Fiscal Transfers in the Spatial Economy
Tobias Seidel and
Jens Suedekum ()
No 7012, CESifo Working Paper Series from CESifo
Many countries operate pronounced fiscal equalization schemes that shift tax revenue across jurisdictions. We use a general equilibrium model with multiple asymmetric regions, costly trade and labor mobility to carve out the aggregate implications of this policy. Calibrating the model for Germany, we find that it indeed delivers smaller spatial economic disparities across regions. This comes at the cost of lower national output, however, because activity is diverted away from core cities and towards remote areas with low productivity. But despite this output loss, fiscal transfers may still raise national welfare, because they effectively countervail over-congestion in large cities.
Keywords: fiscal equalization; regional transfers; migration; spatial economics (search for similar items in EconPapers)
JEL-codes: F15 R12 R13 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-geo and nep-ure
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Journal Article: Fiscal Transfers in the Spatial Economy (2021)
Working Paper: Fiscal transfers in the spatial economy (2019)
Working Paper: Fiscal Transfers in the Spatial Economy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7012
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