Fiscal tansfers in the spatial economy Marcel Henkel, Tobias Seidel, Jens Suedekum
By: Henkel, Marcel
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Contributor(s): Seidel, Tobias | Südekum, Jens.
Material type: 
ArticlePublisher: 2021Subject(s): INGRESOS FISCALES | REDISTRIBUCION | DESEQUILIBRIOS REGIONALES | BALANZAS FISCALES | ALEMANIA | MODELOS ECONOMETRICOS
In:
American Economic Journal : Economic Policy v. 13, n. 4, November 2021, p. 433-468Summary: Many countries shift substantial public resources across jurisdictions to mitigate spatial economic disparities. We use a general equilibrium model with multiple asymmetric regions, labor mobility, and costly trade to carve out the aggregate implications of fiscal transfers. Calibrating the model for Germany, we find that transfers indeed deliver smaller disparities across regions. This comes at the cost of lower national output, however, because economic activity is diverted away from core cities and toward remote areas with low productivity. But despite this loss in output per capita by about 2 percent in our baseline specification, welfare still increases by 0.07 percent because the transfer scheme countervails overcongestion in large cities. If the optimal transfer regime was implemented, welfare would increase by 0.06 percent.
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| OP 2135/2021/4-2 Corporate taxation under weak enforcement | OP 2135/2021/4-3 Collaborative tax evasion in the provision of services to consumers | OP 2135/2021/4-4 Market power and income taxation | OP 2135/2021/4-5 Fiscal tansfers in the spatial economy | OP 2135/2021/4-6 Do value-added taxes affect international trade flows? | OP 2135/20220/2-1 Tax credits and small firm R&D spendig | OP 2135/2022/1 American Economic Journal : Economic Policy |
Resumen.
Bibliografía.
Many countries shift substantial public resources across jurisdictions to mitigate spatial economic disparities. We use a general equilibrium model with multiple asymmetric regions, labor mobility, and costly trade to carve out the aggregate implications of fiscal transfers. Calibrating the model for Germany, we find that transfers indeed deliver smaller disparities across regions. This comes at the cost of lower national output, however, because economic activity is diverted away from core cities and toward remote areas with low productivity. But despite this loss in output per capita by about 2 percent in our baseline specification, welfare still increases by 0.07 percent because the transfer scheme countervails overcongestion in large cities. If the optimal transfer regime was implemented, welfare would increase by 0.06 percent.
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