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Income Segregation and Local Progressive Taxation: Empirical Evidence from Switzerland

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  • Kurt Schmidheiny

Abstract

This study investigates spatial segregation of the population in fiscally decentralized urban areas. The theoretical part proposes the progressivity of local income taxes as a new explanation for income segregation. The empirical part studies how income tax differentials across municipalities in the Swiss metropolitan area of Basel affect the households’ location decisions. The (multinomial) location choice of households is investigated within the framework of the random utility maximization model (RUM). The theoretical model is used to identify the household preferences applied in the RUM. The empirical results show that rich households are significantly and substantially more likely to move to low-tax municipalities than poor households.

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  • Kurt Schmidheiny, 2004. "Income Segregation and Local Progressive Taxation: Empirical Evidence from Switzerland," CESifo Working Paper Series 1313, CESifo.
    • Handle: RePEc:ces:ceswps:_1313
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    More about this item

    Keywords

    location choice; income segregation; fiscal federalism; progressive taxation; discrete choice;
    All these keywords.

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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