State Tax Differentials, Cross-Border Commuting, and Commuting Times in Multi-State Metropolitan Areas

53 Pages Posted: 9 Jul 2014

See all articles by David R. Agrawal

David R. Agrawal

University of Kentucky - James W. Martin School of Public Policy and Administration; University of Kentucky - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

William H. Hoyt

University of Kentucky - Gatton College of Business and Economics

Multiple version iconThere are 3 versions of this paper

Date Written: June 25, 2014

Abstract

We examine the effects of differences in income tax rates on commuting times within multi-state MSAs. Our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commute times and interstate commutes. Empirically examining multi-state MSAs allows us to exploit tax policy discontinuities while holding fixed other characteristics. We identify large effects on commuting times for affluent households and homeowners in MSAs in which taxes are based on the state of residence. We discuss how the model and empirical design can be used to study other policy differences.

Keywords: tax differentials, transportation, inter-jurisdictional competition, commuting

JEL Classification: H20, H71, H73, R12, R28, R41

Suggested Citation

Agrawal, David Robert and Hoyt, William H., State Tax Differentials, Cross-Border Commuting, and Commuting Times in Multi-State Metropolitan Areas (June 25, 2014). CESifo Working Paper Series No. 4852. Available at SSRN: https://ssrn.com/abstract=2463584

David Robert Agrawal

University of Kentucky - James W. Martin School of Public Policy and Administration ( email )

433 Patterson Office Tower
Lexington, KY 40506-0027
United States
859-257-8608 (Phone)

HOME PAGE: http://www.uky.edu/~drag222/

University of Kentucky - Department of Economics ( email )

Lexington, KY 40506
United States

HOME PAGE: http://www.uky.edu/~drag222/

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.uky.edu/~drag222/

William H. Hoyt (Contact Author)

University of Kentucky - Gatton College of Business and Economics ( email )

Dept. of Economics
Lexington, KY 40506
United States
606-257-2518 (Phone)
606-323-1920 (Fax)

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