Redistributive taxation and migration under uncertainty
AbstractRedistributive taxation under uncertainty has two functions: not only the redistribution of income across individuals who are ex ante different but also the sharing of risk between them. The economic integration of factor markets changes the distribution of income within each country, and so the redistributive policies must be changed to account for those changes. In this paper we show that, when mobile individuals are subject to a residence-based linear income tax, the optimal redistributive policy is dependent not only on the relative size of the economies but also on the timing of the migration process: under the small country hypothesis, there is no redistribution in equilibrium if workers’ migration decisions are taken with complete knowledge of incomes. If uncertainty is only solved after mobility has occurred, then it is possible to have redistributive taxation. In this latter case, the magnitude of the tax parameters depends on the size of the countries, i.e., on whether or not the home taxing authorities take foreign utilities as given.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1997086.
Date of creation: 01 Nov 1997
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Tax competition; Income redistribution; Uncertainty; Labour migration;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
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