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

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  • 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.

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Bibliographic Info

Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 749.

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Length: 34 pages
Date of creation: 29 Aug 2008
Date of revision:
Handle: RePEc:hhs:umnees:0749

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
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Web page: http://www.econ.umu.se/
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Keywords: optimal taxation; labor mobility; intertemporal consumer choice;

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  1. Aronsson, T. & Blomquist, S., 2000. "Optimal Taxation, Global Externalities and Labor Mobility," Papers 2000:15, Uppsala - Working Paper Series.
  2. Boadway, Robin & Keen, Michael, 2000. "Redistribution," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 12, pages 677-789 Elsevier.
  3. 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.
  4. repec:fth:louvco:9803 is not listed on IDEAS
  5. Petter Osmundsen, 1999. "Taxing Internationally Mobile Individuals—A Case of Countervailing Incentives," International Tax and Public Finance, Springer, vol. 6(2), pages 149-164, May.
  6. Laurent Simula & Alain Trannoy, 2006. "Optimal Linear Income Tax when Agents Vote with their Feet," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 393-415, September.
  7. Yasuhiro Sato, 2004. "Migration, Frictional Unemployment, and Welfare-Improving Labor Policies," Journal of Regional Science, Wiley Blackwell, vol. 44(4), pages 773-793.
  8. BOADWAY, Robin & MARCHAND, Maurice & VIGNEAULT, Marianne, . "The consequences of overlapping tax bases for redistribution and public spending in a federation," CORE Discussion Papers RP -1326, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Wilson, John D., 1982. "Optimal linear income taxation in the presence of emigration," Journal of Public Economics, Elsevier, vol. 18(3), pages 363-379, August.
  10. Kjetil Bjorvatn, 1998. "Taxation and Migration in a Federal System," International Tax and Public Finance, Springer, vol. 5(3), pages 345-355, July.
  11. Wilson, John D., 1982. "Optimal income taxation and migration : A world welfare point of view," Journal of Public Economics, Elsevier, vol. 18(3), pages 381-397, August.
  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.
  13. Wilson, John Douglas, 1992. "Optimal Income Taxation and International Personal Mobility," American Economic Review, American Economic Association, vol. 82(2), pages 191-96, May.
  14. Petter Osmundsen & Guttorm Schjelderup & Kåre Petter Hagen, 2000. "Personal income taxation under mobility, exogenous and endogenous welfare weights, and asymmetric information," Journal of Population Economics, Springer, vol. 13(4), pages 623-637.
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