Commuting and Taxes: Theory, Empirics and Welfare Implications

David R. Agrawal, William H. Hoyt

Research output: Contribution to journalArticlepeer-review

11 Scopus citations

Abstract

We examine the effect of interstate differences in income taxes on commuting times. Our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commuting patterns, but the sign of the effect depends on whether taxes are residence-based or employment-based. Empirically, tax differentials have a large effect on commuting times for affluent households and mobile households. We show that commuting times are a sufficient statistic to measure the spatial welfare effects of tax policy. The model and empirical design can be used by economists to study other policy differences.

Original languageEnglish
Pages (from-to)2969-3007
Number of pages39
JournalEconomic Journal
Volume128
Issue number616
DOIs
StatePublished - Dec 2018

Bibliographical note

Publisher Copyright:
© 2017 Royal Economic Society

ASJC Scopus subject areas

  • Economics and Econometrics

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