DOES TAXATION, SIZE OF GOVERNMENT, AND LABOR REGULATIONS

DOES TAXATION, SIZE OF GOVERNMENT, AND LABOR REGULATIONS AT THE STATE LEVEL AFFECT INTERSTATE MIGRATION? H A L W. S N A R R A N D E M I LY RA I N S WESTMINSTER COLLEGE S A LT L A K E C I T Y , U TA H Literature Review Review

Literature Sjaastad (1962, JPE), Fuchs (1967, MLR), Miller (1973, SEJ), Schlottman & Herzog (1982, SEJ) net migration is affected by differentials between states or regions Sommers (1981, SSQ) Unemployment reduces net migration in 1960-1970, but not in 1970-1975 AFDC policies had little effect on net black migration AFDC payments encourage out-migration of whites Saltz (2000, AEL)

Migration is positively related to income and the west Higher state taxes reduces net migration to a state Meyer, Matthews & Sommers (2001, AEL) Unemployment reduces net migration in 199-1996 AFDC payments encourage out-migration (generous welfare benefits require high taxes, which may discourage potential migrants) Literature Review Review

Literature Hsing (2001, AEL) o Employment growth, higher wages, and better climate increase net migration a state o Higher state taxes, greater state welfare benefits, more violent crime within a state decrease net migration Kaplan & Schulhofer-Wohl (2017, IER) o US interstate migration has declined from 1991 to 2011 (since technology renders location meaningless & people have more info???) If HS dropouts do not move for reason X or Y, college & HS female graduates move for

reason X, but male HS & college graduates move for reason Y, migration models average these affects out. It may average coefficients into insignificance. Literature Review Review Literature Enchautegui (1997, JLE) o

o o o o o Mothers from 1980 Census Public Use Micro Sample (do not have characteristics prior to migration) 50 states & DC were grouped by 16 regions: NE, SA, ESC, WSC, ENC, WNC, Pac, Mtn, NY, NJ, PA, CT, MA, FL, IL, and CA Old & new state wage rates were estimated using regressions (expected wages moms expect from staying or moving) Differentials computed for actual welfare payment, foodstamps, Medicaid, & unemployment rates

Probit regression used to estimate the probability of all single moms w/ kids, all female dropouts, and by race Welfare differentials affect migration with largest effect on single w/ kids, women enrolled in welfare, & women with low job tenure o Welfare differential effects are larger than wage differential effects o Puerto Ricans are least likely to move, while Black single mothers are not as likely to move as white single moms. Literature Review Review Literature Davies, Greenwood & L8 (2001, JRS)

o Estimate probability 50 states and DC, but with Maryland, Virginia, & DC combined o Approximately 94% percent of the population is covered, but treatment of spouses & dependents in households is unclear o Probability of people moving to a new state (tate tax policy, labor regulations, & govt size not included. o Models are not disaggregated by gender or education. o They account for unemployment by dividing new state UR by old state UR o Low unemployment in new state & high unemployment in old state increased probability of moving to a new state o Distance and probability of migrating were negatively related Literature Review

Review Literature Ross Finnie (2004, AE) o Logit regression is used to estimate the probability that people move to a new province, by gender and by age. o Inter-provincial moves are negatively related to age, marriage, children, earnings o Inter-provincial moves are positively related to unemployment, receipt of UI, having no market income, receipt of social assistance o Gender matters. Snarr and Romero (2015, JE)

o Relaxed mortgage standards & low interest boosted homeownership o Interstate migration was lower for those who owned homes versus those who rent. Data Data State-level Data o o o o

State population density (POPD), Hispanic share of pop (HSP), black share of pop (BLK) from Census estimates State unemployment rate (UR) from the Federal Reserve Economic Database. Share of state population living in poverty (POV) computed from IPUMS-CPS. The Fraser economic freedom index: government spending (GOV) switched to relative size of state government taxation (TAXES) switched to a measure of overall state tax burden labor market freedom (LREG) switched to state labor market regulations. Data

Data Data Data Person-level data from IPUMS CPS o We know what state people currently live in and what state they used to live in o If these states are different, the person migrated to a new state. o 18-60 movers, in the 2003-2009 March Sup CPS that moved for Weather Housing

just retired work-related (new job or transferred, looking for work or lost a job, better commute, other) o Excluded: members of the armed forces, previously retired, college students, Hawaii, Alaska, and DC. o 92,896 movers in the sample. Data Data Data

Data Logit Regression Regression Logit o Given that a person moved, what is the probability that the mover moved to a new state o State effects for the current state of residence o State effects for the previous state of residence (a year ago) o Year effects o Unemployment rate of current state of residence

o Unemployment rate of previous state of residence o GOV of current state of residence o GOV of previous state of residence o TAXES of current state of residence o TAXES of previous state of residence o LREG of current state of residence o LREG of previous state of residence Logit Regression Regression Results

Results Logit Logit Regression Regression Results Results Logit Logit Regression Regression Results

Results Logit Logit Regression Regression Results Results Logit Logit Regression Regression Results

Results Logit Logit Regression Regression Results Results Logit Logit Regression Regression Results

Results Logit (Odds Ratios) Ratios) (Odds Conclusions Conclusions o Government size, taxation & labor market regulations have no affect dropouts interstate mobility. o Size of state government had an insignificant effect on high school and college graduate interstate migration.

o A state that increases labor market regulations by 1 unit (double the max) can expect a 165% more college graduates and a 108% more HS graduates moving out. o A state that reduces labor market regulations by 1 unit (double the max) can expect 62% more college graduates and 44% more high school graduates moving into the state o A state that increases taxation by 1 unit (double the max) can expect a 100% more HS graduates moving out of the state. o A state that reduces taxation by 1 unit (double the max) can expect a 55% more HS graduates moving into the state.

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