Optimal Taxation under Regional Inequality

Sebastian Kessing, Vilen Lipatov and Jens Malte Zoubek

No 5152, CESifo Working Paper Series from CESifo

Abstract: Regional productivity differences provide scope for productivity-enhancing labor mobility. Redistribution reduces relocation incentives through higher taxes or lower transfers. Combining an intensive labor supply margin with an extensive, productivity-enhancing migration margin, we determine how regional inequality and labor mobility affect optimal redistribution. Simulations using the productivity differences between rural and urban regions in the US indicate that optimal marginal tax rates are reduced by several percentage points if productivity enhancing migration is taken into account. Additionally, we study optimal regionally differentiated taxation.

Keywords: optimal taxation; redistribution; regional inequality; migration; multi-dimensional screening; delayed optimal control (search for similar items in EconPapers)
JEL-codes: H11 J45 R12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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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 (2015)
Working Paper: Optimal taxation under regional inequality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5152

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