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Brain Drain and Fiscal Competition: a Theoretical Model for Europe

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  • Pierpaolo Giannoccolo
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    Abstract

    In this paper we study Brain Drain (BD) and Fiscal Competition (FC) in a unified framework for the European Union (EU) specific context. Potential mobility of educated workers can increase the degree of FC through taxation or the provision of public education. An increase in FC can be caused by competition among different jurisdictions that aim to attract educated workers. When the importance of FC increases, then the European States may employ FC as a new policy tool. We propose a simple model in which is possible describe different scenarios: Brain Gain (when BD may increase average productivity in the source economy); Brain Drain (when there is unidirectional flow of highly skilled workers that is welfare-deteriorating in the source economy); Migration Competition (when the regions have not high differences in the productivity and they compete attracting educated workers); Fiscal Competition (when jurisdictions compete either to attract a mobile tax base), This simple model help us to explain several policies implemented by European regions.

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    File URL: http://www.statistica.unimib.it/utenti/WorkingPapers/WorkingPapers/20060602.pdf
    File Function: Revised version, June 2006
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    Bibliographic Info

    Paper provided by Università degli Studi di Milano-Bicocca, Dipartimento di Statistica in its series Working Papers with number 20060602.

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    Length: 30 pages
    Date of creation: Sep 2003
    Date of revision: Jun 2006
    Handle: RePEc:mis:wpaper:20060602

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    Related research

    Keywords: Brain Drain; Fiscal Competition; Migration Competition; Growth.;

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    1. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    2. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
    3. P. Giannoccolo, 2005. "ÒBrain Drain CompetitionÓ Policies in Europe: a Survey," Working Papers 534, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Miyagiwa, Kaz, 1991. "Scale Economies in Education and the Brain Drain Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 743-59, August.
    5. Blomqvist, Ake G, 1986. "International Migration of Educated Manpower and Social Rates of Return to Education in LDCs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 165-74, February.
    6. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    7. P. Giannoccolo, 2003. "Fiscal Competition and Brain Drain," Working Papers 462, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. McCulloch, Rachel & Yellen, Janet L., 1975. "Consequences of a tax on the brain drain for unemployment and income inequality in less developed countries," Journal of Development Economics, Elsevier, vol. 2(3), pages 249-264, September.
    9. P. Giannoccolo, 2003. "Brain Drain and Fiscal Competition. A theoretical model for the Europe," Working Papers 481, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. H. G. Grubel & A. D. Scott, 1966. "The Immigration of Scientists and Engineers to the United States, 1949-61," Journal of Political Economy, University of Chicago Press, vol. 74, pages 368.
    11. Stark, Oded, 2004. "Rethinking the Brain Drain," World Development, Elsevier, vol. 32(1), pages 15-22, January.
    12. Stark, Oded & Wang, Yong, 2002. "Inducing human capital formation: migration as a substitute for subsidies," Journal of Public Economics, Elsevier, vol. 86(1), pages 29-46, October.
    13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    14. Kwok, Viem & Leland, Hayne, 1982. "An Economic Model of the Brain Drain," American Economic Review, American Economic Association, vol. 72(1), pages 91-100, March.
    15. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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