Total State In-Migration and Public Policy in the United States: A Comparative Analysis of the Great recession and the Pre- and Post-Great Recession Years

Abstract

This study adopts state-level data to empirically investigate the Tiebout hypothesis (as extended by Tullock) of “voting with one’s feet” for the period referred to in the U.S. as the “Great Recession” (2007-2009). As compared to previous studies, we use more recent data and provide estimates for three time periods: the “Great Recession” (from July 1, 2007 through June 30, 2009), the pre-Great Recession period (July 1, 2004 through June 30, 2006) and the post-Great Recession period (July 1, 2009 through June 30, 2011). This analysis also differs from most previous literature by including a separate cost of living variable and a variable measuring effective state personal income tax rates. After allowing for various economic factors and quality of life/climate variables, migrants (consumer-voters) over the 2007-2009 period appear to prefer states with lower effective state personal income tax rates and higher levels of “fiscal surplus,” defined in this study for each state as the total outlay per pupil on primary and secondary public education minus the per capita property tax level. The three empirical estimates all demonstrate that the Tiebout/Tullock hypothesis was operational not only during but also both before and after the Great Recession since for all three time periods migrants (consumer-voters) manifested a preference for lower effective state personal income tax rates and higher levels of fiscal surplus