Inefficiencies in Regional Commuting Policy

Abstract:     
This paper discusses investments in transport infrastructure and incentives for commuting taxes in a multiregional setting. We study the horizontal and vertical interactions between governments. We identify incentives for strategic and tax exporting behavior that might lead to underinvestment in transport infrastructure. Furthermore, we show that the intensity of the strategic behavior is affected by geographic firm ownership structure, the number of labor-supplying regions and the revenue-sharing mechanism in the federation. A numerical example applies the insights on commuting in Belgium.

Number of Pages in PDF File: 34

Keywords: regional tax competition, commuting subsidies, transport pricing, regional labor markets

JEL Classification: H73, H77, J61, R23, R48, R53

working papers series