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Tax Burden and Migration

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Author Info

  • Razin, Assaf

    (Eitan Berglas School of Economics, Tel Aviv University)

  • Sadka, Efraim

    (Eitan Berglas School of Economics, Tel Aviv University)

  • Swagel, Phillip

    (Research Department, International Monetary Fund)

Abstract

The extent of taxation and redistribution Policy is generally determined as a political-economy equilibrium by a balance between those who gain from higher taxes/transfers and those who lose. In a stylized model of migration and human capital formation, we show - somewhat against the conventional wisdom - that low-skill immigration may lead to a lower tax burden and less redistribution than would be the case with no immigration, even though migrants (naturally) join the pro-tax/transfer coalition. Data on 11 European countries over the period 1974 to 1992 are consistent with the implications of the theory: a higher share of immigrants in the population leads to a lower tax rate on labor income, with the effect statistically significant even after controlling for the generosity and size of the welfare state, demographics, and the international exposure of the economy. As predicted by the theory, it is the increased share of low-education immigrants that leads to the smaller tax burden.

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File URL: http://www.ihs.ac.at/publications/eco/es-59.pdf
File Function: First version, 1998
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 59.

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Length: 22 pages
Date of creation: Nov 1998
Date of revision:
Handle: RePEc:ihs:ihsesp:59

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Related research

Keywords: Migration; Political-economy Equilibrium; Tax-transfer Policy;

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Cited by:
  1. Hansson, Åsa & Olofsdotter, Karin, 2005. "Integration and Tax Competition: An Empirical Study of OECD Countries," Working Papers 2005:4, Lund University, Department of Economics, revised 09 Feb 2005.
  2. ?gel Solano Garc?, 2004. "Does illegal immigration empower rightist parties?," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 614.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Facchini, Giovanni & Mayda, Anna Maria, 2006. "Individual Attitudes Towards Immigrants: Welfare-State Determinants Across Countries," CEPR Discussion Papers 5702, C.E.P.R. Discussion Papers.
  4. Marko Koethenbuerger, 2012. "Competition for Migrants in a Federation: Tax or Transfer Competition?," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 2012-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Cohen, Alon & Razin, Assaf, 2008. "The Skill Composition of Immigrants and the Generosity of the Welfare State: Free vs. Policy-Controlled Migration," CEPR Discussion Papers 7034, C.E.P.R. Discussion Papers.
  6. Cohen, Alon & Razin, Assaf & Sadka, Efraim, 2009. "The Skill Composition of Migration and the Generosity of the Welfare State," CEPR Discussion Papers 7185, C.E.P.R. Discussion Papers.
  7. Giovanni Facchini & Anna Maria Mayda, 2007. "Does the Welfare State Affect Individual Attitudes towards Immigrants? Evidence Across Countries," Development Working Papers 233, Centro Studi Luca d\'Agliano, University of Milano.
  8. Assaf Razin & Jackline Wahba, 2011. "Free vs. Controlled Migration: Bilateral Country Study," NBER Working Papers 16831, National Bureau of Economic Research, Inc.
  9. Razin, Assaf & Wahba, Jackline, 2011. "Free vs. Restricted Immigration: Bilateral Country Study," IZA Discussion Papers 5546, Institute for the Study of Labor (IZA).
  10. Assaf Razin, 2001. "Policy implications of demographic change: panel discussion: notes on demographic changes and the welfare state," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 46, pages 289-296.
  11. Edith Sand & Assaf Razin, 2006. "Immigration and the Survival of Social Security: A Political Economy Model," NBER Working Papers 12800, National Bureau of Economic Research, Inc.

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