The Impact of Migration on Metro- and Non-Metro Marginal Tax Prices for County Government Services

Abstract

Migration of population has impacts on the provision of local government services. Destination regions should benefit from an inflow of more highly skilled and educated workers, since these are the groups most likely to move. On the other hand, origin regions may suffer from a loss of the more productive members of their communities who are also less dependent on government services. This reasoning has led to the argument that rural-urban migration trends over the past half century have increased the costs of providing local government services in rural areas. This study examines the relationship between the marginal tax cost of county government services and population in- and out-migration for a sample of 949 counties that exist in metropolitan areas versus 1,742 non-metropolitan counties. A spatial econometric model is used to quantify direct and indirect (spillover) effects arising from in- and out-migration that impact the marginal tax costs of county-level government services.