Optimal Linear Income Tax when Agents Vote with their Feet
AbstractIndividuals, initially living in a Mirrleesian economy A, have outside options consisting in settling down in a laissez-faire country B while paying positive migration costs. We first examine the effect of the threat of migration, assuming participation constraints are taken into account for all individuals, and show that optimal linear income taxes are obtained as corner solutions. We then consider a social criterion allowing emigration of the highest-skilled individuals and show by means of an example that social welfare may rise following an increase in income redistribution, despite this resulting in the departure of the most productive individuals. Numerical simulations on French data illustrate the lack of degrees of freedom offered by linear taxation when agents can vote with their feet, which may be regarded as an argument against linear taxes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 62 (2006)
Issue (Month): 3 (September)
Contact details of provider:
Web page: http://www.mohr.de/fa
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2011.
"Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency,"
201102, School Of Economics, University College Dublin.
- Bargain, Olivier & Dolls, Mathias & Neumann, Dirk & Peichl, Andreas & Siegloch, Sebastian, 2011. "Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency," IZA Discussion Papers 5440, Institute for the Study of Labor (IZA).
- Olivier Bargain & Mathias Dolls & Dirk Neumann & Sebastian Siegloch & Andreas Peichl, 2011. "Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency," Working Papers 201101, Geary Institute, University College Dublin.
- BARGAIN Olivier & DOLLS Mathias & NEUMANN Dirk & PEICHL Andreas & SIEGLOCH Sebastian, 2011. "Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency," CEPS/INSTEAD Working Paper Series 2011-11, CEPS/INSTEAD.
- Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2011. "Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency," CESifo Working Paper Series 3534, CESifo Group Munich.
- Laurent Simula & Alain Trannoy, 2006.
"Optimal Non-Linear Income Tax when Highly Skilled Individuals Vote with their Feet,"
IDEP Working Papers
0606, Institut d'economie publique (IDEP), Marseille, France, revised Sep 2006.
- Simula, L. & Trannoy, A., 2006. "Optimal Non-Linear Income Tax when Highly Skilled Individuals Vote with their Feet," Cambridge Working Papers in Economics 0656, Faculty of Economics, University of Cambridge.
- Laurent Simula & Alain Trannoy, 2006. "Optimal Non-Linear Income Tax when Highly Skilled Individuals Vote with their Feet," IDEP Working Papers 0610, Institut d'economie publique (IDEP), Marseille, France, revised 18 Dec 2006.
- Backlund, Kenneth & Sjögren, Tomas & Stage, Jesper, 2008. "Optimal Tax and Expenditure Policy in the Presence of Migration - Are Credit Restrictions Important?," UmeÃ¥ Economic Studies 749, Umeå University, Department of Economics.
- Alain Trannoy, Laurent Simula and, 2009.
"Optimal Income Tax under the Threat of Migration by Top-Income Earners,"
Working Paper Series, Center for Fiscal Studies
2009:8, Uppsala University, Department of Economics.
- Simula, Laurent & Trannoy, Alain, 2010. "Optimal income tax under the threat of migration by top-income earners," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 163-173, February.
- repec:ese:emodwp:em2-11 is not listed on IDEAS
- Laurent Simula & Alain Trannoy, 2011.
"Shall we Keep the Highly Skilled at Home? The Optimal Income Tax Perspective,"
CESifo Working Paper Series
3326, CESifo Group Munich.
- Laurent Simula & Alain Trannoy, 2012. "Shall we keep the highly skilled at home? The optimal income tax perspective," Social Choice and Welfare, Springer, vol. 39(4), pages 751-782, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.