Jonathan C. Rork

Foreign Direct Investment, Economic Growth, and the Human Capital Threshold: Evidence from US States

The United States has experienced a dramatic increase in foreign direct investment (FDI) in recent years. While foreign firms bring immediate benefits of high-paying jobs, data limitations have prevented detailed study on FDIs long-term effects on the states receiving it. By creating a new stock measure of FDI based on employment, we are able to capture these long-term effects. Results demonstrate that FDI has a greater impact on per capita output growth than domestic investment for US states that meet a minimum human capital threshold. Ironically, the most active states in the recruitment of FDI tend to fall below this threshold.

Lotto nothing? The budgetary impact of state lotteries

Lottery revenues are often touted as an independent revenue source for states. Using 32 years of state financial data, the fallacy of such thinking is demonstrated. Being the first to control for the self-selection of being a lottery state, it is found that overall tax revenues decline with increased lottery sales. Moreover, it is discovered that this decline is driven by a decrease in revenues from general sales and excise taxes, which is only partially offset by increases in income tax receipts. Such findings are attributed to a combination of behavioural and political responses following the lotterys implementation.

The Changing Roles of Disability, Veteran, and Socioeconomic Status in Elderly Interstate Migration

This research explores how interstate elderly migration behavior through the life course has changed over time by examining the role of individual characteristics in different types of moves. The authors focus on disability, veteran, and socioeconomic status, which research suggests are linked with differing motives for elderly migration. Using data from the 1970-2000 Integrated Public Use Microdata Series (IPUMS), descriptive and multivariate analyses show that disability status has grown in importance while veteran and socioeconomic status have declined or remained stable. These changes are unique to the elderly. The growing role of disability in elderly migration is geographically universal, extending to both return (a proxy for assistance-related migration) and nonreturn migration. Possible explanations include a tendency for the “first” (amenity-based) elderly move to occur at younger ages and a decline in primarily milder disabilities that leads to relatively more severe disabilities—and need for assistance—of those remaining.

“Going With the Flow”—A Comparison of Interstate Elderly Migration During 1970–2000 Using the (I)PUMS Versus Full Census Data

OBJECTIVES We investigate how much state-to-state elderly migration patterns have changed during 1970-2000 and compare the findings from 2 commonly used sources of data, the census flow tabulations and the integrated public use microdata series (IPUMS). METHODS We calculate descriptive statistics such as migration rates, the distribution of top destination and origin states, and a new migration Herfindahl-Hirschman Index that measures geographic concentration. Comparisons over time and between data sources are formalized using correlations and regression analyses that permit persistent flow patterns. RESULTS After an increase between 1970 and 1980, elderly migration rates have been stable, with a slight decline. Elderly migration has become less geographically concentrated; the decline of California and Florida and ascension of Nevada and the Carolinas as top destinations are evident. Correlation and regression analyses reveal that migration patterns are overall very persistent over time, especially using census tabulations based on a larger sample. DISCUSSION Elderly migration patterns have been quite stable since 1970. Using the IPUMS, as most migration studies do, exaggerates the changes in elderly migration over time in both descriptive and statistical analyses, a result that is likely due to its smaller sample size and the relative rarity of an interstate move.

CONSIDERING THE SOURCE: DOES THE COUNTRY OF ORIGIN OF FDI MATTER TO ECONOMIC GROWTH?*

It has long been surmised that firms controlled by different countries may have unequal effects on the host economies in which they locate. By looking at the seven major source countries of foreign direct investment (FDI) in the United States, we provide empirical evidence that the state growth effects of FDI differ by source country. We attribute these differential growth effects to the relative differences in factor endowments between the source country and the state. The implication of this result is that technology transfer, believed to be the engine of economic growth, becomes more costly the more dissimilar the endowments.

Is There a Connection Between Reciprocity and Tax Competition

One challenge states face in designing income tax systems is deciding how to treat nonresident earners. Numerous states have entered into reciprocity agreements with other states that exclude nonresidents’ income from the tax base. These agreements provide a unique opportunity to explore the nature of state tax competition. The authors demonstrate that not only do reciprocity agreements allow states to have higher income tax rates than do nonreciprocity states but also that the states with reciprocity agreements exhibit increased levels of competition over other taxes.

