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Education policy and tax competition with imperfect student and labor mobility

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Author Info

  • Tim Krieger

    ()
    (University of Paderborn)

  • Thomas Lange

    ()
    (Ifo institute for economic research & University of Konstanz)

Abstract

In this paper we analyze the effect of increasing labor (i.e. graduates’/ academics’) and student mobility on net tax revenues when revenuemaximizing governments compete for human capital by means of income tax rates and amenities offered to students (positive expenditure) or rather tuition fees (negative expenditure). We demonstrate that these instruments are strategic complements and that increasing labor mobility due to ongoing globalization not necessarily implies intensified tax competition and an erosion of revenues. On the contrary, the equilibrium tax rate even increases in mobility. Amenities offered to students (or rather tuition fees) may either increase or decrease, and, overall, net revenues increase. An increase in student mobility, however, erodes revenues due to intensified tax and amenity competition.

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File URL: http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/ciepap/WP08.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by University of Paderborn, CIE Center for International Economics in its series Working Papers CIE with number 8.

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Length: 31 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:pdn:ciepap:8

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Keywords: labor mobility; student mobility; higher education; tax competition; public expenditure competition;

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References

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  1. Poutvaara, Panu, 2001. "Alternative tax constitutions and risky education in a federation," Munich Reprints in Economics, University of Munich, Department of Economics 19302, University of Munich, Department of Economics.
  2. Alexander Haupt & Tim Krieger, 2009. "The Role of Mobility in Tax and Subsidy Competition," CESifo Working Paper Series, CESifo Group Munich 2555, CESifo Group Munich.
  3. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, Elsevier, vol. 52(3), pages 285-307, October.
  4. Andersson, Fredrik & Konrad, Kai A., 2001. "Human Capital Investment and Globalization in Extortionary States," IZA Discussion Papers 239, Institute for the Study of Labor (IZA).
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  6. Kemnitz, Alexander, 2007. "Educational Federalism and the Quality Effects of Tuition Fees," Dresden Discussion Paper Series in Economics, Dresden University of Technology, Faculty of Business and Economics, Department of Economics 08/07, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  7. Boadway, R. & Marceau, N. & Marchand, M., . "Investment in education and the time inconsistency of redistributive tax policy," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1219, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  10. Poutvaara, Panu, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," Munich Reprints in Economics, University of Munich, Department of Economics 19296, University of Munich, Department of Economics.
  11. Axel Dreher & Panu Poutvaara, 2005. "Student Flows and Migration: An Empirical Analysis ," TWI Research Paper Series, Thurgauer Wirtschaftsinstitut, Universität Konstanz 8, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  12. Miriam Henseler & Joachim Plesch, 2009. "How Can Scholarship Institutions Foster the Return of Foreign Students?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(4), pages 382-409, August.
  13. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2008. "Financing Higher Education and Labor Mobility," CESifo Working Paper Series, CESifo Group Munich 2362, CESifo Group Munich.
  14. Panu Poutvaara & Vesa Kanniainen, 2000. "Why Invest in Your Neighbor? Social Contract on Educational Investment," International Tax and Public Finance, Springer, Springer, vol. 7(4), pages 547-562, August.
  15. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer, Springer, vol. 7(3), pages 247-258, May.
  16. Thomas Lange, 2009. "Public Funding of Higher Education when Students and Skilled Workers are Mobile," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 65(2), pages 178-199, June.
  17. Justman, Moshe & Thisse, Jacques-Francois, 1997. "Implications of the mobility of skilled labor for local public funding of higher education," Economics Letters, Elsevier, Elsevier, vol. 55(3), pages 409-412, September.
  18. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer, Springer, vol. 28(2), pages 203-218, June.
  19. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer, Springer, vol. 17(6), pages 587-606, December.
  20. Panu Poutvaara, 2003. "Educating Europe," Public Economics, EconWPA 0302008, EconWPA.
  21. repec:pdn:wpaper:21 is not listed on IDEAS
  22. Baruch, Yehuda & Budhwar, Pawan S. & Khatri, Naresh, 2007. "Brain drain: Inclination to stay abroad after studies," Journal of World Business, Elsevier, Elsevier, vol. 42(1), pages 99-112, March.
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Citations

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Cited by:
  1. Dwenger, Nadja & Storck, Johanna & Wrohlich, Katharina, 2012. "Do tuition fees affect the mobility of university applicants? Evidence from a natural experiment," Economics of Education Review, Elsevier, Elsevier, vol. 31(1), pages 155-167.
  2. Tim Krieger & Thomas Lange, 2008. "Education policy and tax competition with imperfect student and labor mobility," Working Papers CIE 8, University of Paderborn, CIE Center for International Economics.
  3. Hübner, Malte, 2012. "The welfare effects of discriminating between in-state and out-of-state students," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 42(1-2), pages 364-374.
  4. Alexander Haupt & Tim Krieger & Thomas Lange, 2011. "Competition for the International Pool of Talent: Education Policy and Student Mobility," Working Papers CIE 35, University of Paderborn, CIE Center for International Economics.
  5. Alexander Haupt & Tim Krieger, 2009. "The role of mobility in tax and subsidy competition," Working Papers CIE 21, University of Paderborn, CIE Center for International Economics.
  6. Thomas Lange, 2008. "Local Public Funding of Higher Education when Students and Skilled Workers are Mobile," Working Papers CIE 11, University of Paderborn, CIE Center for International Economics.
  7. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2014. "Financing Higher Education in a Mobile World," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 343-371, 06.
  8. Thomas Lange, 2013. "Return migration of foreign students and non-resident tuition fees," Journal of Population Economics, Springer, Springer, vol. 26(2), pages 703-718, April.
  9. Haupt, Alexander & Krieger, Tim & Lange, Thomas, 2013. "Education policy, student migration, and brain gain," Discussion Paper Series, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy 2013-05, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
  10. Silke Übelmesser & Marcel Gérard, 2014. "Financing Higher Education when Students and Graduates are Internationally Mobile," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2014-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  11. Matthieu Delpierre & Bertrand Verheyden, 2011. "Student and Worker Mobility under University and Government Competition," CESifo Working Paper Series, CESifo Group Munich 3415, CESifo Group Munich.

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