Credible Redistributive Policies and Migration across US States

Review of Economic Dynamics, 2010, vol. 13, issue 2, 403-423

Abstract: We ask whether worker mobility has undermined the ability of U.S. states to redistribute income. We build a tractable model where both migration decisions and redistribution policies are jointly determined. Our model features a large number of heterogeneous regions and skilled and unskilled workers with idiosyncratic migration costs. The calibrated model is able to account for the main features of interstate migration in the US, as well as some qualitative features of the cross-sectional distribution of redistributive policies. We conduct a counterfactual experiment in order to isolate the effect of worker mobility on state-level redistributive policies. We find that migration has induced substantial convergence in tax rates across U.S. states, but no race to the bottom. Interestingly, the degree of convergence has been much lower for transfers due to an offsetting tax-base effect. (Copyright: Elsevier)

Keywords: Labor mobility; Redistribution; Credible policies (search for similar items in EconPapers)
JEL-codes: E51 J61 J68 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (16)

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Working Paper: Credible redistributive policies and migration across US States (2007)
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DOI: 10.1016/j.red.2010.02.001

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