Working Papers in Economics and Statistics,
Linnaeus University, School of Business and Economics, Department of Economics and Statistics

Abstract: This paper studies the question of how place of birth affects the design of effective tax policies. Using Swedish population-wide register data, I investigate the relationship between regional origin and economic outcomes. Using a numerical simulation approach, I explore the implications of tagging individuals based on their place of birth for optimal tax policy and income redistribution. The numerical simulations show that under optimal tax policy, individuals from more populous regions are consistently assigned higher marginal and average tax rates, implying that the government redistributes from these regions to less populous ones. Moreover, I find that such policies can lead to significant welfare improvements.

Keywords: Optimal taxation; tagging; regional heterogeneity

JEL-codes: H21; H24

Language: English

32 pages, May 23, 2024

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