The Importance of Local Fiscal Conditions in Analyzing Local Labor Markets
A new test of the compensating wage differential model is proposed. The logic behind Jennifer Roback's model, which shows how differences in nonproduced amenities may be reflected in intercity wage differentials, is extended to the case of differences in local fiscal conditions, represented by tax rates and publicly produced services. Results show that differences in local tax rates and services provisions do generate compensating wage differentials across cities. The effects of a particularly large set of taxes and effective services output measures are examined. Differences in local fiscal conditions are shown to play important roles in explaining the variance in intermetropolitan wages. Copyright 1989 by University of Chicago Press.
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- Duncan, Greg J & Holmlund, Bertil, 1983.
"Was Adam Smith Right after All? Another Test of the Theory of Compensating Wage Differentials,"
Journal of Labor Economics,
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517, Princeton University, Department of Economics, Industrial Relations Section..
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- Greg J. Duncan, 1976. "Earnings Functions and Nonpecuniary Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 462-483.
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