Optimal Taxation under Regional Inequality

Arbeitspapier

We study how regional productivity differences and labor mobility shape optimal Mirrleesian tax-transfer schemes. When tax schedules are not allowed to differ across regions, productivity-enhancing inter-regional migration exerts a downward pressure on optimal marginal tax rates. When regionally differentiated taxation is allowed, marginal tax rates in high-(low-)productivity regions should be corrected downwards (upwards) relative to the benchmark without migration. Simulations of the productivity differences between metropolitan and other areas of the US indicate that migration affects the optimal tax-transfer schedule more strongly in the regionally differentiated rather than in the undifferentiated case.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 13-2020

Classification and Topics

• Classification: Wirtschaft ; Structure, Scope, and Performance of Government ; Public Sector Labor Markets ; Size and Spatial Distributions of Regional Economic Activity
• Subject: Optimal taxation ; place-based redistribution ; regional inequality ; migration ; multidimensional screening ; delayed optimal control

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kessing, Sebastian G. ; Lipatov, Vilen ; Zoubek, J. Malte
• Event: Veröffentlichung
• (who): Philipps-University Marburg, School of Business and Economics
• (where): Marburg
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/216653