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 language | English |
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Pages (from-to) | 2969-3007 |
Number of pages | 39 |
Journal | Economic Journal |
Volume | 128 |
Issue number | 616 |
DOIs | |
State | Published - Dec 2018 |
Bibliographical note
Publisher Copyright:© 2017 Royal Economic Society
ASJC Scopus subject areas
- Economics and Econometrics