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Opportunity For Business: Allow Employees To Choose Where They Live And Work

Commentary: Geoarbitrage is the idea, popularized by Tim Ferriss, that the digital workplace allows people to live anywhere yet still be able to do their job via internet commuting, so one might as well live where the costs are lower. Different geographical areas have different cost of living. One can take advantage of this to obtain a higher standard of living than would otherwise be possible. Get a job in San Diego with a San Diego salary, but live Berlin and pay Berlin rents and Berlin medical prices.

Consider this: Who is richer, a woman who works 70 hours a week to earn the $150,000 need to survive in Manhattan or a similar woman earning $75,000 working three days a week in Chiang Mai. If you say the second women, then you are a candidate for geoarbitrage.

We border dwellers are familiar with this concept. Thousands of commuters cross the border every day. A job in El Paso and a home in Juarez—most of us know someone who does this. Border commuting is even more popular in other locations on the border with the San Diego-Tajuana having the busiest border crossings

To be a good candidate for geoarbitrage, a location needs to have a low cost of living, a good internet connection, and be a safe area. Other important factors include fluent English, great food and culture, quality health care, and outdoor activities. High on the list of locations are Chiang Mai, Thailand; Bali, Indonesia; Tallinn, Estonia; Medellin, Colombia; and Ogden, UT.

Low costs, high flying lifestyle. So why aren’t more people doing this? In fact, why don’t we all pick up sticks and more Prague (another city on the best places list)? Prague is a very nice place and cheap. I know, I just spent three days there.

First, proximity is a critical element in many collaborations. Especially among the creative classes, being in the next office, able to consult a colleague does help. There is a reason why Silicon Valley is Silicon Valley and the Research Triangle is the Research Triangle, proximity promotes creativity.

Second is culture. Many of us prefer to be around the familiar. Living in a foreign country becomes a struggle for these people. Even those of us who like other cultures, there can be limits.

For many, living in a foreign country becomes mentally exhausting at some point. The novelty of the unfamiliar is replaced with homesickness, loneliness and a desire to go home. One wanted to be among the familiar, where culture expectations are well understood. Home is where the customary makes the daily struggle less of a struggle.

A third reason is the lifestyle afforded by many high cost of living locals. Expensive places are places where people like to live. Why do people pay so much for a Boston brownstone? Because Boston has many cultural and entertainment venues. Why do people move to high cost Boulder, CO? Because there is lots to do there.

Of course, the whole idea behind geoarbitrage is that you can find underpriced life style. And certainly, for the right person, this can be tempting. But for many of us, paying more for a better life style and so that we can be among the familiar+ is the strategy we will adopt.

Then there is the different type of geoarbitrage that we often see on the border, where what is being arbitraged is not cost of living, but personal safety. Continue to work in Juarez but move the family to El Paso, away for narcos.

Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He has traveled to more than 30 countries and lived for extended periods in Costa Rica, India, Taiwan and Colombia.