Marginal Costs of Income Redistribution at the State Level / William R. Johnson.

Format:

Book

Author/Creator:

Johnson, William R.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1937.

NBER working paper series no. w1937

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Summary:

Previous analyses of the cost of redistribution by a unitary government

have focussed on the welfare losses of distorted labor supply choices. On the

other hand, the analysis of redistribution b,y local qovernments in a federal

system has emphasized the effect of the migration of taxpayers and transfer

recipients in raising the cost (faced by state residents) of engaging in more

redistribution. This paper combines both migration and labor supply effects

to compute marginal redistribution costs at the state and federal level.

Surprisingly, for a wide range of parameter values, states face lower

redistribution costs than the national government because they are able to

"export" some of the cost through lower federal tax revenue. The normative

implication of the analysis is that any case for national redistribution

policies must be based on benefit spillovers across state lines rather than on

tax competition among state governments.

Notes:

Print version record

June 1986.