Elderly Migration, State Taxes, and What They Reveal

Working Paper No. 09-WG01

Ali Sina Onder and Herwig Schlunk

ABSTRACT [article]

Empirical results obtained from the 2000 Census elderly migration data using a general gravity model of migration flows confirm earlier findings of the `same sign problem' in the literature, which means that the elderly both migrate from and to states where taxes are higher. The same sign problem can be attributed to the heterogeneity of in- and out-migrating groups. We propose that it is possible to control for heterogeneity of migrating groups by controlling for some characteristics of either the origin or the destination state. In a gravity equation estimation for elderly migration, when controlled for heterogeneity of migrants, the same sign problem fades away, and the gravity equation shows clearer patterns for elderly migration. In particular, local amenities, tax exemptions, and low inheritance taxes are shown to be significant variables in attracting the elderly into a state.

Keywords and Phrases: Tiebout hypothesis, migration, maxation, mtate maxes, amenities

JEL Clasification Numbers: H24, H25, H31, H7

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