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How regional differences in taxes and public goods distort life cycle location choices

Author

Listed:
  • Laurence J. Kotlikoff

    () (Boston University)

  • Bernd Raffelhüeschen

    () (Freiburg University (Germany))

  • Christian D. Hagist

    () (Freiburg University (Germany))

Abstract

This paper has considered an issue which only a few considered in the literature on harmonization of regional fiscal policies. The lack of attention paid to location distortions may reflect the sense that few individuals actually move to different states or countries because of differences in fiscal policies. This study confirms this view for the U.S.; for the U.S. economy as a whole the distortion of location choice appears to be small. However, for the four percent or so of Americans induced, by regional differences in fiscal policy, to relocate, the location distortion may range from .5 to 1.5 percent of the present value of their lifetime consumption – which is not small. In addition, the results suggest that location distortions rise geometrically with the size of regional fiscal differences.

Suggested Citation

  • Laurence J. Kotlikoff & Bernd Raffelhüeschen & Christian D. Hagist, 2009. "How regional differences in taxes and public goods distort life cycle location choices," Hacienda Pública Española, IEF, vol. 189(2), pages 47-79, June.
  • Handle: RePEc:hpe:journl:y:2009:v:189:i:2:p:47-79
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    References listed on IDEAS

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    Cited by:

    1. John P. Conley & Robert Driskill & Ping Wang, 2019. "Capitalization, decentralization, and intergenerational spillovers in a Tiebout economy with a durable public good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(1), pages 1-27, February.

    More about this item

    Keywords

    Life cycle location choices; regional tax distortions; regional public goods;

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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