Place-Based Redistribution

Cecile Gaubert, Patrick Kline, Damian Vergara and Danny Yagan

American Economic Review, 2025, vol. 115, issue 10, 3415-50

Abstract: We study optimal income taxation in a spatial equilibrium model with heterogeneous locational preferences, labor supply decisions, and competitive housing and labor markets. Expressions characterizing the optimal tax schedule in each community are provided that capture the fiscal externalities associated with migration and the effects of redistribution between households and landlords. Correlation between skill and locational preferences yields optimal transfers to poor areas, while sorting based on comparative advantage can motivate transfers in either direction. A calibration to areas targeted by the US Empowerment Zone program yields sizable optimal spatial transfers that are sensitive to assumed levels of migration responsiveness.

JEL-codes: H21 H23 H24 J24 J31 R23 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Place-Based Redistribution (2021)
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DOI: 10.1257/aer.20202067

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