Place-Based Redistribution

Cecile Gaubert, Patrick Kline, Damián Vergara and Danny Yagan

No 28337, NBER Working Papers from National Bureau of Economic Research, Inc

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 U.S. Empowerment Zone program yields sizable optimal spatial transfers that are sensitive to assumed levels of migration responsiveness.

JEL-codes: H20 R10 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-geo and nep-ure
Note: DEV ITI LS PE
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