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Income segregation from local income taxation when households differ in both preferences and incomes
JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)
 
ID 931151
Author(s) Schmidheiny, Kurt
Author(s) at UniBasel Schmidheiny, Kurt
Year 2006
Title Income segregation from local income taxation when households differ in both preferences and incomes
Journal Regional Science and Urban Economics
Volume 36
Number 2
Pages / Article-Number 270-299
Abstract This paper presents a model of an urban area with local income taxes used to finance a local public good. Households differ in both incomes and their taste for housing. The existence of a segregated equilibrium is shown in a calibrated two-community model assuming single-peaked distributions for both income and housing taste. The equilibrium features income segregation of the population across the communities. The segregation is, however, imperfect: some rich households can be found in poor communities and vice-versa. The calibrated model is able to explain the substantial differences in local income tax levels and average incomes across communities as observed in e.g. Switzerland. The numerical investigation reveals that the ordering of community characteristics critically depends on the substitutability between the public and the private good. The numerical investigation also suggests that taste heterogeneity reduces the distributional effects of local tax differences. The numerical investigation furthermore suggests that the rich community can set lower taxes when it is small.
Publisher Elsevier
ISSN/ISBN 0166-0462
edoc-URL http://edoc.unibas.ch/46218/
Full Text on edoc No
Digital Object Identifier DOI 10.1016/j.regsciurbeco.2005.10.003
ISI-Number WOS:000236697400006
Document type (ISI) Article
 
   

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