IDEAS home Printed from https://ideas.repec.org/p/upf/upfgen/1022.html
   My bibliography  Save this paper

Credible redistributive policies and migration across US States

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://econ-papers.upf.edu/papers/1022.pdf
    File Function: Whole Paper
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2005. "A Positive Theory Of Geographic Mobility And Social Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 263-303, February.
    2. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, January.
    3. John DiNardo & David Card, 2000. "Do Immigrant Inflows Lead to Native Outflows?," American Economic Review, American Economic Association, vol. 90(2), pages 360-367, May.
    4. Lutz Hendricks, 2004. "Why does educational attainment differ across U.S. states?," 2004 Meeting Papers 361, Society for Economic Dynamics.
    5. Bewley, Truman F, 1981. "A Critique of Tiebout's Theory of Local Public Expenditures," Econometrica, Econometric Society, vol. 49(3), pages 713-740, May.
    6. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    7. Armenter, Roc & Ortega, Francesc, 2011. "Credible redistribution policy and skilled migration," European Economic Review, Elsevier, vol. 55(2), pages 228-245, February.
    8. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 2021. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 8, pages 163-234, World Scientific Publishing Co. Pte. Ltd..
    9. Edward Ludwig Glaeser & Albert Saiz, 2003. "The rise of the skilled city," Working Papers 04-2, Federal Reserve Bank of Philadelphia.
    10. Coen-Pirani, Daniele, 2010. "Understanding gross worker flows across U.S. states," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 769-784, October.
    11. Paul Beaudry & Mark Doms & Ethan Lewis, 2006. "Endogenous Skill Bias in Technology Adoption: City-Level Evidence from the IT Revolution," NBER Working Papers 12521, National Bureau of Economic Research, Inc.
    12. Cremer, Helmuth & Pestieau, Pierre, 1998. "Social insurance, majority voting and labor mobility," Journal of Public Economics, Elsevier, vol. 68(3), pages 397-420, June.
    13. Grogger, Jeffrey & Hanson, Gordon H., 2011. "Income maximization and the selection and sorting of international migrants," Journal of Development Economics, Elsevier, vol. 95(1), pages 42-57, May.
    14. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    15. 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.
    16. Damba Lkhagvasuren, 2005. "Big Locational Differences in Unemployment Despite High Labor Mobility," Working Papers 12002, Concordia University, Department of Economics, revised Feb 2012.
    17. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2008. "Identifying Agglomeration Spillovers: Evidence from Million Dollar Plants," Working Paper series 36_08, Rimini Centre for Economic Analysis.
    18. Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," Econometrica, Econometric Society, vol. 70(6), pages 2367-2420, November.
    19. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
    20. Bound, John & Groen, Jeffrey & Kezdi, G.Gabor & Turner, Sarah, 2004. "Trade in university training: cross-state variation in the production and stock of college-educated labor," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 143-173.
    21. repec:rim:rimwps:36-08 is not listed on IDEAS
    22. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Gordon, Grey & Guerron-Quintana, Pablo, 2024. "On regional borrowing, default, and migration," Journal of International Economics, Elsevier, vol. 150(C).
    3. 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.
    4. Grey Gordon & Pablo Guerrón-Quintana, 2021. "Public Debt, Private Pain: Regional Borrowing, Default, and Migration," Working Paper 21-13, Federal Reserve Bank of Richmond.
    5. Giuranno, Michele G. & Rongili, Biswas, 2012. "Inter-jurisdictional migration and the size of government," MPRA Paper 42604, University Library of Munich, Germany.
    6. Grey Gordon & Pablo Guerron-Quintana, 2018. "On Regional Borrowing, Migration, and Default," 2018 Meeting Papers 305, Society for Economic Dynamics.
    7. 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.
    8. Ortega, Francesc & Tanaka, Ryuichi, 2015. "Immigration and the Political Economy of Public Education: Recent Perspectives," IZA Discussion Papers 8778, Institute of Labor Economics (IZA).
    9. Coen-Pirani, Daniele, 2010. "Understanding gross worker flows across U.S. states," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 769-784, October.
    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).

    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. Tschopp, Jeanne, 2015. "The Wage Response to Shocks: The Role of Inter-Occupational Labour Adjustment," Labour Economics, Elsevier, vol. 37(C), pages 28-37.
    2. Parkhomenko, Andrii, 2016. "Opportunity to Move: Macroeconomic Effects of Relocation Subsidies," MPRA Paper 75256, University Library of Munich, Germany.
    3. Ning Jia & Raven Molloy & Christopher Smith & Abigail Wozniak, 2023. "The Economics of Internal Migration: Advances and Policy Questions," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 144-180, March.
    4. Dustmann, Christian & Glitz, Albrecht, 2011. "Migration and Education," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 327-439, Elsevier.
    5. Noel Gaston & Douglas R. Nelson, 2013. "Bridging Trade Theory And Labour Econometrics: The Effects Of International Migration," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 98-139, February.
    6. Lkhagvasuren, Damba, 2014. "Education, mobility and the college wage premium," European Economic Review, Elsevier, vol. 67(C), pages 159-173.
    7. Nicole M. Fortin, 2006. "Higher-Education Policies and the College Wage Premium: Cross-State Evidence from the 1990s," American Economic Review, American Economic Association, vol. 96(4), pages 959-987, September.
    8. Gianmarco I.P. Ottaviano & Giovanni Peri, 2021. "The economic value of cultural diversity: evidence from US cities," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 7, pages 187-222, World Scientific Publishing Co. Pte. Ltd..
    9. 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.
    10. Etienne Wasmer & Peter Fredriksson & Ana Lamo & Julian Messina & Giovanni Peri, 2005. "The Macroeconomics of Education," Post-Print hal-03458955, HAL.
    11. Amior, Michael, 2020. "Immigration, local crowd-out and undercoverage bias," LSE Research Online Documents on Economics 108490, London School of Economics and Political Science, LSE Library.
    12. Langella, Monica & Manning, Alan, 2022. "Residential mobility and unemployment in the UK," Labour Economics, Elsevier, vol. 75(C).
    13. Braun, Sebastian Till & Weber, Henning, 2021. "How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany," Journal of International Economics, Elsevier, vol. 129(C).
    14. Greenaway-McGrevy, Ryan & Hood, Kyle K., 2016. "Worker migration or job creation? Persistent shocks and regional recoveries," Journal of Urban Economics, Elsevier, vol. 96(C), pages 1-16.
    15. Michel Beine & Serge Coulombe, 2018. "Immigration and internal mobility in Canada," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(1), pages 69-106, January.
    16. Lkhagvasuren, Damba, 2012. "Big locational unemployment differences despite high labor mobility," Journal of Monetary Economics, Elsevier, vol. 59(8), pages 798-814.
    17. Etienne Wasmer & Peter Fredriksson & Ana Lamo & Julian Messina & Giovanni Peri, 2005. "The Macroeconomics of Education," Post-Print hal-03458955, HAL.
    18. Kawata, Keisuke & Nakajima, Kentaro & Sato, Yasuhiro, 2016. "Multi-region job search with moving costs," Regional Science and Urban Economics, Elsevier, vol. 61(C), pages 114-129.
    19. Amior, Michael, 2018. "The contribution of foreign migration to local labor market adjustment," LSE Research Online Documents on Economics 91705, London School of Economics and Political Science, LSE Library.
    20. Silvia Helena Barcellos, 2010. "The Dynamics of Immigration and Wages," Working Papers 755, RAND Corporation.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:upf:upfgen:1022. 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: the person in charge (email available below). General contact details of provider: http://www.econ.upf.edu/ .

    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.