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Optimal Tax and Expenditure Policy in the Presence of Migration - Are Credit Restrictions Important?

Author

Listed:
  • Backlund, Kenneth

    (Department of Economics, Umeå University)

  • Sjögren, Tomas

    (Department of Economics, Umeå University)

  • Stage, Jesper

    (Department of Social Sciences, Mid Sweden University)

Abstract

This paper concerns optimal income taxation in the presence of emigration. The basic model is a two-period model where all agents are identical and live in the home country in the first period of life, but where some emigrate at the end of the first period. It is shown that with a binding credit restriction, the government will tax labor income in the first period at a higher rate than otherwise, whereas the labor income tax in the second period is unaffected by emigration. With heterogenous agents, the labor income tax in period two will be affected by emigration.

Suggested Citation

  • Backlund, Kenneth & Sjögren, Tomas & Stage, Jesper, 2008. "Optimal Tax and Expenditure Policy in the Presence of Migration - Are Credit Restrictions Important?," Umeå Economic Studies 749, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0749
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    References listed on IDEAS

    as
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    5. Wilson, John Douglas, 1992. "Optimal Income Taxation and International Personal Mobility," American Economic Review, American Economic Association, vol. 82(2), pages 191-196, May.
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    8. Pirttila, Jukka & Tuomala, Matti, 2001. "On optimal non-linear taxation and public good provision in an overlapping generations economy," Journal of Public Economics, Elsevier, vol. 79(3), pages 485-501, March.
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    More about this item

    Keywords

    optimal taxation; labor mobility; intertemporal consumer choice;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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