Date of this Version
Regional Science and Urban Economics
This paper provides an equilibrium numerical model of an open city economy with mobile firms and resident workers. Given household preferences and firm technologies and an exogenous configuration of city tax rates and national grants and fiscal mandates, the model calculates equilibrium values for aggregate city economic activity, factor prices, and finally, local tax bases, revenues, and public goods provision. The model is calibrated to the Philadelphia economy for Fiscal Year 1998. We then explore the economic and fiscal consequences of raising city tax rates and the city’s ability to finance rising local welfare payments. We find the city to be incapable of bearing significant increases in local responsibility for welfare transfers.
© 2001. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
fiscal policy, cities, federalism
Haughwout, A. F., & Inman, R. P. (2001). Fiscal Policies in Open Cities With Firms and Households. Regional Science and Urban Economics, 31 (2-3), 147-180. http://dx.doi.org/10.1016/S0166-0462(00)00059-4
Date Posted: 27 November 2017
This document has been peer reviewed.