The employment effects of a central city's source-based wage tax or hybrid wage tax

Abstract

This paper considers the employment effects of a central city's wage tax. The tax will normally decrease employment in the central city and increase employment in the suburbs. The magnitude of the effects depends on the exact type of wage tax that the central city imposes (the tax rates on central-city residents who work in the central city, on central-city residents who work in the suburbs, and on suburbanites who work in the central city), on a production function, on a commuting cost parameter, and on a multinomial-logit-choice parameter.