Tagging Birthplace for Optimal Tax Policy, Redistribution, and Welfare

Khayyam Tayibov ()
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Khayyam Tayibov: Department of Economics and Statistics, Postal: Department of Economics and Statistics, School of Business and Economics, Linnaeus University, 351 95 Växjö, Sweden

No 9/2024, Working Papers in Economics and Statistics from Linnaeus University, School of Business and Economics, Department of Economics and Statistics

Abstract: This paper studies the question of how place of birth affects the design of effective tax policies. Using Swedish population-wide register data, I investigate the relationship between regional origin and economic outcomes. Using a numerical simulation approach, I explore the implications of tagging individuals based on their place of birth for optimal tax policy and income redistribution. The numerical simulations show that under optimal tax policy, individuals from more populous regions are consistently assigned higher marginal and average tax rates, implying that the government redistributes from these regions to less populous ones. Moreover, I find that such policies can lead to significant welfare improvements.

Keywords: Optimal taxation; tagging; regional heterogeneity (search for similar items in EconPapers)
JEL-codes: H21 H24 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2024-05-23
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:vxesta:2024_009

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