American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Place-Based Redistribution
American Economic Review
(pp. 3415–50)
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 US Empowerment Zone program yields sizable optimal spatial transfers that are sensitive to assumed levels of migration responsiveness.Citation
Gaubert, Cecile, Patrick Kline, Damian Vergara, and Danny Yagan. 2025. "Place-Based Redistribution." American Economic Review 115 (10): 3415–50. DOI: 10.1257/aer.20202067Additional Materials
JEL Classification
- H21 Taxation and Subsidies: Efficiency; Optimal Taxation
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- 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