IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v90y2000i1p73-95.html
   My bibliography  Save this article

Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition

Author

Listed:
  • David E. Wildasin

Abstract

This paper presents a general-equilibrium model where human capital investment increases specialization and exposes skilled workers to region-specific earnings risk Interjurisdictional mobility of skilled labor mitigates these risks; state-contingent migration of skilled labor also improves efficiency. With perfect capital markets, labor-market integration raises welfare and reduces ex post earnings inequality. If instead human capital investment can only be financed through local taxes, labor-market integration leads to interjurisdictional fiscal competition, shifting the burden of taxation to low-skilled immobile workers. Decentralized public provision of human capital investment creates earnings inequalities and is inefficient.

Suggested Citation

  • David E. Wildasin, 2000. "Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition," American Economic Review, American Economic Association, vol. 90(1), pages 73-95, March.
    • Handle: RePEc:aea:aecrev:v:90:y:2000:i:1:p:73-95
    Note: DOI: 10.1257/aer.90.1.73
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.90.1.73
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Philippe Michel & Anne Perrot & Jacques-François Thisse, 1996. "Interregional equilibrium with heterogeneous labor," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(1), pages 95-113, February.
    3. Marcus Berliant & Yves Zenou, 2014. "Labor Differentiation and Agglomeration in General Equilibrium," International Regional Science Review, , vol. 37(1), pages 36-65, January.
    4. Nechyba, Thomas J, 1997. "Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 351-384, April.
    5. Cremer, Helmuth & et al, 1996. "Mobility and Redistribution: A Survey," Public Finance = Finances publiques, , vol. 51(3), pages 325-352.
    6. Douglass C. North, 1994. "Institutional Competition," Economic History 9411001, University Library of Munich, Germany.
    7. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602, Elsevier.
    8. Eaton, Jonathan & Rosen, Harvey S., 1980. "Labor supply, uncertainty, and efficient taxation," Journal of Public Economics, Elsevier, vol. 14(3), pages 365-374, December.
    9. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    10. Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, vol. 18(1), pages 1-33, June.
    11. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-858, August.
    12. Raquel Fernandez & Richard Rogerson, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 135-164.
    13. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    14. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    15. Jagdish N. Bhagwati, 1976. "Taxing the Brain Drain," Challenge, Taylor & Francis Journals, vol. 19(3), pages 34-38, July.
    16. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    17. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    18. Wildasin, David E. & Wilson, John Douglas, 1996. "Imperfect mobility and local government behaviour in an overlapping-generations model," Journal of Public Economics, Elsevier, vol. 60(2), pages 177-198, May.
    19. Naomi R. Lamoreaux & Kenneth L. Sokoloff, 1999. "Inventors, Firms, and the Market for Technology in the Late Nineteenth and Early Twentieth Centuries," NBER Chapters, in: Learning by Doing in Markets, Firms, and Countries, pages 19-60, National Bureau of Economic Research, Inc.
    20. Williams, Joseph T, 1978. "Risk, Human Capital, and the Investor's Portfolio," The Journal of Business, University of Chicago Press, vol. 51(1), pages 65-89, January.
    21. repec:bla:scandj:v:97:y:1995:i:4:p:527-46 is not listed on IDEAS
    22. Zuliu Hu, 1993. "Risk Taking and Optimal Taxation in the Presence of Nontradable Human Capital," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 622-637, September.
    23. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, December.
    24. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
    25. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 439-479.
    26. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59(3), pages 185-185.
    27. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David E. Wildasin, 2003. "Fiscal Policy, Human Capital, and Canada-US Labor Market Integration," Public Economics 0309006, University Library of Munich, Germany.
    2. David E. Wildasin, 2000. "Factor mobility and fiscal policy in the EU: policy issues and analytical approaches," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(31), pages 338-378.
    3. Berliant, Marcus & Reed III, Robert R. & Wang, Ping, 2006. "Knowledge exchange, matching, and agglomeration," Journal of Urban Economics, Elsevier, vol. 60(1), pages 69-95, July.
    4. Patrick Bayer & Stephen L. Ross, 2006. "Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application," Working papers 2006-13, University of Connecticut, Department of Economics, revised Jan 2009.
    5. Epple, Dennis & Romano, Richard & Sieg, Holger, 2012. "The intergenerational conflict over the provision of public education," Journal of Public Economics, Elsevier, vol. 96(3), pages 255-268.
    6. Giovanni Peri, 1999. "Local Human Capital Externalities: An Overlapping Generation Model and Some Evidence on Experience Premia," CESifo Working Paper Series 219, CESifo.
    7. Goodspeed, Timothy J., 2002. "Tax competition and tax structure in open federal economies: Evidence from OECD countries with implications for the European Union," European Economic Review, Elsevier, vol. 46(2), pages 357-374, February.
    8. Ozan Hatipoglu, 2007. "Inequality and Growth. Where Are We Headed? A Survey," Working Papers 2007/07, Bogazici University, Department of Economics.
    9. Joseph G. Altonji & Anthony A. Smith Jr. & Ivan Vidangos, 2013. "Modeling Earnings Dynamics," Econometrica, Econometric Society, vol. 81(4), pages 1395-1454, July.
    10. Fosfuri, Andrea & Rønde, Thomas, 2003. "High-Tech Clusters, Technology Spillovers and Trade Secret Laws," CEPR Discussion Papers 4130, C.E.P.R. Discussion Papers.
    11. Gerlach, Heiko & Rønde, Thomas & Stahl, Konrad, 2009. "Labor pooling in R&D intensive industries," Journal of Urban Economics, Elsevier, vol. 65(1), pages 99-111, January.
    12. Calabrese, Stephen & Epple, Dennis & Romano, Richard, 2015. "Majority choice of tax systems in single- and multi-jurisdictional economies," Journal of Public Economics, Elsevier, vol. 131(C), pages 58-70.
    13. Hansen, Nico A. & Kessler, Anke S., 2001. "(Non-)Existence of Equilibria in Multicommunity Models," Journal of Urban Economics, Elsevier, vol. 50(3), pages 418-435, November.
    14. Dennis N. Epple & Richard Romano, 2003. "Neighborhood Schools, Choice, and the Distribution of Educational Benefits," NBER Chapters, in: The Economics of School Choice, pages 227-286, National Bureau of Economic Research, Inc.
    15. Calabrese, Stephen, 2024. "Household mobility and the political economy and welfare effects of local tax limits," Journal of Urban Economics, Elsevier, vol. 142(C).
    16. Calabrese, Stephen & Epple, Dennis & Romano, Richard, 2023. "Majority choice of taxation and redistribution in a federation," Journal of Public Economics, Elsevier, vol. 217(C).
    17. Rim Lahmandi‐Ayed & Hejer Lasram & Didier Laussel, 2021. "Is partial privatization of universities a solution for higher education?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1174-1198, December.
    18. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 847-904.
    19. Gilles Saint-Paul, 2001. "On the Distribution of Income and Worker Assignment under Intrafirm Spillovers, with an Application to Ideas and Networks," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 1-37, February.
    20. Paololo Melindi Ghidi, 2012. "Income Inequality, School Choice and the Endogenous Gentrification of US Cities," LIDAM Discussion Papers IRES 2012006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:90:y:2000:i:1:p:73-95. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.