Costly Migration and the Incidence of State and Local Taxes
AbstractThis paper incorporates costly migration into the empirical literature on the incidence on wages of states and local taxes. The responsiveness of pre-tax wages to changes in state and local taxes (including income, sales and property taxes) is shown to vary by age and education. Using repeated cross-section and pseudo-panel regressions, the paper shows that the pre-tax wages of highly-educated and experienced workers are relatively unresponsive to tax changes. The wages of young and highly-educated workers – those facing the lowest costs of migration – are quite responsive. Results from migration regressions confirm that low migration cost households respond to state and local tax changes, while higher migration cost households do not. In addition, property taxes do not appear to be influencing shifts in pre-tax wages. Relatively small responses of both high and low-income workers suggest that redistributive effects of regressive or progressive state-level taxes are not undermined by labor supply shifts. In practice, however, states with relatively progressive tax structures also impose relatively high taxes on young and highly-educated workers, whose responsiveness is likely generating considerable deadweight losses and not contributing to redistribution in after-tax wages.
Download InfoIf 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.
Bibliographic InfoPaper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp251.
Date of creation: 2011
Date of revision:
Find related papers by JEL classification:
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
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.:
- Wallace, Sally, 1993. "The effects of state personal income tax differentials on wages," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 611-628, November.
- David E. Wildasin, 1993.
"State income taxation with mobile labor,"
Journal of Policy Analysis and Management,
John Wiley & Sons, Ltd., vol. 12(1), pages 51-75.
- Erhan Artu� & Shubham Chaudhuri & John McLaren, 2010.
"Trade Shocks and Labor Adjustment: A Structural Empirical Approach,"
American Economic Review,
American Economic Association, vol. 100(3), pages 1008-45, June.
- Erhan Artuc & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," NBER Working Papers 13465, National Bureau of Economic Research, Inc.
- Jon Bakija & Joel Slemrod, 2004.
"Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns,"
Department of Economics Working Papers
2004-12, Department of Economics, Williams College.
- Jon Bakija & Joel Slemrod, 2004. "Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns," NBER Working Papers 10645, National Bureau of Economic Research, Inc.
- Quiggin, John, 2001. "Valuing Publicly Provided Services," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 291-304, September.
- Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
- Harvey S. Rosen, 1986. "Studies in State and Local Public Finance," NBER Books, National Bureau of Economic Research, Inc, number rose86-1, May.
- Andrew Leigh, 2005. "Can Redistributive State Taxes Reduce Inequality?," CEPR Discussion Papers 490, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- John Kennan & James R. Walker, 2003.
"The Effect of Expected Income on Individual Migration Decisions,"
NBER Working Papers
9585, National Bureau of Economic Research, Inc.
- John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, 01.
- Kennan,J. & Walker,J.R., 2003. "The effect of expected income on individual migration decisions," Working papers 7, Wisconsin Madison - Social Systems.
- Stephen Cameron & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: Theory," NBER Working Papers 13463, National Bureau of Economic Research, Inc.
- Howard Chernick, 1997. "Tax Progressivity and State Economic Performance," Economic Development Quarterly, , vol. 11(3), pages 249-267, August.
- Joshua L. Rosenbloom & William A. Sundstrom, 2003. "The Decline and Rise of Interstate Migration in the United States: Evidence from the IPUMS, 1850-1990," NBER Working Papers 9857, National Bureau of Economic Research, Inc.
- Gardes, Francois & Duncan, Greg J. & Gaubert, Patrice & Gurgand, Marc & Starzec, Christophe, 2005. "Panel and Pseudo-Panel Estimation of Cross-Sectional and Time Series Elasticities of Food Consumption: The Case of U.S. and Polish Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 242-253, April.
- Harvey S. Rosen, 1986. "Introduction to "Studies in State and Local Public Finance"," NBER Chapters, in: Studies in State and Local Public Finance, pages 1-4 National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Judy Fogg).
If references are entirely missing, you can add them using this form.