Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180274
Authors: 
Henkel, Marcel
Seidel, Tobias
Suedekum, Jens
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper 7012
Abstract: 
Many countries operate pronounced fiscal equalization schemes that shift tax revenue across jurisdictions. We use a general equilibrium model with multiple asymmetric regions, costly trade and labor mobility to carve out the aggregate implications of this policy. Calibrating the model for Germany, we find that it indeed delivers smaller spatial economic disparities across regions. This comes at the cost of lower national output, however, because activity is diverted away from core cities and towards remote areas with low productivity. But despite this output loss, fiscal transfers may still raise national welfare, because they effectively countervail over-congestion in large cities.
Subjects: 
fiscal equalization
regional transfers
migration
spatial economics
JEL: 
F15
R12
R13
R23
Document Type: 
Working Paper

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