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A Distortive Wage Tax and a Countervailing Commuting Subsidy

Matthias Wrede ()

Journal of Public Economic Theory, 2009, vol. 11, issue 2, 297-310

Abstract: Within a second‐best duocentric urban economics framework where labor income taxation distorts workplace choices on account of commuting costs, this paper studies a commuting subsidy, which distorts land use. It is shown that a commuting subsidy increases welfare if and only if it shifts labor supply from less to more productive business districts.

Date: 2009
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Handle: RePEc:bla:jpbect:v:11:y:2009:i:2:p:297-310