This paper presents a general-equilibrium model where human capital investm
ent increases specialization and exposes skilled workers to region-specific
earnings risk. Interjurisdictional mobility of skilled labor mitigates the
se risks; state-contingent migration of skilled labor also improves efficie
ncy. With perfect capital markets, labor-marker integration raises welfare
and reduces ex post earnings inequality. If instead human capital investmen
t call only be financed through local tares, labor-market integration leads
to interjurisdictional fiscal competition, shifting the burden of taxation
to low-skilled immobile workers. Decentralized public provision of human c
apital investment creates earnings inequalities and is inefficient. (JEL H0
0).