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Place-Based Redistribution

Author

Listed:
  • Cecile Gaubert
  • Patrick Kline
  • Damian Vergara
  • Danny Yagan

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

Suggested Citation

  • Cecile Gaubert & Patrick Kline & Damian Vergara & Danny Yagan, 2025. "Place-Based Redistribution," American Economic Review, American Economic Association, vol. 115(10), pages 3415-3450, October.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:10:p:3415-50
    DOI: 10.1257/aer.20202067
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    Cited by:

    1. is not listed on IDEAS
    2. Seidel Tobias, 2024. "Optimale regionale Transfers," Wirtschaftsdienst, Sciendo, vol. 104(11), pages 763-767.
    3. Ida Farida Adi Prawira, 2021. "Phenomenology of Employee Income Tax Policies during the Covid-19 in Indonesia," GATR Journals afr199, Global Academy of Training and Research (GATR) Enterprise.
    4. Jeffrey Clemens & Stan Veuger, 2024. "Intergovernmental Grants and Policy Competition: Concepts, Institutions, and Evidence," NBER Chapters, in: Policy Responses to Tax Competition, pages 273-325, National Bureau of Economic Research, Inc.
    5. Hershbein, Brad & Stuart, Bryan A., 2023. "Place-based consequences of person-based transfers: Evidence from recessions," Journal of Public Economics, Elsevier, vol. 224(C).
    6. Luke Heath Milsom, 2023. "Moving OpportunityLocal Connectivity and Spatial Inequality," CEPREMAP Working Papers (Docweb) 2303, CEPREMAP.
    7. repec:ces:ceswps:_11595 is not listed on IDEAS
    8. Enghin Atalay & Ali Hortaçsu & Mustafa Runyun & Chad Syverson & Mehmet Fatih Ulu, 2023. "Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy," NBER Working Papers 31293, National Bureau of Economic Research, Inc.
    9. Diaz, Antonia & Jáñez, Álvaro & Wellschmied, Felix, 2023. "Geographic Mobility over the Life-Cycle," IZA Discussion Papers 15896, Institute of Labor Economics (IZA).
    10. Coen-Pirani, Daniele, 2025. "Tax progressivity and mobility costs," Regional Science and Urban Economics, Elsevier, vol. 114(C).
    11. Jung, Philip & Korfmann, Philipp & Preugschat, Edgar, 2023. "Optimal regional labor market policies," European Economic Review, Elsevier, vol. 152(C).
    12. Lee, Hwanoong & Ko, Changsu & Kim, Wookun, 2024. "Local employment multiplier: Evidence from relocation of public-sector entities in South Korea," Labour Economics, Elsevier, vol. 88(C).
    13. Ning Jia & Raven Molloy & Christopher Smith & Abigail Wozniak, 2023. "The Economics of Internal Migration: Advances and Policy Questions," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 144-180, March.
    14. Rothenberg, Alexander D. & Wang, Yao & Chari, Amalavoyal, 2025. "When regional policies fail: An evaluation of Indonesia’s Integrated Economic Development Zones," Journal of Development Economics, Elsevier, vol. 176(C).
    15. Sebastian Siegloch & Nils Wehrhöfer & Tobias Etzel, 2025. "Spillover, Efficiency, and Equity Effects of Regional Firm Subsidies," American Economic Journal: Economic Policy, American Economic Association, vol. 17(1), pages 144-180, February.
    16. Freedman, Matthew & Khanna, Shantanu & Neumark, David, 2023. "Combining rules and discretion in economic development policy: Evidence on the impacts of the California Competes Tax Credit," Journal of Public Economics, Elsevier, vol. 217(C).
    17. Rodríguez-Pose, Andrés & Bartalucci, Federico & Lozano-Gracia, Nancy & Dávalos, María, 2024. "Overcoming left-behindedness. Moving beyond the efficiency versus equity debate in territorial development," LSE Research Online Documents on Economics 125629, London School of Economics and Political Science, LSE Library.
    18. Giuseppe Albanese & Guglielmo Barone & Guido DeBlasio, 2021. "The impact of place-based policies on income distribution," Discussion Paper series in Regional Science & Economic Geography 2021-04, Gran Sasso Science Institute, Social Sciences, revised Mar 2021.
    19. Blouri, Yashar & Büchler, Simon & Schöni, Olivier, 2023. "The geography of mortgage interest deductions," Journal of Urban Economics, Elsevier, vol. 138(C).
    20. Yang, Xiaozhong & Zhang, Cheng, 2022. "Spatial investments in the real estate industry: Based on the population flow within the city," Journal of Business Research, Elsevier, vol. 140(C), pages 593-603.
    21. Agrawal David R. & Foremny Dirk, 2022. "Redistribution In A Globalized World," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 242(5-6), pages 551-567, December.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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