State income tax reciprocity agreements and small businesses

Purpose - – Small businesses play a vital role in job creation and economic growth, and previous studies have noted that higher state tax rates may reduce entrepreneurial activity, growth, and hiring. The paper aims to discuss this issue. Design/methodology/approach - – In this paper, the authors use a 1989-2005 panel of state-level data to explore the effects of state income tax reciprocity agreements on several measures of small business activity. Since a reciprocity agreement exempts non-resident income from a states personal income tax base, it has the potential to reduce barriers to entrepreneurial activity and lower tax compliance costs. Findings - – The results indicate that reciprocity agreements appear to have reduced the tax-rate sensitivity of entrepreneurial activity, which may lead to more small business and entrepreneurial activity in states with more active agreements, other factors constant. This suggests that personal income tax reciprocity agreements may be a credible policy tool to expand small business activity. Originality/value - – In this study, the paper sets out to determine if small business and entrepreneurial activity is greater in states that have reciprocity agreements and if such activity is dependent on the number of active agreements in place. Given recent nationwide efforts to ease compliance costs for business through other initiatives such as the Telecommuter Tax Fairness Act and the Streamlined Sales Tax Agreement, this study is the first to quantify how decreasing tax compliance and eliminating barriers to labor mobility affects small business activity. The results therefore have the potential to help shape debates in many states today.

How Has Elderly Migration Changed in the Twenty-First Century? What the Data Can— and Cannot —Tell Us

Interstate elderly migration has strong implications for state tax policies and health care systems, yet little is known about how it has changed in the twenty-first century. Its relative rarity requires a large data set with which to construct reliable measures, and the replacement of the U.S. Census long form (CLF) with the American Community Survey (ACS) has made such updates difficult. Two commonly used alternative migration data sources—the Current Population Survey (CPS) and the Statistics of Income (SOI) program of the Internal Revenue Service (IRS)—suffer serious limitations in studying the migration of any subpopulation, including the elderly. Our study informs migration research in the post-2000 era by identifying methodological differences between data sources and devising strategies for reconciling the CLF and ACS. Our investigation focusing on the elderly suggests that the ACS can generate comparable migration data that reveal a continuation of previously identified geographic patterns as well as changes unique to the 2000s. However, its changed definition of residence and survey timing leaves us unable to construct a comparable national migration rate, suggesting that one must use national trends in the smaller CPS to investigate whether elderly migration has increased or decreased in the twenty-first century.

State Income Tax Preferences for the Elderly

This research investigates the evolution of state income tax preferences for the elderly over the last 25 years. Documenting how various types of income tax preferences have changed reveals that state tax policies are not simply mimicking federal tax law. It also shows a divergence in how the different types of state preferences have evolved. We therefore construct a summary measure using representative household profiles created from the Current Population Survey and the TAXSIM calculator for the period 1977-2002. Both our descriptive and econometric analyses point to state tax competition as a likely explanation for the recent patterns in state income tax preferences for the elderly.

Protecting the Vulnerable or Ripe for Reform? State Income Tax Breaks for the Elderly—Then and Now

State governments have a long history of providing income tax relief to their elderly constituents. Our research investigates the current distributional and revenue effects of these tax breaks, as well as the economic status of the elderly, and explores how these measures have changed since 1990. Using data from the 1990 Integrated Public Use Microdata Series and the 2013 American Community Survey, combined with the TAXSIM calculator, we calculate current state income tax liabilities and revenues and simulate the effects of removing all age-related tax breaks. Our analyses reveal that the economic well-being of the elderly has grown substantially relative to the nonelderly and that state tax breaks primarily benefit the middle- and upper-income elderly. Revenue costs of these tax breaks have also grown substantially, and their modest and mixed effects on income equality, measured by changes in the Gini, cast doubt on equity as a justification.