Texas’s border situation is messy, but its economy remains strong and has been for years. Recently released data show that from 2010 to 2019 Texas led the nation in job gains from business relocations. Meanwhile, California led the nation in job losses from relocations. Texas’s economic model of low taxes and modest regulation continues to outcompete California’s high-tax, high-regulation model for businesses and residents.

A new analysis from the Federal Reserve Bank of Dallas of recently released National Establishment Time Series data confirms that Texas has been a magnet for businesses. From 2000 to 2019, more businesses moved to Texas than left, and the gap between in-migration and out-migration widened in the years just before the pandemic, as shown in the figure below.

From 2010 to 2019, over 25,000 businesses and 281,000 jobs relocated to Texas from other states. Some businesses and jobs left, too, but on net Texas gained 7,232 businesses and almost 103,000 jobs. Over this period, Texas was second in net businesses gained, behind Florida, and first in net jobs gained, ahead of Florida, Georgia, Michigan, and Arizona. California, New York, and New Jersey had the largest net job losses as shown below.

Many of the jobs that left California ended up in Texas. Over 44,000 jobs left California for Texas, while only 14,700 jobs moved the other way. Oklahoma and New Jersey also sent thousands of jobs to Texas, while Nevada and Virginia gained the most jobs from Texas.

The proximity of Oklahoma to Texas partially explains the flow of businesses and jobs between them, but proximity does not explain the large inflow of jobs from California and New Jersey. Instead, it suggests that entrepreneurs and workers left these two highly regulated, high-tax states to look for success in Texas, a state with lower taxes, cheaper housing, and an overall friendlier business climate. Dozens of studies show that taxes and regulation impact where businesses and workers locate, and the Dallas Fed’s analysis provides further evidence.

Texas is a big state, so when a business decides to move there, it has a lot of places to choose from. The Dallas Fed’s analysis shows that businesses that moved to Texas mostly chose Dallas or Houston. Both metro areas gained more than 80,000 jobs from relocations from 2010 to 2019. Fort Worth, Austin, and San Antonio each gained less than half as many jobs. This may be surprising given how often we hear stories of tech firms moving to Austin, but it reminds us that high-profile moves like Tesla’s
TSLA
relocation from Palo Alto to Austin are just a small share of all business relocations.

Texas’s success at attracting businesses and jobs over the last decade reminds us that basic insights from economics remain true. People will move to states that allow them to experiment, innovate, and expand their businesses, like Texas, and leave states that bind them in rolls of red tape, like California and New York. People also prefer states with lower taxes since this allows them to keep more of what they earn, whether as workers or entrepreneurs. If nothing changes, we should expect the 2020s to look like the 2010s: States such as Texas and Florida will continue to grow while California and New York stagnate or decline.