Migration, Commuting, and the Spatial Distribution of Public Spending

What are the welfare consequences of fiscal transfers across local governments that finance their spending? I develop a spatial equilibrium framework in which workers’ migration and commuting choices reveal preferences. I combine it with unique data from South Korea and leverage tax reforms as a source of exogenous variation. General-equilibrium counterfactuals imply that a fiscal arrangement with lower redistribution would result in aggregate gains. A key aspect of my analysis is that migration and commuting decisions are jointly made. Ignoring either of these margins biases the estimates of preferences for public goods and key elasticities in quantitative spatial models.