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Mobility and local income redistribution

  • Sigrid Roehrs

    ()

    (University of Zurich)

  • David Stadelmann

    ()

    (University of Fribourg)

Mobility may undermine local income redistribution in federal systems,because rich taxpayers can evade high taxes by moving to low tax jurisdictions. By analyzing a model of local income redistribution with endogenous voting, income heterogeneity and an exogenously given degree of mobility we focus explicitly on the link between redistribution and mobility. Our findings suggest a nonlinear relationship between redistribution and mobility: high and low degrees of mobility permit major income redistribution as income sorting is absent, while a medium degree of mobility leads to high differences in tax rates between jurisdictions and thus to income sorting and less redistribution.

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File URL: http://ieb.ub.edu/aplicacio/fitxers/2010/4/Doc2010-4.pdf
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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/4.

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Length: 41 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:ieb:wpaper:2010/4/doc2010-4
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