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Should I Stay or Should I Go? The Impact of Taxation on Canadian Inter-Provincial Migration

Author

Listed:
  • Adam Lavecchia
  • Robert McKercher
  • Alisa Tazhitdinova

Abstract

This paper estimates the causal effect of income taxation on inter-provincial migration in Canada. We exploit a major tax decentralization reform between 1998-2001 that led to some provinces lowering their marginal and average tax rates more than others, particularly for top earners. Using a difference-in-differences design, we estimate a population stock-elasticity with respect to the net-of-average-tax rate of about 2.5-3 for young, unmarried high-income individuals. The estimates for older and married individuals are smaller and mostly statistically insignificant. We find that the population stock elasticity estimates are driven by a reduction the likelihood that young, unmarried and high-income individuals emigrate from their province of residence (i.e. out-migration) rather than a change to in-migration. This suggests that individuals react more strongly to tax changes in their home province rather than tax changes in other provinces.

Suggested Citation

  • Adam Lavecchia & Robert McKercher & Alisa Tazhitdinova, 2026. "Should I Stay or Should I Go? The Impact of Taxation on Canadian Inter-Provincial Migration," CESifo Working Paper Series 12600, CESifo.
    • Handle: RePEc:ces:ceswps:_12600
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    Keywords

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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