The Importance of Local Fiscal Conditions in Analyzing Local Labor Markets
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NBER Working Paper No. 2040
Issued in October 1986
NBER Program(s): LS
A new test of the compensating wage differential model is proposed. The logic behind Roback's model showing how differences in nonproduced amenities may be reflected in intercity wage differentials is extended to the case of differences in local fiscal conditions, represented by tax rates and publicly produced services. Results show that differences in local tax rates and services provisions do generate compensating wage differentials across cities. The effects of a particularly large set of taxes and effective services output measures are examined.
Published: Journal of Political Economy, vol.97, no. 5, October 1989, pp.1208-1231.
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