Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Poverty of States: Do State Tax Policies Affect State Labor Productivity?

Contents:

Author Info

  • McPhail, Joseph E.
  • Orazem, Peter
  • Singh, Rajesh

Abstract

There are substantial differences in output per worker across states that have persisted over time.� This study demonstrates that in the context of a neoclassical growth model, differences in marginal tax rates on income from capital investment, capital ownership, and consumption will lead to persistent differences in labor productivity across states.� These theoretical predictions are supported, using data on state marginal tax rates and output per worker over the 1977-2008 sample period.� Over that period, the mix of state tax policies has led to a reduction in labor productivity averaging almost 2.8% per year.� The implied adverse effect of tax distortions on labor productivity across states is substantial, varying from -1.6% in Nevada to -3.9% in New York.� On the other hand, government expenditure policies explain none of the variation in labor productivity across states or time.� Results allow rankings of state tax structures by their adverse impacts on productivity and by their efficiency at raising revenue relative to lost productivity.�

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p11552-2010-05-26.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 31552.

as in new window
Length:
Date of creation: 26 May 2010
Date of revision:
Handle: RePEc:isu:genres:31552

Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Email:
Web page: http://www.econ.iastate.edu
More information through EDIRC

Related research

Keywords: labor productivity; sales tax; Property tax; income tax; corporate tax; capital gains tax; efficiency; workers’ compensation; unemployment insurance; growth;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. David Alan Aschauer, 1997. "Do States Optimize? Public Capital and Economic Growth," Macroeconomics, EconWPA 9711007, EconWPA.
  2. Benson, Bruce L & Johnson, Ronald N, 1986. "The Lagged Impact of State and Local Taxes on Economic Activity and Political Behavior," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 24(3), pages 389-401, July.
  3. Acemoglu, Daron & Johnson, Simon H. & Robinson, James A., 2003. "The Rise of Europe: Atlantic Trade, Institutioanl Change and Economic Growth," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 4269-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. Paul W. Bauer & Yoonsoo Lee, 2006. "Estimating GSP and labor productivity by state," Policy Discussion Papers, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Mar.
  5. N. Gregory Mankiw & Matthew Weinzierl & Danny Yagan, 2009. "Optimal Taxation in Theory and Practice," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 23(4), pages 147-74, Fall.
  6. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda, Federal Reserve Bank of Chicago 88-7, Federal Reserve Bank of Chicago.
  7. Bania, Neil & Gray, Jo Anna & Stone, Joe A., 2007. "Growth, Taxes, and Government Expenditures: Growth Hills for U.S. States," National Tax Journal, National Tax Association, vol. 60(2), pages 193-204, June.
  8. Ellen R. McGrattan & Edward C. Prescott, 2004. "Taxes, Regulations, and the Value of U.S. and U.K. Corporations," Levine's Bibliography 122247000000000715, UCLA Department of Economics.
  9. Stephen P. A. Brown & Kathy J. Hayes & Lori L. Taylor, 2002. "State and local policy, factor markets and regional growth," Working Papers, Federal Reserve Bank of Dallas 0202, Federal Reserve Bank of Dallas.
  10. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
  11. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  12. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  13. Crain, W Mark & Lee, Katherine J, 1999. "Economic Growth Regressions for the American States: A Sensitivity Analysis," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 37(2), pages 242-57, April.
  14. McGrattan, Ellen R. & Schmitz, James Jr., 1999. "Explaining cross-country income differences," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 10, pages 669-737 Elsevier.
  15. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1076-94, December.
  16. V. V. Chari & Patrick J. Kehoe, 2006. "Modern macroeconomics in practice: how theory is shaping policy," Staff Report, Federal Reserve Bank of Minneapolis 376, Federal Reserve Bank of Minneapolis.
  17. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1.
  18. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 407-37, May.
  19. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers, Centre for Economic Performance & Institute of Economics 23, Centre for Economic Performance & Institute of Economics.
  20. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 949-995, October.
  21. Alberto F. Alesina & Edward L. Glaeser & Bruce Sacerdote, 2006. "Work and Leisure in the U.S. and Europe: Why So Different?," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 1-100 National Bureau of Economic Research, Inc.
  22. Mofidi, Alaeddin & Stone, Joe A, 1990. "Do State and Local Taxes Affect Economic Growth?," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 686-91, November.
  23. Alicia H. Munnell, 1990. "How does public infrastructure affect regional economic performance?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, vol. 34, pages 69-112.
  24. Gasper A. Garofalo & Steven Yamarik, 2002. "Regional Convergence: Evidence From A New State-By-State Capital Stock Series," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 316-323, May.
  25. Joel Slemrod & Jon Bakija, 2004. "Taxing Ourselves, 3rd Edition: A Citizen's Guide to the Debate over Taxes," MIT Press Books, The MIT Press, The MIT Press, edition 3, volume 1, number 026269302x, December.
  26. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  27. Timothy Dunne & Lucia Foster & John Haltiwanger & Kenneth R. Troske, 2004. "Wage and Productivity Dispersion in United States Manufacturing: The Role of Computer Investment," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 22(2), pages 397-430, April.
  28. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  29. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 83-116, February.
  30. Lynde, Catherine & Richmond, J, 1993. "Public Capital and Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 401-14, May.
  31. Mark, Stephen T. & McGuire, Therese J. & Papke, Leslie E., 2000. "The Influence of Taxes on Employment and Population Growth: Evidence from the Washington, D.C. Metropolitan Area," National Tax Journal, National Tax Association, vol. 53(n. 1), pages 105-24, March.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:isu:genres:31552. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Bridges) The email address of this maintainer does not seem to be valid anymore. Please ask Stephanie Bridges to update the entry or send us the correct address.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.