Optimal Regional Fiscal Policies and Workers' Education, Location, and Occupation: A Note
This note concerns the determination of optimal rates of region-specific taxes in a two region model which allows for occupational choice and spatial migration. The tax system assumed in this model exists to finance education which allows workers access to jobs requiring skills. It is shown that the optimal tax rate differs across regions. Moreover, it is demonstrated that central co-ordination of regions' tax policies is needed in order to arrive at the social welfare optimum. The response both of migration and of optimal tax rates to region-specific productivity shocks is shown to be ambiguous.
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Volume (Year): 53 (1998)
Issue (Month): 3-4 ()
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