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Fiscal Transfers in the Spatial Economy

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  • Henkel, Marcel
  • Seidel, Tobias
  • Südekum, Jens

Abstract

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.

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  • Henkel, Marcel & Seidel, Tobias & Südekum, Jens, 2018. "Fiscal Transfers in the Spatial Economy," CEPR Discussion Papers 12875, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12875
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    Cited by:

    1. Henkel, Marcel & Seidel, Tobias & Südekum, Jens, 2018. "Fiscal Transfers in the Spatial Economy," CEPR Discussion Papers 12875, C.E.P.R. Discussion Papers.
    2. Abuselidze, George, 2019. "Анализ На Формирането И Прилагането На Бюджетни Политики, Осигуряващи Социално-Икономическото Развитие На Административнотериториалните Единици [Analysis of the formation and use of budgetary polic," MPRA Paper 99889, University Library of Munich, Germany.
    3. Eduardo A. Haddad & Luis A. Galvis & Inácio F. Araújo-Junior & Vinicius A.Vale, 2018. "Impact Assessment of Scenarios of Interregional Transfers in Colombia," Documentos de Trabajo Sobre Economía Regional y Urbana 016767, Banco de la República - Economía Regional.
    4. Hansjörg Blöchliger & Olivier Durand-Lasserve, 2018. "The drivers of regional growth in Russia: A baseline model with applications," OECD Economics Department Working Papers 1523, OECD Publishing.
    5. Martins, Thales G.V. & Reis, Geraldo G. & Reis, Maria G.F. & Telles, Lucas A.A. & Lage, Mayara R. & Mendes, Gleidson G.C. & Pinto, Dayane L. & Castro, Nero L.M. & Lorenzon, Alexandre S. & Silva, Ricar, 2020. "Potential planting areas for native tree species in minas gerais state, Brazil, based on environmental variables and wood demand," Ecological Modelling, Elsevier, vol. 432(C).
    6. Sven Wardenburg & Thomas Brenner, 2019. "The impact of place-based policies on perceived regional living conditions across German labor market regions. Examining the impacts on migration flows," Working Papers on Innovation and Space 2019-02, Philipps University Marburg, Department of Geography.
    7. Sheedy, Elizabeth & Zhang, Le & Tam, Kenny Chi Ho, 2019. "Incentives and culture in risk compliance," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    8. Channing Arndt & Chris Loewald & Konstantin Makrelov, 2020. "Climate change and its implications for central banks in emerging and developing economies," Working Papers 10001, South African Reserve Bank.
    9. Tauli-Corpuz, Vicky & Alcorn, Janis & Molnar, Augusta & Healy, Christina & Barrow, Edmund, 2020. "Cornered by PAs: Adopting rights-based approaches to enable cost-effective conservation and climate action," World Development, Elsevier, vol. 130(C).
    10. George Abuselidze, 2019. "Analysis Of The Formation And Use Of Budgetary Policies Ensuring The Socio-Economic Development Of Territorial Units," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 2 Year 20, pages 3-15.

    More about this item

    Keywords

    Fiscal equalization; migration; regional transfers; spatial economics;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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