Tax Substitution Effects in a Two-period Model of Urban Structure

Abstract

This paper uses a two-period model of urban growth to investigate the effects of tax substitution when a local government imposes a land value tax and a wage tax simultaneously. The substitution of a land value tax for a wage tax increases the size of the industrial zone in the first and second periods under very weak restrictions. So, the results, that Lim (1999) showed in the previous paper that a nonneutral land value tax is relatively efficient to a wage tax in a single tax system, are still valid in the case of the simultaneous tax system.