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Devolving fiscal policy: migration and tax yields

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  • James Foreman-Peck
  • Peng Zhou

Abstract

Devolution of taxes to sub-national jurisdictions could reduce expected tax revenue if some households move to lower tax regimes, constraining devolved government policy. This paper develops an indirect approach to establishing lower bound revenue impacts of possible devolved tax changes by allowing for tax-induced migration. The results suggest that limited tax devolution, such as conferred on Wales by the UK 2014 Act, could trigger substantial tax revenue and gross value added (GVA) spillovers from migration on the devolved economy. The prospect may have, and perhaps should have, discouraged decentralization of taxation to the same extent as decentralization of spending in the Organisation for Economic Co-operation and Development (OECD).

Suggested Citation

  • James Foreman-Peck & Peng Zhou, 2020. "Devolving fiscal policy: migration and tax yields," Regional Studies, Taylor & Francis Journals, vol. 54(3), pages 308-317, March.
    • Handle: RePEc:taf:regstd:v:54:y:2020:i:3:p:308-317
    DOI: 10.1080/00343404.2019.1602256
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    Cited by:

    1. Chen, Xiaodong & Mi, Haoming & Zhou, Peng, 2023. "Whether to decentralize and how to decentralize? The optimal fiscal federalism in an endogenous growth model," Cardiff Economics Working Papers E2023/11, Cardiff University, Cardiff Business School, Economics Section.
    2. Hao Wei & Linlin Deng & Peng Zhou, 2023. "The impact of globalization on domestic employment," Applied Economics, Taylor & Francis Journals, vol. 55(29), pages 3390-3403, June.

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