Fiscal Competition among States in Australia: The Demise of Death Duties

This study examines interstate migration in Australia for the period 1972-1985 to determine if it was influenced by Tiebout-style fiscal competition. In particular, it examines the impact of Queensland's abolition of death duties in the mid-1970s. The evidence presented is consistent with the common wisdom surrounding the event as well as with the Tiebout hypothesis. Interstate migration during this period appears to have been in favor of Queensland and at the expense of those states that delayed following the Queensland example. Queensland's population growth during the first three years after abolishing death duties was an average 0.20 percent higher due to migrants avoiding the death duties of the other five states. On average, population growth in each of these states was 0.04 percent lower as a result of the tax.