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Brain-drain taxes for non-benevolent governments

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  • Wilson, John Douglas
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    Abstract

    This paper investigates the welfare effects of brain-drain taxes levied by non-benevolent governments, whereby a country collects a tax from skilled emigrants but potentially wastes a sizable portion of the revenue. Using a model in which taxes are chosen to maximize expected political rents, I show that the availability of a brain-drain tax increases a weighted sum of citizen utilities. However, the government's optimal brain-drain tax is found to be higher than the level that maximizes this weighted sum. In another model, a brain-drain tax is found to be desirable when governments use public good expenditures to compete for mobile residents.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Development Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 1 (May)
    Pages: 68-76

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    Handle: RePEc:eee:deveco:v:95:y:2011:i:1:p:68-76

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    Web page: http://www.elsevier.com/locate/devec

    Related research

    Keywords: Brain drain Tax Emigration Migration;

    References

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    1. Facchini, Giovanni & Willmann, Gerald, 2005. "The political economy of international factor mobility," Journal of International Economics, Elsevier, vol. 67(1), pages 201-219, September.
    2. Stark, Oded & Wang, Yong, 2002. "Inducing human capital formation: migration as a substitute for subsidies," Journal of Public Economics, Elsevier, vol. 86(1), pages 29-46, October.
    3. Frédéric Docquier & Hillel Rapoport, 2001. "Ethnic Discrimination and the Migration of Skilled Labor," Working Papers 2001-19, Department of Economics, Bar-Ilan University.
    4. Wilson, John Douglas, 2005. "Welfare-improving competition for mobile capital," Journal of Urban Economics, Elsevier, vol. 57(1), pages 1-18, January.
    5. Epstein, Gil S & Hillman, Arye L & Ursprung, Heinrich W, 1999. "The King Never Emigrates," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 107-21, June.
    6. Hamada, Koichi & Bhagwati, Jagdish, 1975. "Domestic distortions, imperfect information and the brain drain," Journal of Development Economics, Elsevier, vol. 2(3), pages 265-279, September.
    7. Mirrlees, J. A., 1982. "Migration and optimal income taxes," Journal of Public Economics, Elsevier, vol. 18(3), pages 319-341, August.
    8. Bourguignon, Francois & Verdier, Thierry, 2000. "Oligarchy, democracy, inequality and growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 285-313, August.
    9. Mihir A. Desai & Devesh Kapur & John McHale, 2004. "Sharing the Spoils: Taxing International Human Capital Flows," International Tax and Public Finance, Springer, vol. 11(5), pages 663-693, 09.
    10. Michel Beine & Frédéric Docquier & Hillel Rapoport, . "Brain drain and human capital formation in developing countries: winners and losers?," ULB Institutional Repository 2013/10415, ULB -- Universite Libre de Bruxelles.
    11. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
    12. K. Hamada & J. N. Bhagwati, 1975. "Domestic Distortions, Imperfect Information and the Brain Drain," Working papers 161, Massachusetts Institute of Technology (MIT), Department of Economics.
    13. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
    14. Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
    15. Alexander Haupt & Eckhard Janeba, 2004. "Education, Redistribution, and the Threat of Brain Drain," NBER Working Papers 10618, National Bureau of Economic Research, Inc.
    16. Michael Keen & Jenny Ligthart, 2006. "Information Sharing and International Taxation: A Primer," International Tax and Public Finance, Springer, vol. 13(1), pages 81-110, January.
    17. Roger H. Gordon & John D. Wilson, 2001. "Expenditure Competition," NBER Working Papers 8189, National Bureau of Economic Research, Inc.
    18. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
    19. Wilson, John Douglas, 2008. "A voluntary brain-drain tax," Journal of Public Economics, Elsevier, vol. 92(12), pages 2385-2391, December.
    20. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    21. Mountford, Andrew, 1997. "Can a brain drain be good for growth in the source economy?," Journal of Development Economics, Elsevier, vol. 53(2), pages 287-303, August.
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    Cited by:
    1. Frédéric Docquier & Hillel Rapoport, 2012. "Globalization, Brain Drain, and Development," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 681-730, September.
    2. Docquier, Frédéric & Lodigiani, Elisabetta & Rapoport, Hillel & Schiff, Maurice, 2011. "Emigration and Democracy," IZA Discussion Papers 5496, Institute for the Study of Labor (IZA).

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