Optimal Taxation under Regional Inequality

Sebastian Kessing, Vilen Lipatov and J. Malte Zoubek
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J. Malte Zoubek: University of Siegen

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Combining an intensive labor supply margin with an extensive, productivity-enhancing migration margin, we determine how regional inequality and labor mobility shape optimal redistribution. We propose the use of delayed optimal-control techniques to obtain optimal tax formulae with location-dependent productivity and two-dimensional heterogeneity. Our baseline simulations using the productivity differences between large metropolitan and other regions in the US indicate that productivity-increasing internal migration can constitute a quantitatively important constraint on redis-tribution. Allowing for regionally di¤erentiated taxation with location-dependent productivity, we find that marginal tax rates in high (low) productivity regions should be corrected downwards (upwards) relative to a no-migration benchmark.

Keywords: Optimal taxation; redistribution; regional inequality; migration; multidimensional screening; delayed optimal control JEL Classification: H11; J45; R12 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-pbe and nep-ure
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Citations: View citations in EconPapers (3)

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http://www2.warwick.ac.uk/fac/soc/economics/resear ... 253-2015_kessing.pdf

Related works:
Journal Article: Optimal taxation under regional inequality (2020)
Working Paper: Optimal Taxation under Regional Inequality (2020)
Working Paper: Optimal Taxation under Regional Inequality (2019)
Working Paper: Optimal Taxation under Regional Inequality (2014)
Working Paper: Optimal taxation under regional inequality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:253

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