Fiscal Transfers in the Spatial Economy

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7012

Classification and Topics

• Classification: Wirtschaft ; Economic Integration ; Size and Spatial Distributions of Regional Economic Activity ; General Equilibrium and Welfare Economic Analysis of Regional Economies ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
• Subject: fiscal equalization ; regional transfers ; migration ; spatial economics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Henkel, Marcel ; Seidel, Tobias ; Suedekum, Jens
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/180274
• Last update: 10.03.2025, 11:45 AM CET