Migration Elasticities, Fiscal Federalism and the Ability of States to Redistribute Income

Seth Giertz and Mehmet Tosun

No 6798, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper develops a simulation model in order to examine the effectiveness of state attempts at redistribution under a variety of migration elasticity assumptions. Key outputs from the simulation include the impact of tax-induced migration on state revenues, excess burden, and fiscal externalities. With modest migration elasticities, the costs of state-level redistribution are substantial, but state action may still be preferred to a federal policy that is at odds with preferences of a state's citizens. At higher migration elasticities, the costs of state action can be tremendous. Overall excess burden is greater, but this is dominated by horizontal fiscal externalities. Horizontal fiscal externalities represent a cost to the state pursuing additional redistribution, but not a cost at the national level.

Keywords: excess burden; income redistribution; fiscal federalism; fiscal externalities; deadweight loss (search for similar items in EconPapers)
JEL-codes: H21 H23 H71 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-08
New Economics Papers: this item is included in nep-mig, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: National Tax Journal, 2012, 65, 1069-92

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Journal Article: Migration Elasticities, Fiscal Federalism, and the Ability of States to Redistribute Income (2012)
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