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Migration Elasticities, Fiscal Federalism and the Ability of States to Redistribute Income

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  • Giertz, Seth H.

    (University of Nebraska-Lincoln)

  • Tosun, Mehmet S.

    (University of Nevada, Reno)

Abstract

This paper develops a simulation model in order to examine the effectiveness of state attempts at redistribution under a variety of migration elasticity assumptions. Key outputs from the simulation include the impact of tax-induced migration on state revenues, excess burden, and fiscal externalities. With modest migration elasticities, the costs of state-level redistribution are substantial, but state action may still be preferred to a federal policy that is at odds with preferences of a state's citizens. At higher migration elasticities, the costs of state action can be tremendous. Overall excess burden is greater, but this is dominated by horizontal fiscal externalities. Horizontal fiscal externalities represent a cost to the state pursuing additional redistribution, but not a cost at the national level.

Suggested Citation

  • Giertz, Seth H. & Tosun, Mehmet S., 2012. "Migration Elasticities, Fiscal Federalism and the Ability of States to Redistribute Income," IZA Discussion Papers 6798, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6798
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    Cited by:

    1. Colas, Mark & Saulnier, Emmett, 2023. "Vertical migration externalities," Regional Science and Urban Economics, Elsevier, vol. 101(C).

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    More about this item

    Keywords

    excess burden; income redistribution; fiscal federalism; fiscal externalities; deadweight loss;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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