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Optimal Taxation under Regional Inequality

Resource Type
  • Kessing, Sebastian G. (University of Siegen)
  • Lipatov, Vilen (Compass Lexecon Brussels)
  • Zoubek, Malte (University of Siegen)
Publication Date
Funding Reference
  • Deutsche Forschungsgemeinschaft (Germany)
    • Award Number: KE 1693/3-1 and KE 1693/3-2.
  • Abstract

    Combining an intensive labor supply margin with an extensive, productivity-enhancing migration margin, we determine how regional inequality and labor mobility shape optimal redistribution. We propose the use of delayed optimal-control techniques to obtain optimal tax formulae with location-dependent productivity and multi-dimensional
    heterogeneity. Productivity-enhancing inter-regional migration exerts a downward pressure on marginal tax rates. Allowing for regionally differentiated taxation with location-dependent productivity, we find that marginal tax rates in high- (low-)productivity regions should be corrected downwards (upwards). Simulations using the productivity differences between metropolitan and other regions in the US indicate that productivity-increasing internal migration constitutes only a minor
    constraint on regionally undifferentiated redistributive taxation, but it is quantitatively more important for differentiated taxation.


Update Metadata: 2019-11-11 | Issue Number: 1 | Registration Date: 2019-11-11

Kessing, Sebastian G.; Lipatov, Vilen; Zoubek, Malte (2018): Optimal Taxation under Regional Inequality. Version: 1. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset.