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Credible Redistributive Policies and Migration across US States

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  • Roc Armenter

    (Federal Reserve Bank of Philadelphia)

  • Francesc Ortega

    (Universitat Pompeu Fabra)

Abstract

We ask whether worker mobility has undermined the ability of U.S. states to redistribute income. We build a tractable model where both migration decisions and redistribution policies are jointly determined. Our model features a large number of heterogeneous regions and skilled and unskilled workers with idiosyncratic migration costs. The calibrated model is able to account for the main features of interstate migration in the US, as well as some qualitative features of the cross-sectional distribution of redistributive policies. We conduct a counterfactual experiment in order to isolate the effect of worker mobility on state-level redistributive policies. We find that migration has induced substantial convergence in tax rates across U.S. states, but no race to the bottom. Interestingly, the degree of convergence has been much lower for transfers due to an offsetting tax-base effect. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2010.02.001
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 13 (2010)
Issue (Month): 2 (April)
Pages: 403-423

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Handle: RePEc:red:issued:09-58

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Related research

Keywords: Labor mobility; Redistribution; Credible policies;

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References

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  9. Armenter, Roc & Ortega, Francesc, 2011. "Credible redistribution policy and skilled migration," European Economic Review, Elsevier, vol. 55(2), pages 228-245, February.
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Citations

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Cited by:
  1. Christian Bayer & Falko Juessen, 2006. "On the Dynamics of Interstate Migration: Migration Costs and Self-Selection," Discussion Papers in Economics 06_03, University of Dortmund, Department of Economics.
  2. Giuranno, Michele G. & Rongili, Biswas, 2012. "Inter-jurisdictional migration and the size of government," MPRA Paper 42604, University Library of Munich, Germany.
  3. Armenter, Roc & Ortega, Francesc, 2011. "Credible redistribution policy and skilled migration," European Economic Review, Elsevier, vol. 55(2), pages 228-245, February.
  4. Daniele Coen-Pirani, 2006. "Understanding Gross Workers Flows Across U.S. States," 2006 Meeting Papers 459, Society for Economic Dynamics.

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