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Local Fiscal Policies and Urban Wage Structures

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Abstract

It has long been recognized that average wages vary strikingly across regions and urban areas, in part due to differences in local amenities and fiscal policies. However, analogous differences in wage dispersion remain relatively unexplored. We develop a model suggesting that, after accounting for individual characteristics, wage dispersion across income groups should reflect differences in the relative valuation of local amenities and fiscal policies. We empirically investigate whether there is a link between local taxes and expenditures and the degree of dispersion in the wage structure, and find evidence that such a relationship exists.

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File URL: http://web.williams.edu/Economics/wp/BeesonShoreSheppardWatsonLocalFiscalPolicies.pdf
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Bibliographic Info

Paper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2010-05.

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Length: 42 pages
Date of creation: Apr 2010
Date of revision:
Publication status: published in Public Finance Review, 2010, 38: 540-584.
Handle: RePEc:wil:wileco:2010-05

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Keywords: inequality; wage distributions; local expenditures; local taxes;

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