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

Posted: 5 Mar 2013

See all articles by Seth H. Giertz

Seth H. Giertz

School of Economic, Political and Policy Sciences

Mehmet Serkan Tosun

University of Nevada, Reno - Department of Economics; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2012

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: fiscal federalism, income redistribution, excess burden, deadweight loss, fiscal externalities

JEL Classification: H21, H23, H71

Suggested Citation

Giertz, Seth H. and Tosun, Mehmet Serkan, Migration Elasticities, Fiscal Federalism and the Ability of States to Redistribute Income (2012). National Tax Journal, December 2012, Vol. 65 Issue 4, p. 1069, Available at SSRN: https://ssrn.com/abstract=2228774

Seth H. Giertz (Contact Author)

School of Economic, Political and Policy Sciences ( email )

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Mehmet Serkan Tosun

University of Nevada, Reno - Department of Economics ( email )

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Reno, NV 89557
United States
775-784-6678 (Phone)

HOME PAGE: http://www.coba.unr.edu/econ/

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