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Skilled migration and education policies: Is there still scope for a Bhagwati tax?

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  • Scalera, Domenico

Abstract

The Bhagwati brain drain tax proposal dating back to more than thirty years ago has been criticized from different viewpoints. In particular, recent literature has pointed out that this tax would hamper accumulation of human capital by reducing gains from skilled migration. In this paper, it is argued that when taking into account social externalities of human capital, and optimal policies implemented by a government caring only for left behind residents, a brain drain tax tends rather to foster the investment in human capital and increase residents’ income and welfare. The Bhagwati tax could even be universally welfare improving. In fact, if the tax is paid by migrants in addition to the ordinary income taxation, their larger fiscal burden might be outweighed by a higher human capital and gross income. Alternatively, if the transfer is financed by the destination country, its fiscal losses might be outweighed by the advantage of more skilled immigrants.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19643.

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Date of creation: 18 Dec 2009
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Handle: RePEc:pra:mprapa:19643

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Keywords: Skilled migration; education policies; Bhagwati tax;

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Cited by:
  1. Nifo, Annamaria & Pagnotta, Stefano & Scalera, Domenico, 2011. "The best and brightest. Selezione positiva e brain drain nelle migrazioni interne italiane
    [The best and brightest. Positive selection and brain drain in Italian internal migrations]
    ," MPRA Paper 34506, University Library of Munich, Germany.

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