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Place-Based Redistribution

Author

Listed:
  • Cecile Gaubert
  • Patrick M. Kline
  • Damián 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 U.S. Empowerment Zone program yields sizable optimal spatial transfers that are sensitive to assumed levels of migration responsiveness.

Suggested Citation

  • Cecile Gaubert & Patrick M. Kline & Damián Vergara & Danny Yagan, 2021. "Place-Based Redistribution," NBER Working Papers 28337, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28337
    Note: DEV ITI LS PE
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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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