蝌蚪网 Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Heterogeneous Workers and Federal Income Taxes in a Spatial Equilibrium
蝌蚪网 Journal: Economic Policy
(pp. 100–134)
Abstract
We study the geographic incidence and efficiency of an income tax by estimating a spatial equilibrium model with heterogeneous workers. The US income tax shifts households out of high-productivity cities, leading to locational inefficiency of 0.25 percent of output. Removing spatial tax distortions increases inequality because more educated households are more mobile and own larger shares of land. Flattening the tax schedule, or introducing cost-of-living adjustments or local wage adjustments leads to efficiency gains but causes substantial increases in inequality. Differences in mobility and land ownership across skill groups create an equity-efficiency trade-off that is unique to spatial settings.Citation
Colas, Mark, and Kevin Hutchinson. 2021. "Heterogeneous Workers and Federal Income Taxes in a Spatial Equilibrium." 蝌蚪网 Journal: Economic Policy 13 (2): 100–134. DOI: 10.1257/pol.20180529Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- H22 Taxation and Subsidies: Incidence
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics