Spatial productivity differences and the optimal tax treatment of commuting expenses

Spatial wage differences other incentives to change the location of work either by commuting or by moving to the new work location. Combining an intensive labor supply margin with an extensive, productivity-enhancing margin of work place change due to commuting or moving, I study how spatial urban-fringe productivity differences and labor mobility shape optimal redistribution under tax deduction of commuting expenses. My study underlines the significance of the tax system for local labour market and settlement pattern.