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Credible redistributive policies and migration across US States

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  • Roc Armenter
  • Francesc Ortega

Abstract

Does worker mobility undermine governments ability to redistribute income? This paper analyzes the experience of US states in the recent decades. We build a tractable model where both migration decisions and redistribution policies are endogenous. We calibrate the model to match skill premium and worker productivity at the state level, as well as the size and skill composition of migration flows. The calibrated model is able to reproduce the large changes in skill composition as well as key qualitative relationships of labor flows and redistribution policies observed in the data. Our results suggest that regional di¤erences in labor productivity are an important determinant of interstate migration. We use the calibrated model to compare the cross-section of redistributive policies with and without worker mobility. The main result of the paper is that interstate migration has induced substantial convergence in tax rates across US states, but no race to the bottom. Skill-biased in-migration has reduced the skill premium and the need for tax-based redistribution in the states that would have had the highest tax rates in the absence of mobility.

Suggested Citation

  • Roc Armenter & Francesc Ortega, 2007. "Credible redistributive policies and migration across US States," Economics Working Papers 1022, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1022
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    References listed on IDEAS

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    Cited by:

    1. Grey Gordon & Pablo Guerrón-Quintana, 2019. "On Regional Borrowing, Default, and Migration," Working Paper 19-4, Federal Reserve Bank of Richmond.
    2. Christian Bayer & Falko Juessen, 2012. "On the Dynamics of Interstate Migration: Migration Costs and Self-Selection," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 377-401, July.
    3. Grey Gordon & Pablo Guerron-Quintana, 2018. "On Regional Borrowing, Migration, and Default," 2018 Meeting Papers 305, Society for Economic Dynamics.
    4. Friederike Seifert, 2022. "The Affordable Care Act Medicaid expansion and interstate migration in border regions of US States [Die Ausweitung von Medicaid durch den Affordable Care Act und zwischenstaatliche Migration in den," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 42(1), pages 49-74, April.
    5. Coen-Pirani, Daniele, 2010. "Understanding gross worker flows across U.S. states," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 769-784, October.
    6. Giuranno Michele G. & Biswas Rongili, 2019. "Internal Migration and Public Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-16, October.
    7. Grey Gordon & Pablo Guerrón-Quintana, 2021. "Public Debt, Private Pain: Regional Borrowing, Default, and Migration," Working Paper 21-13, Federal Reserve Bank of Richmond.
    8. Giuranno, Michele G. & Rongili, Biswas, 2012. "Inter-jurisdictional migration and the size of government," MPRA Paper 42604, University Library of Munich, Germany.
    9. Ortega, Francesc & Tanaka, Ryuichi, 2015. "Immigration and the Political Economy of Public Education: Recent Perspectives," IZA Discussion Papers 8778, Institute of Labor Economics (IZA).
    10. Ortega Francesc, 2010. "Immigration, Citizenship, and the Size of Government," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-40, March.
    11. Armenter, Roc & Ortega, Francesc, 2011. "Credible redistribution policy and skilled migration," European Economic Review, Elsevier, vol. 55(2), pages 228-245, February.
    12. Soojin Kim, 2014. "The Effects of Labor Migration on Optimal Taxation: An International Tax Competition Analysis," 2014 Meeting Papers 508, Society for Economic Dynamics.
    13. Tanaka, Ryuichi & Farré, Lídia & Ortega, Francesc, 2014. "Immigration, Naturalization, and the Future of Public Education," IZA Discussion Papers 8342, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Migration; taxation; education; credibility;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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