Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227600
Authors: 
Kessing, Sebastian
Lipatov, Vilen
Zoubek, J. Malte
Year of Publication: 
2019
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge No. 191-19
Abstract: 
Combining an intensive labor supply margin with an extensive, productivity-enhancing migration margin, we determine how regional inequality and labor mobility shape optimal redistribution. We propose the use of delayed optimal-control techniques to obtain optimal tax formulae with location-dependent productivity and multidimensional heterogeneity. Productivity-enhancing interregional migration exerts a downward pressure on marginal tax rates. Allowing for regionally differentiated taxation with location-dependent productivity, we find that marginal tax rates in high-(low-)productivity regions should be corrected downwards (upwards). Simula- tions using the productivity differences between metropolitan and other regions in the US indicate that productivity-increasing internal migration constitutes only a minor constraint on regionally undifferentiated redistributive taxation, but it is quantitatively more important for differentiated taxation.
Subjects: 
optimal taxation
redistribution
regional inequality
migration
multidimensional screening
delayed optimal control
JEL: 
H11
J45
R12
Document Type: 
Working Paper

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