Regional wage convergence has long been predicted across the United States as barriers to factor mobility have fallen, yet there is little evidence (apart from a brief period in the 1970s and 1980s) that convergence has actually occurred. Why not? I reexamine this issue by developing a model in...

We present a model of optimizing government behavior in which a need for increased revenue leads to the introduction of a new revenue source, such as a VAT, accompanied by a reduction in income taxes. We argue that this is a plausible outcome for the United States, in view of international...