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The Importance of Local Fiscal Conditions in Analyzing Local Labor Markets

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  • Joseph Gyourko
  • Joseph S. Tracy

Abstract

A new test of the compensating wage differential model is proposed. The logic behind Roback's model showing 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.

Suggested Citation

  • Joseph Gyourko & Joseph S. Tracy, 1986. "The Importance of Local Fiscal Conditions in Analyzing Local Labor Markets," NBER Working Papers 2040, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2040
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    1. 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, University of Chicago Press, vol. 1(4), pages 366-379, October.
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    3. Greg J. Duncan, 1976. "Earnings Functions and Nonpecuniary Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 462-483.
    4. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
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