The convergence of fiscal regimes and the decline of the Tiebout effect

Summary and conclusions

I have argued that the spatial convergence of per capita incomes and income distributions lead to the spatial convergence of fiscal regimes and that convergence diminishes opportunities for Tiebout-type moves in the economy. Considerable empirical evidence confirms the hypothesis. States with relatively low initial levels of taxation have had relatively higher growth rates of taxation. Low per capita income states have had higher growth rates of real per capita incomes than have had high per capita income states. The high economic growth rate states have had lower growth rates of taxation than the low income growth rate states. Spatial convergence of per capita incomes is associated with spatial convergence of fiscal regimes. Furthermore, there has been a spatial convergence in income distributions. Increased equality of income empirically is associated with increased size of the fiscal regime, confirming the public choice insight.

The spatial convergence of fiscal regimes has diminished the gains from Tiebout-type moves. As such, fiscal convergence diminishes the opportunity for citizen-voters to reveal their preference for collective goods through migration. Of course, at the limit, where per capita incomes and the income distribution are invariant spatially, the spatial convergence of fiscal regimes makes the Musgrave-Samuelson problem of revealed preference for collective goods as intractable at the state and local levels as at the national level. Tiebout-type moves no longer allow escape from Leviathan.