Commuting and Taxes: Theory, Empirics and Welfare Implications

39 Pages Posted: 11 Dec 2018

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: December 2018

Abstract

We examine the effect of interstate differences in income taxes on commuting times. Our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commuting patterns, but the sign of the effect depends on whether taxes are residence-based or employment-based. Empirically, tax differentials have a large effect on commuting times for affluent households and mobile households. We show that commuting times are a sufficient statistic to measure the spatial welfare effects of tax policy. The model and empirical design can be used by economists to study other policy differences.

Suggested Citation

Agrawal, David Robert and Hoyt, William H., Commuting and Taxes: Theory, Empirics and Welfare Implications (December 2018). The Economic Journal, Vol. 128, Issue 616, pp. 2969-3007, 2018. Available at SSRN: https://ssrn.com/abstract=3298975 or http://dx.doi.org/10.1111/ecoj.12550

David Robert Agrawal (Contact Author)

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

433 Patterson Office Tower
Lexington, KY 40506-0027
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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

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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