Final answer:
An economic decline occurs when higher earners leave an area, reducing tax revenue and potentially leading to higher tax rates for those who remain. Businesses with lower operating costs may move into these areas, which can stabilize but not significantly revive the economy.
Step-by-step explanation:
When higher-earning people leave an area, it often leads to an economic decline due to the reduction in total tax revenue available for local government services. This outmigration, sometimes referred to as 'white flight,' decreases the funds necessary for public operations which can lead to detrimental effects on the urban core and subsequently increase the wealth of suburban areas.
If higher earners move out and residences become rentals, leading to a smaller pool of tax funds, the tax rate may potentially increase for the remaining higher earners to make up for the deficit. Furthermore, when tax revenue diminishes and commercial businesses exit, the area could hit 'rock bottom.' Eventually, businesses that tend to operate with lower overhead and can capitalize on lower property costs, like discount stores or dollar stores, may move in. The influx of these businesses can provide basic goods and services; however, they may not contribute substantially to economic revival.
Capital flight and property devaluation will occur as houses become older and the marketable appeal of houses diminishes, often resulting in a vicious cycle of disinvestment. This can result in a decline in property values and can lead to buildings being abandoned and potentially becoming tax-foreclosed properties owned by the city.