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Education policy and tax competition with imperfect student and labor mobility

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  • Tim Krieger

    ()

  • Thomas Lange

    ()

Abstract

In this paper we analyze the effect of increasing labor (i.e. graduates’/ academics’) and student mobility on net tax revenues when revenuemaximizing governments compete for human capital by means of income tax rates and amenities offered to students (positive expenditure) or rather tuition fees (negative expenditure). We demonstrate that these instruments are strategic complements and that increasing labor mobility due to ongoing globalization not necessarily implies intensified tax competition and an erosion of revenues. On the contrary, the equilibrium tax rate even increases in mobility. Amenities offered to students (or rather tuition fees) may either increase or decrease, and, overall, net revenues increase. An increase in student mobility, however, erodes revenues due to intensified tax and amenity competition.

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 17 (2010)
Issue (Month): 6 (December)
Pages: 587-606

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Handle: RePEc:kap:itaxpf:v:17:y:2010:i:6:p:587-606

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: Labor mobility; Student mobility; Higher education; Tax competition; Public expenditure competition; I22; J61; F22; H2; H87;

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References

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  1. Poutvaara, Panu, 2001. "Alternative tax constitutions and risky education in a federation," Munich Reprints in Economics 19302, University of Munich, Department of Economics.
  2. Alexander Haupt & Tim Krieger, 2009. "The role of mobility in tax and subsidy competition," Working Papers CIE 21, University of Paderborn, CIE Center for International Economics.
  3. Andersson, Fredrik & Konrad, Kai A., 2003. "Human capital investment and globalization in extortionary states," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1539-1555, August.
  4. Kemnitz, Alexander, 2007. "Educational Federalism and the Quality Effects of Tuition Fees," Dresden Discussion Paper Series in Economics 08/07, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  5. JUSTMAN , Moshe & THISSE, Jacques-François, . "Local public funding of higher education when skilled labor is imperfectly mobile," CORE Discussion Papers RP -1460, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer, vol. 28(2), pages 203-218, June.
  7. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA.
  8. Poutvaara, Panu, 2000. "Education, mobility of labour and tax competition," Munich Reprints in Economics 19303, University of Munich, Department of Economics.
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  10. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
  11. Justman, M. & Thisse, J.-F., . "Implications of the mobility of skilled labor for local public funding of higher education," CORE Discussion Papers RP -1296, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Boadway, Robin & Marceau, Nicolas & Marchand, Maurice, 1996. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Economica, London School of Economics and Political Science, vol. 63(250), pages 171-89, May.
  13. Panu Poutvaara & Vesa Kanniainen, 2000. "Why Invest in Your Neighbor? Social Contract on Educational Investment," International Tax and Public Finance, Springer, vol. 7(4), pages 547-562, August.
  14. repec:pdn:wpaper:21 is not listed on IDEAS
  15. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2008. "Financing Higher Education and Labor Mobility," CESifo Working Paper Series 2362, CESifo Group Munich.
  16. Miriam Henseler & Joachim Plesch, 2009. "How Can Scholarship Institutions Foster the Return of Foreign Students?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(4), pages 382-409, August.
  17. Poutvaara, Panu, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," Munich Reprints in Economics 19296, University of Munich, Department of Economics.
  18. Baruch, Yehuda & Budhwar, Pawan S. & Khatri, Naresh, 2007. "Brain drain: Inclination to stay abroad after studies," Journal of World Business, Elsevier, vol. 42(1), pages 99-112, March.
  19. Dreher, Axel & Poutvaara, Panu, 2005. "Student Flows and Migration: An Empirical Analysis," IZA Discussion Papers 1612, Institute for the Study of Labor (IZA).
  20. Thomas Lange, 2009. "Public Funding of Higher Education when Students and Skilled Workers are Mobile," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(2), pages 178-199, June.
  21. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
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Citations

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Cited by:
  1. Silke Übelmesser & Marcel Gérard, 2014. "Financing Higher Education when Students and Graduates are Internationally Mobile," Jena Economic Research Papers 2014-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Alexander Haupt & Tim Krieger & Thomas Lange, 2011. "Competition for the International Pool of Talent: Education Policy and Student Mobility," CESifo Working Paper Series 3421, CESifo Group Munich.
  3. Thomas Lange, 2013. "Return migration of foreign students and non-resident tuition fees," Journal of Population Economics, Springer, vol. 26(2), pages 703-718, April.
  4. Haupt, Alexander & Krieger, Tim & Lange, Thomas, 2013. "Education policy, student migration, and brain gain," Discussion Paper Series 2013-05, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
  5. Matthieu Delpierre & Bertrand Verheyden, 2011. "Student and Worker Mobility under University and Government Competition," CESifo Working Paper Series 3415, CESifo Group Munich.
  6. Alexander Haupt & Tim Krieger, 2009. "The role of mobility in tax and subsidy competition," Working Papers CIE 21, University of Paderborn, CIE Center for International Economics.
  7. Hübner, Malte, 2012. "The welfare effects of discriminating between in-state and out-of-state students," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 364-374.
  8. Dwenger, Nadja & Storck, Johanna & Wrohlich, Katharina, 2012. "Do tuition fees affect the mobility of university applicants? Evidence from a natural experiment," Economics of Education Review, Elsevier, vol. 31(1), pages 155-167.
  9. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2012. "Financing Higher Education in a Mobile World," CESifo Working Paper Series 3849, CESifo Group Munich.

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