Sorting across the line: evidence from a Tax Discontinuity in Italy (joint with Enrico Rubolino)

In this paper, we plan to investigate whether taxation has distortionary effects on the geographical distribution of the taxpayers. We use a geographical discontinuity in the tax rate of Italian municipalities closer to Switzerland to show whether Italian tax payers relocate on the side where taxes are lower. This question is relevant to any country sharing borders. Countries typically have differential tax rates, and because of the constant increase in the mobility of labor, this could generate relocations of workers with several implications for the affected areas. Depending on the findings of this first stage, we will investigate the effects of a redistribution in tax revenues on several outcomes: local service provision, labor markets, and efficiency of the local administrators.