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Education, Mobility of Labour and Tax Competition

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Author Info

  • Panu Poutvaara

Abstract

We show that wage-taxfinanced subsidies encourage investment in risky education andoffer welfare gains. Tax competition and labour mobility maylead to substantial erosion of regional taxation. On the otherhand, mobility insures against region-specific shocks encouraginginvestment in education. Thus, welfare effects on the educatedand the owners of the fixed factor may go in either direction.Tax competition is especially fierce if the governments careabout the owners of the fixed factor. Elimination of their interestsfrom the governments' objective functions results in a Pareto-improvementin a federation with tax competition. Copyright Kluwer Academic Publishers 2000

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File URL: http://hdl.handle.net/10.1023/A:1008733527427
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Bibliographic Info

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

Volume (Year): 7 (2000)
Issue (Month): 6 (December)
Pages: 699-719

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Handle: RePEc:kap:itaxpf:v:7:y:2000:i:6:p:699-719

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

Related research

Keywords: education subsidies; optimal taxation; tax competition; fiscal federalism;

References

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  1. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December.
  2. Hans-Werner Sinn, 1996. "Social insurance, incentives and risk taking," International Tax and Public Finance, Springer, vol. 3(3), pages 259-280, July.
  3. Wildasin, David E, 1995. " Factor Mobility, Risk and Redistribution in the Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 527-46, December.
  4. David E. Wildasin, 2000. "Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition," American Economic Review, American Economic Association, vol. 90(1), pages 73-95, March.
  5. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  6. Wildasin, David E, 1992. "Relaxation of Barriers to Factor Mobility and Income Redistribution," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 216-30.
  7. Wellisch, Dietmar & Wildasin, David E., 1996. "Decentralized income redistribution and immigration," European Economic Review, Elsevier, vol. 40(1), pages 187-217, January.
  8. Hamilton, Jonathan H, 1987. "Optimal Wage and Income Taxation with Wage Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 373-88, June.
  9. Sinn, Hans-Werner, 1994. "How Much Europe? Subsidiarity, Centralization and Fiscal Competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(1), pages 85-107, February.
  10. Wildasin, D.E., 1992. "Income Restribution and Migration," Papers 92-003, Indiana - Center for Econometric Model Research.
  11. Brennan,Geoffrey & Buchanan,James M., 1980. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521233293, November.
  12. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
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Citations

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Cited by:
  1. 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.
  2. Alexander Kemnitz, 2009. "Native welfare losses from high skilled immigration," International Tax and Public Finance, Springer, vol. 16(4), pages 560-570, August.
  3. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA.
  4. Poutvaara, Panu, 2005. "On Human Capital Formation with Exit Options: Comment and New Results," IZA Discussion Papers 1903, Institute for the Study of Labor (IZA).
  5. Delpierre, Matthieu & Verheyden, Bertrand, 2014. "Student and worker mobility under university and government competition," Journal of Public Economics, Elsevier, vol. 110(C), pages 26-41.
  6. Morten I. Lau & Panu Poutvaara, 2006. "Social Security Incentives and Human Capital Investment," Finnish Economic Papers, Finnish Economic Association, vol. 19(1), pages 16-24, Spring.
  7. Jens Südekum, 2005. "The Pitfalls of Regional Education Policy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(3), pages 327-, November.
  8. Poutvaara, Panu, 1999. "Federation's alternative tax constitutions and risky education," ZEW Discussion Papers 99-42, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Andersson, Fredrik & Konrad, Kai A, 2003. "Globalization and Risky Human-Capital Investment," International Tax and Public Finance, Springer, vol. 10(3), pages 211-28, May.
  10. Poutvaara, Panu, 2001. "Alternative tax constitutions and risky education in a federation," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 355-377, April.
  11. Poutvaara, P. & Kanniainen, V., 1999. "Why to Invest in your Neighbor? Social Contract on Educational Investment," University of Helsinki, Department of Economics 462, Department of Economics.
  12. 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.
  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. Tim Krieger & Thomas Lange, 2008. "Education policy and tax competition with imperfect student and labor mobility," Working Papers 8, University of Paderborn, CIE Center for International Economics.
  15. Panu Poutvaara, 2004. "Public Education in an Integrated Europe: Studying for Migration and Teaching for Staying?," Public Economics 0406006, EconWPA.

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