Tax exporting, regional economic growth, and welfare

Long-run exporting and importing of regional taxes is assessed theoretically and empirically using a six-region nonlinear general equilibrium model of the United States. The relationships between tax exporting and three aggregate measures of regional change (value added, welfare of all residents, and welfare of original residents only) are examined empirically. The ability of states to adopt tax structures that successfully impose more of a burden on out-of-state residents does not necessarily promote regional economic growth or welfare, and evaluating tax policy based on its ability to promote economic growth may be misleading if regional welfare is the primary objective. (C) 1996 Academic Press, Inc.