Cecile Gaubert, University of California. "Place-Based Redistribution"
Department webinar. Cecile Gaubert is an Assistant Professor at the University of California. She will present the paper: "Place-Based Redistribution". Coauthored by Pat Kline and Danny Yagan.
Place-based redistribution is ubiquitous but has traditionally enjoyed little support among economists. We study the equity-efficiency tradeoffs that arise when taxes may be indexed to location in addition to labor income. Using a series of stylized spatial equilibrium models, we show that when locational sorting on the basis of income is sufficiently strong – either due to skill-taste correlation or income effects in locational choice – transfers from one region to another can be welfare improving, even in an environment with optimal place-blind income taxes. Efficiency costs dominate equity gains, however, when workers are very mobile and subsidized areas are substantially less productive. A calibration exercise illustrates the relative strength of these forces and concludes that sizable place-based transfers may be optimal.
This is a shared webinar with BI.