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The Influence of Labour Taxes on the Migration of Skilled Workers

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  • Peter Egger
  • Doina Maria Radulescu

Abstract

Abstract This paper investigates empirically the role of taxes on labour for the stock of expatriates and the migration flows of skilled workers. Given the increasing mobility of labour, especially of high-skilled people and expatriates, it is interesting to see to what extent labour income taxes and social security contributions determine migration flows. We collect data on personal income tax profiles for 49 economies and the year 2002. In particular, we determine the component of labour taxes which is borne by employers and that which is borne by employees, following the OECD's Taxing Wages Approach. For the latter, we calculate the progressivity of personal income tax rates between the average wage and five times the average wage. This may be interpreted as the tax progression which is relevant for well-paid workers. Then, we use the personal income tax variables to estimate their effect on bilateral stocks of expatriates into OECD countries and the migration of skilled workers into these countries. Personal income tax rates turn out to have a robust negative effect on cross-border flows of skilled workers in the OECD. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 32 (2009)
Issue (Month): 9 (09)
Pages: 1365-1379

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Handle: RePEc:bla:worlde:v:32:y:2009:i:9:p:1365-1379

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  1. Lars P. Feld & Gebhard Kirchgässner, 2000. "Income Tax Competition at the State and Local Level in Switzerland," CESifo Working Paper Series 238, CESifo Group Munich.
  2. Daniel Chiquiar & Gordon H. Hanson, 2005. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 239-281, April.
  3. Grogger, Jeffrey & Hanson, Gordon H., 2011. "Income maximization and the selection and sorting of international migrants," Journal of Development Economics, Elsevier, vol. 95(1), pages 42-57, May.
  4. Thomas Liebig & Alfonso Sousa-Poza, 2004. "Migration, Self-Selection and Income Inequality: An International Analysis," Kyklos, Wiley Blackwell, vol. 57(1), pages 125-146, 02.
  5. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  6. Kirchgassner, Gebhard & Pommerehne, Werner W., 1996. "Tax harmonization and tax competition in the European Union: Lessons from Switzerland," Journal of Public Economics, Elsevier, vol. 60(3), pages 351-371, June.
  7. Christopher Heady, 2003. "The "Taxing Wages" Approach to Measuring the Tax Burden on Labour," CESifo Working Paper Series 967, CESifo Group Munich.
  8. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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Cited by:
  1. Thushyanthan Baskaran & Zohal Hessami, 2010. "Globalization and the Composition of Public Education Expenditures: A Dynamic Panel Analysis," Working Paper Series of the Department of Economics, University of Konstanz 2010-03, Department of Economics, University of Konstanz.
  2. Peter Huber & Julia Bock-Schappelwein, 2013. "The Impact of Migration Policy on Migrants’ Education Structure: Evidence from Austrian Policy Reform," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-21, March.
  3. Peter Huber & Klaus Nowotny & Julia Bock-Schappelwein, 2010. "Qualification Structure, Over- and Underqualification of the Foreign Born in Austria and the EU," FIW Research Reports series II-008, FIW.
  4. Mario Morger, 2013. "What Do Immigrants Value Most About Switzerland? Evidence of the Relative Importance of Income Taxes," CESifo Working Paper Series 4134, CESifo Group Munich.
  5. Thushyanthan Baskaran & Zohal Hessami, 2012. "Public education spending in a globalized world:," International Tax and Public Finance, Springer, vol. 19(5), pages 677-707, October.
  6. Volker Grossmann & David Stadelmann, 2013. "Wage Effects of High-Skilled Migration: International Evidence," World Bank Economic Review, World Bank Group, vol. 27(2), pages 297-319.
  7. Thushyanthan Baskaran & Zohal Hessami, 2011. "Public Education Spending in a Globalized World: Is there a Shift in Priorities Across Educational Stages?," Working Paper Series of the Department of Economics, University of Konstanz 2011-42, Department of Economics, University of Konstanz.
  8. Simone Bertoli & Jesus Fernández-Huertas Moraga, 2012. "Visa Policies, Networks and the Cliff at the Border," Working Papers 2012-12, FEDEA.
  9. Hendel, Ulrich, 2012. "The Influence of Altruistic Preferences on the Race to the Bottom of Welfare States," Discussion Papers in Economics 13999, University of Munich, Department of Economics.
  10. Zohal Hessami & Thushyanthan Baskaran, 2013. "Has Globalization Affected Collective Bargaining? An Empirical Test, 1980-2009," Working Paper Series of the Department of Economics, University of Konstanz 2013-02, Department of Economics, University of Konstanz.
  11. Denvil Duncan & Ed Gerrish, 2014. "Personal income tax mimicry: evidence from international panel data," International Tax and Public Finance, Springer, vol. 21(1), pages 119-152, February.
  12. Klaus Nowotny, 2011. "Welfare Magnets, Taxation and the Location Decisions of Migrants to the EU," ERSA conference papers ersa11p133, European Regional Science Association.
  13. Yabiku, Scott T. & Agadjanian, Victor & Cau, Boaventura, 2012. "Labor migration and child mortality in Mozambique," Social Science & Medicine, Elsevier, vol. 75(12), pages 2530-2538.
  14. Andrew Hughes Hallett & Drew Scott, 2010. "Scotland: A New Fiscal Settlement," CDMA Working Paper Series 201009, Centre for Dynamic Macroeconomic Analysis.
  15. Petr Huber & Julia Bock-Schappelwein, 2013. "The Impact of Migration Policy on Migrants' Education Structure: Evidence from an Austrian Policy Reform," MENDELU Working Papers in Business and Economics 2013-35, Mendel University in Brno, Faculty of Business and Economics.

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