New Working Paper: Adam Lavecchia & Robert McKercher

We have another Department Working Paper from Associate Professor Adam Lavecchia and PhD Robert McKercher!

Should I Stay or Should I Go? The Impact of Taxation on Canadian Inter-Provincial Migration

Dr. Adam Lavecchia is an associate professor in the Department of Economics, as well as a research fellow at the Institute of Labor Economics (IZA) and a CESifo Research Network Affiliate. His research interests span public economics and labour economics.

Robert McKercher is a PhD student in the Department of Economics in his fifth year of doctoral studies. His research is in Public Finance and Experimental Economics.

Their new working paper is titled, “Should I Stay or Should I Go? The Impact of Taxation on Canadian Inter-Provincial Migration,” Joint with Alisa Tazhitdinova.

Abstract

This paper estimates the causal effect of income taxation on inter-provincial migration in Canada. We exploit a major tax decentralization reform between 1998-2001 that led to some provinces lowering their marginal and average tax rates more than others, particularly for top earners. Using a difference-in-differences design, we estimate a population stock-elasticity with respect to the net-of-average-tax rate of about 2.5-3 for young, unmarried high-income individuals. The estimates for older and married individuals are smaller and mostly statistically insignificant. We find that the population stock elasticity estimates are driven by a reduction the likelihood that young, unmarried and high-income individuals emigrate from their province of residence (i.e. out-migration) rather than a change to in-migration. This suggests that individuals react more strongly to tax changes in their home province rather than tax changes in other provinces.

For the full set of working papers, visit RePEC/ideas.