IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Costly Migration and the Incidence of State and Local Taxes

  • Jeffrey Thompson
Registered author(s):

    This paper incorporates costly migration into the empirical literature on the incidence on wages of states and local taxes. The responsiveness of pre-tax wages to changes in state and local taxes (including income, sales and property taxes) is shown to vary by age and education. Using repeated cross-section and pseudo-panel regressions, the paper shows that the pre-tax wages of highly-educated and experienced workers are relatively unresponsive to tax changes. The wages of young and highly-educated workers – those facing the lowest costs of migration – are quite responsive. Results from migration regressions confirm that low migration cost households respond to state and local tax changes, while higher migration cost households do not. In addition, property taxes do not appear to be influencing shifts in pre-tax wages. Relatively small responses of both high and low-income workers suggest that redistributive effects of regressive or progressive state-level taxes are not undermined by labor supply shifts. In practice, however, states with relatively progressive tax structures also impose relatively high taxes on young and highly-educated workers, whose responsiveness is likely generating considerable deadweight losses and not contributing to redistribution in after-tax wages.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp251.

    in new window

    Date of creation: 2011
    Date of revision:
    Handle: RePEc:uma:periwp:wp251
    Contact details of provider: Postal:
    418 N Pleasant St, Amherst MA 01002

    Phone: (413) 545-6355
    Fax: (413) 545-2921
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
    2. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    3. Wallace, Sally, 1993. "The effects of state personal income tax differentials on wages," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 611-628, November.
    4. Erhan Artuc & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," NBER Working Papers 13465, National Bureau of Economic Research, Inc.
    5. S. Rosen, Harvey, 1987. "Studies in state and local public finance," Business Horizons, Elsevier, vol. 30(3), pages 84-85.
    6. Quiggin, John, 2001. "Valuing Publicly Provided Services," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 291-304, September.
    7. David E. Wildasin, 1993. "State income taxation with mobile labor," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 51-75.
    8. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 705-746.
    9. John Kennan & James R. Walker, 2003. "The Effect of Expected Income on Individual Migration Decisions," NBER Working Papers 9585, National Bureau of Economic Research, Inc.
    10. Krupka, Douglas J. & Donaldson, Kwame, 2007. "Wages, Rents and Heterogeneous Moving Costs," IZA Discussion Papers 3224, Institute for the Study of Labor (IZA).
    11. Andrew Leigh, 2005. "Can Redistributive State Taxes Reduce Inequality?," CEPR Discussion Papers 490, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    12. Jon Bakija & Joel Slemrod, 2004. "Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns," Department of Economics Working Papers 2004-12, Department of Economics, Williams College.
    13. Stephen Cameron & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: Theory," NBER Working Papers 13463, National Bureau of Economic Research, Inc.
    14. Howard Chernick, 1997. "Tax Progressivity and State Economic Performance," Economic Development Quarterly, W.E. Upjohn Institute for Employment Research, vol. 11(3), pages 249-267, August.
    15. Harvey S. Rosen, 1986. "Introduction to "Studies in State and Local Public Finance"," NBER Chapters, in: Studies in State and Local Public Finance, pages 1-4 National Bureau of Economic Research, Inc.
    16. Joshua L. Rosenbloom & William A. Sundstrom, 2003. "The Decline and Rise of Interstate Migration in the United States: Evidence from the IPUMS, 1850-1990," NBER Working Papers 9857, National Bureau of Economic Research, Inc.
    17. Gardes, Francois & Duncan, Greg J. & Gaubert, Patrice & Gurgand, Marc & Starzec, Christophe, 2005. "Panel and Pseudo-Panel Estimation of Cross-Sectional and Time Series Elasticities of Food Consumption: The Case of U.S. and Polish Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 242-253, April.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:uma:periwp:wp251. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Judy Fogg)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.