@article{928b825264cc41d68f36cba3d8fb518e,
title = "State Taxes and Spatial Misallocation",
abstract = "We study state taxes as a potential source of spatial misallocation in the U.S.. We build a spatial general equilibrium framework that incorporates salient features of the U.S. state tax system, and use changes in state tax rates between 1980 and 2010 to estimate the model parameters that determine how worker and firm location respond to changes in state taxes. We find that heterogeneity in state tax rates leads to aggregate welfare losses. In terms of consumption equivalent units, harmonizing state taxes increases worker welfare by 0.6% if government spending is held constant, and by 1.2% if government spending responds endogenously. Harmonization of state taxes within Census regions achieves most of these gains. We also use our model to study the general equilibrium effects of recently implemented and proposed tax reforms.",
keywords = "Economic Geography, Misallocation, Monopolistic Competition, State Taxes",
author = "Fajgelbaum, {Pablo D.} and Eduardo Morales and {Su{\'a}rez Serrato}, {Juan Carlos} and Owen Zidar",
note = "Funding Information: Acknowledgments. We are grateful to the editor and five anonymous referees for helpful comments and suggestions. We thank Costas Arkolakis, Lorenzo Caliendo, Dave Donaldson, Nirupama Rao, and Jon Vogel for their discussions of the article. We also thank David Atkin, Arnaud Costinot, Klaus Desmet, Cecile Gaubert, David Lagakos, Enrico Moretti, Pat Kline, Andr{\'e}s Rodr{\'i}guez-Clare, Esteban Rossi-Hansberg, and Aleh Tsyvinski for helpful comments. Pawel Charasz, Stephanie Kestelman, Matt Panhans, Francesco Ruggieri, Prab Upadrashta, Victor Ye, and John Wieselthier provided excellent research assistance. P.D.F. gratefully acknowledges support from the UCLA Ziman Center. E.M. thanks the University of Wisconsin-Madison and the Cowles Foundation at Yale University for their hospitality and support. J. C.S.S. gratefully acknowledges support from the Kauffman Foundation. O.Z. gratefully acknowledges support from the Kathryn and Grant Swick Faculty Research Fund, Booth School of Business at the University of Chicago, and the National Science Foundation under Grant Number (1752431). Funding Information: We are grateful to the editor and five anonymous referees for helpful comments and suggestions. We thank Costas Arkolakis, Lorenzo Caliendo, Dave Donaldson, Nirupama Rao, and Jon Vogel for their discussions of the article.We also thank David Atkin, Arnaud Costinot, Klaus Desmet, Cecile Gaubert, David Lagakos, Enrico Moretti, Pat Kline, Andr{\'e}s Rodr{\'i}guez-Clare, Esteban Rossi-Hansberg, and Aleh Tsyvinski for helpful comments. Pawel Charasz, Stephanie Kestelman, Matt Panhans, Francesco Ruggieri, Prab Upadrashta, Victor Ye, and John Wieselthier provided excellent research assistance. P.D.F. gratefully acknowledges support from the UCLA Ziman Center. E.M. thanks the University ofWisconsin-Madison and the Cowles Foundation atYale University for their hospitality and support. J. C.S.S. gratefully acknowledges support from the Kauffman Foundation. O.Z. gratefully acknowledges support from the Kathryn and Grant Swick Faculty Research Fund, Booth School of Business at the University of Chicago, and the National Science Foundation under Grant Number (1752431). Publisher Copyright: {\textcopyright} The Author(s) 2018.",
year = "2019",
month = jan,
day = "1",
doi = "10.1093/restud/rdy050",
language = "English (US)",
volume = "86",
pages = "333--376",
journal = "Review of Economic Studies",
issn = "0034-6527",
publisher = "Oxford University Press",
number = "1",
}