Taxes, traffic jam and spillover in the metropolis

Abstract : This paper studies local governments' public policies in a metropolitan area plagued by traffic congestion, where both residents and workers consume local public goods. We develop a new spatial sub-metropolitan tax competition model which features a central city surrounded by suburban towns linked by mobile capital and mobile residents who commute to work. We show that Pareto-efficiency is achieved if towns can retain their workers using labor subsidies. Otherwise, traffic congestion in the city is inefficiently high and local governments respond by setting inefficient public policies: (1) the city over-taxes capital and under-taxes residents, which leads to too little capital and too many residents in the city; (2) local public goods are under-provided in the city and over-provided in the towns.
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https://halshs.archives-ouvertes.fr/halshs-02275672
Contributor : Tidiane Ly <>
Submitted on : Sunday, September 1, 2019 - 2:42:50 PM
Last modification on : Tuesday, September 3, 2019 - 1:01:35 AM

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Tidiane Ly. Taxes, traffic jam and spillover in the metropolis. 2019. ⟨halshs-02275672⟩

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