Tiebout (1956) put forth his influential “voting with their feet” theory that people move across regions to match their preferences for the optimal bundle of tax and government services. Other previous studies had emphasized the significant impacts of locational characteristics on individual moving decisions especially those made by young professional workers (Florida, 2014). The issue of migration has important policy implications. On the one hand, policy makers actively use region-based policies to attract business activities and high-productivity worker groups that are critical for a region’s future growth.For example, the smart specialization concept calls for the promotion of “a local skills base that can facilitate widespread local incremental improvements across a range of the region’s economic activities” (McCann and Ortega-Argilés, 2015), as it has been found that inflows of skills that are related to the existing knowledge base of the region had a positive effect on regional economic growth (Boschma et al., 2009). On the other hand, policy makers and the public are concerned about mitigating the impacts of socio-economic changes on incumbent residents and have enacted policies to protect them from displacement. For example, community activists have long been concerned that gentrification might drive up the housing values in a community and displace long-term incumbent residents through higher property-tax burdens. Several state and local governments have debated or enacted caps on the taxation of owner-occupied property as anti-displacement measures. Many policy makers appear to assume that long-term homeowners in gentrifying neighborhoods require special tax treatment to prevent their displacement. The three chapters of this dissertation investigated how people migrate in response to state-level and intra-metropolitan socio-economic changes. Chapter one uses a Computational General Equilibrium (CGE) model of Illinois to estimate a tax policy’s impacts on labor migration as well as on the wider state economy. In 2011, the Illinois state government raised individual and corporate income taxes as one contribution to easing the problem of short term and longer-term fiscal deficits; However, the impact of the tax increase goes beyond state balance sheets and contemporary labor statistics since higher taxes may drive corporations and taxpayers out of the state, seeking lower tax rates and greater employment opportunities in other locations.The average number of Illinois migrants who moved to other states was 65,100 from 2008 to 2011, but this number jumped significantly to 97,947 between 2012 and 2013, one year after the tax increase.To quantify the impact of the 2011 tax increase on migration, Chapter one first estimates parameters related to Illinois’s labor market then plug them back to the CGE model. Sensitivity checks show that the CGE model has enhanced explanatory power when the labor market parameters were estimated rather than borrowed from existing studies of other regions and historical periods.Comparison of the simulations with/out the 2011 tax increase provides an approximation of its long-term negative impacts on Illinois regional economy in terms of GRP, labor out-migration, total employment, and real wage, although the state government’s income increased in the short term.Moreover, this income gain is temporary because the tax increase has shrunk the size of Illinois’s tax base, as a result of the enhanced out-migration of taxpayers. In the long run, the state government’s tax revenue will decrease. In addition, the simulation results show that the tax increase alone will not quickly change Illinois’s financial standing unless the state government allocates a significantly greater share of its revenue to debt repayment.However, this additional allocation comes at a price of aggravating the negative economic impacts of the tax increase.To summarize, policy maker should be cautious of the tension between addressing the state’s fiscal responsibility (in hopes of retaining corporate activities as well as lowering the interest on bonds) through unilateral changes in tax rates versus reducing the short-run negative impact on the economy.Chapter two of the dissertation uses a national data to study the tax-induced migration of top scientists that are economically important and associated with the fostering of new industries and job creation (Zucker et al. 1998; Zucker and Darby 2006). The existing literature on tax-induced migration (TIM) has a literature gap with important policy implications. By far it has mainly focused on the estimation of the average elasticity of migration to taxes but has largely ignored the variance around these estimates.For example, if TIM has a threshold pattern where migrants respond only to tax differentials outside an “inertia range,” then small-scale fiscal adjustments might not attain the policy goal of skill attraction.Chapter two aims to fill this literature gap by investigating the nonlinear effects of taxes on migration.Specifically, it applied a spline regression to the dataset of Moretti and Wilson (2017) and observe different nonlinear patterns in the effects of four types of taxes on scientist migration. Then it uses bin regression to confirm the statistical significance of observed marginal effect variations. The results suggest that personal income tax and research and development tax credit have threshold patterns in their effects on inter-state migration and migration only occurred once certain thresholds in tax/credit gaps are met. The inter-state gap of net-of-ATR and R& D tax credit need to be respectively greater than or equal to 4 and 10 percentage points to induce migration. In contrast, corporate income tax has a linear effect on migration: a one-percent increase in tax differentials between two states leads to a fixed percentage increase in the migration flows between the two states, as described by an average elasticity. Meanwhile, investment tax credits have a stable effect on migration only when the destination state initially has higher credits than the origin state. To summarize, chapter two finds salient and distinctively different nonlinear patterns in the effects of inter-state tax differences on scientists’ migration. Chapter three shifts the focus from socio-economic changes in macro-environment to gentrification in local neighborhoods that alters the immediate surroundings of residents. The socioeconomic upgrading of gentrifying neighborhoods has been believed to be associated with the displacement of its long-term, incumbent residents (Marcuse, 1985). The mechanisms of gentrification also predict that renters should face higher displacement pressure than homeowners because they face the displacing factors of gentrification like rent appreciation but are excluded from the retaining factors such as the expectation of greater housing sales price in the future. By far, the empirical literature generally had overlooked the substantial differences between owners and renters (Martin and Beck, 2018). The owner-renter displacement incidence has important policy implications: If the policy goal is to protect long-term residents in gentrifying neighborhoods, then policy makers should prioritize stabilizing the rental markets. Chapter three studies the owner/renter incidence difference of gentrification from a novel perspective of downward mobility. Ding et al. (2016)was the first to find that although residents with low credit scores and without a mortgage were no more likely to exit gentrifying neighborhoods than their counterparts in non-gentrifying neighborhoods, individuals that did move out were more likely to move to lower-income neighborhoods. These findings highlight the importance of investigating the quality and destination of residential moves as opposed to solely studying mobility rates. However, the data of Ding et al. (2016) did not have a direct distinction between homeowners and renters thus did not address the potential owner-renter incidence gap of gentrification. Chapter three overcomes this limitation with a longitudinal dataset, InfoUSA, that contains annual information between 2010-2015 of Chicago households’ residential location, owner/renter status, and other demographic characteristics. This paper develops the gentrification-displacement literature by investigating how downward mobility is impacted by not only gentrification but also housing tenure status. The empirical results confirm that renter migrants have a greater incidence of downward movement than homeowners. Renters on average have a 12.2 percentage-point higher probability than homeowners to move to a more disadvantaged destination, regardless of the gentrification intensity in the origin neighborhood. On the other hand, intensely gentrified neighborhoods observe a 5.4 percentage point higher downward mobility than nongentrified neighborhoods, renters and owners alike. Although the synergy of housing tenure and gentrification can make a difference in downward movement probability as high as 17.6 percentage points, their interaction terms tend to be insignificant meaning that the magnitude of the owner-renter incidence gap is not different across gentrifying and nongentrifying neighborhoods. More importantly, As the synergy between gentrification and housing tenure status redistribute renters to less advantaged neighborhoods, policy makers and researchers should pay attention to the detrimental effects of this residential redistribution on local community development and focus on preventing and mitigating the relevant negative consequences.The rest of the dissertation is organized as follows. Section two, three, and four respectively lays out the structures of chapters one to three. The figures and tables of each chapter are included after their conclusion sections. A reference list of the full dissertation is given at the end of the document.
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Essays on driving factors of migration: From regional to metro perspectives
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