Workplace choice, commuting costs, and wage taxation in urban and adjacent rural regions

We analyze the impact of wage taxation on the workplace choices of and the commuting costs borne by individuals in an aggregate economy consisting of an urban and an adjacent rural region. This economy is inhabited by a continuum of individuals who are uniformly distributed with a total mass of one. These individuals choose whether to work in the urban or in the rural region. The wage is higher (lower) in the urban (rural) region. Our analysis...