Federal Income Taxes and Their Effects on Inter and Intra City Resource Allocation

Oded Hochman and David Pines

No 275492, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: This paper discusses the distortive effect of federal income tax on the efficiency of resource allocation within and between cities. The underlying assumption is that cities differ from one another in labor productivity. Consequently, in equilibrium, the size, the nominal income, and the price of housing vary across cities. When uniform income tax rate is used for financing federal expenditure, the shadow price of housing exceeds the market price in the larger cities, indicating that the stock of housing is too small and the per—capita housing consumption is too large. The opposite is true in small cities, where also, if housing and LPG (local public good) are net substitutes, the provision of the LPG is excessive. The paper also discusses the effects of federal corporate profit and net land rent taxes. The first is shown to discourage the supply of the LPG; the second is not always a feasible tax instrument capable to raise the predetermined tax revenue. This is especially true in the long run.

Keywords: Financial Economics; Labor and Human Capital (search for similar items in EconPapers)
Pages: 24
Date: 1990-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/275492/files/TEL-AVIV-FSWP-162.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275492

DOI: 10.22004/ag.econ.275492

Access Statistics for this paper

More papers in Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().