetime, and that 42% of alumni from four-year colleges remain in the area of the college after graduating.

But of course, there are many excellent colleges in rural areas. And while they have been one of the few effective bulwarks against the growing urban-rural economic divide, few college towns are growing like Bozeman. Which brings me to the second reason: the outstanding natural amenities and the tourism it provides. Hundreds of thousands of tourists come through Yellowstone airport throughout the year for skiing, National Park visits and fly fishing, among other activities.

Tourism of course helps the local economy directly, but a crucial indirect benefit is that it sustains a well-connected local airport. Prior to airline deregulation in 1978, the Civil Aeronautics Board was tasked with maintaining equitable levels of air service and fares in regions across the US. After deregulation airlines have primarily focused on major cities and left rural areas behind. Trucking and railroad service and prices were similarly deregulated in the late 1970s (see this article for a detailed summary). The result is that it’s simply much more difficult to get to and from many rural regions in the US, which severely limits economic potential. But Montana’s growing status as a world-class tourist destination, and Bozeman’s airport in particular being the main tourism portal, has resisted this trend.  

I have outlined what I believe to be two of the most important factors driving Bozeman’s unusual growth, but there are likely policy decisions made at the state and local levels that are important as well. I may explore these in a future post, but in the meantime I would like to hear any further reader insight on Bozeman’s economy.  

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Brock Smith is an Assistant Professor in the Department of Agricultural Economics and Economics at Montana State University. He received a PhD from UC-Davis in 2013 and spent three years as a Research Fellow at the Oxford Centre for Analysis of Resource Rich Economies. He mainly studies effects of oil and natural gas shocks in both an international and domestic US setting.

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