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Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition

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David E. Wildasin

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Abstract

This paper presents a general-equilibrium model where human capital investment increases specialization and exposes skilled workers to region-specific earnings risk Interjurisdictional mobility of skilled labor mitigates these risks; state-contingent migration of skilled labor also improves efficiency. With perfect capital markets, labor-market integration raises welfare and reduces ex post earnings inequality. If instead human capital investment can only be financed through local taxes, labor-market integration leads to interjurisdictional fiscal competition, shifting the burden of taxation to low-skilled immobile workers. Decentralized public provision of human capital investment creates earnings inequalities and is inefficient.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 90 (2000)
Issue (Month): 1 (March)
Pages: 73-95
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Handle: RePEc:aea:aecrev:v:90:y:2000:i:1:p:73-95

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  5. Douglass C. North, 1994. "Institutional Competition," Economic History 9411001, EconWPA. [Downloadable!]
  6. Williams, Joseph T, 1978. "Risk, Human Capital, and the Investor's Portfolio," Journal of Business, University of Chicago Press, vol. 51(1), pages 65-89, January. [Downloadable!] (restricted)
  7. Joseph E. Stiglitz, 1982. "Utilitarianism and Horizontal Equity: The Case for Random Taxation," NBER Working Papers 0694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August. [Downloadable!] (restricted)
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  9. Wildasin, David E, 1995. " Factor Mobility, Risk and Redistribution in the Welfare State," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(4), pages 527-46, December.
  10. Nechyba, Thomas J, 1997. "Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 351-84, April.
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  11. Eaton, Jonathan & Rosen, Harvey S., 1980. "Labor supply, uncertainty, and efficient taxation," Journal of Public Economics, Elsevier, vol. 14(3), pages 365-374, December. [Downloadable!] (restricted)
  12. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May. [Downloadable!] (restricted)
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  13. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-48, September. [Downloadable!] (restricted)
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  14. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March. [Downloadable!] (restricted)
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  16. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February. [Downloadable!] (restricted)
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  17. Anne Perrot & Philippe Michel & Jacques-FranÚois Thisse, 1996. "Interregional equilibrium with heterogeneous labor," Journal of Population Economics, Springer, vol. 9(1), pages 95-113.
  18. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Wildasin, David E., 2003. "Fiscal Policy, Human Capital, and Canada-US Labor Market Integration," IZA Discussion Papers 889, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Panu Poutvaara, 2004. "Public Education in an Integrated Europe: Studying for Migration and Teaching for Staying?," Public Economics 0406006, EconWPA. [Downloadable!]
  3. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA. [Downloadable!]
    Other versions:
  4. repec:isu:genres:10230 is not listed on IDEAS
  5. Wolfgang Eggert & Tim Krieger & Volker Meier, 2007. "Education, unemployment and migration," Working Papers 7, University of Paderborn, CIE Center for International Economics. [Downloadable!]
    Other versions:
  6. Panu Poutvaara, 2005. "Social Security Incentives, Human Capital Investment and Mobility of Labor," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  7. Panu Poutvaara, 2004. "Public Education in an Integrated Europe: Studying to Migrate and Teaching to Stay?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  8. Volker Grossmann, 2004. "Risky Human Capital Investment, Income Distribution, and Macroeconomic Dynamics," DEGIT Conference Papers c009_028, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  9. Panu Poutvaara, 2007. "The Expansion of Higher Education and Time-Consistent Taxation," IZA Discussion Papers 3023, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Christiane Schuppert, 2007. "Does mobility of educated workers undermine decentralized education policies?," Discussion Papers in Economics 07_01, University of Dortmund, Department of Economics. [Downloadable!]
  11. Kreider, Brent, 2005. "Optimal Wage Taxation When Human Capital and Employment Are Endogenous," Staff General Research Papers 12358, Iowa State University, Department of Economics. [Downloadable!]
  12. Schiff, Maurice, 2004. "Labor Mobility, Trade and Social Capital," IZA Discussion Papers 1027, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  13. David Wildasin, 2008. "Public Finance in an Era of Global Demographic Change: Fertility Busts, Migration Booms, and Public Policy," Working Papers 2008-02, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
  14. Fredrik Andersson, 2002. "Technological Change,Labour Contracts and Income Distribution," Finnish Economic Papers, Finnish Society for Economic Research, vol. 15(1), pages 24-35, Spring. [Downloadable!]
  15. Alexander Haupt & Eckhard Janeba, 2003. "Bildung im Zeitalter mobilen Humankapitals," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(2), pages 173-187. [Downloadable!] (restricted)
  16. Schwager, Robert, 2007. "Public Universities, Tuition and Competition: A Tiebout Model," ZEW Discussion Papers 07-056, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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