Finance Papers

Document Type

Journal Article

Date of this Version

4-2001

Publication Source

Regional Science and Urban Economics

Volume

31

Issue

2-3

Start Page

147

Last Page

180

DOI

10.1016/S0166-0462(00)00059-4

Abstract

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.

Copyright/Permission Statement

© 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/

Keywords

fiscal policy, cities, federalism

Embargo Date

3-7-2003

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Date Posted: 27 November 2017

This document has been peer reviewed.