Does competition for (human) capital discipline governments? The role of commitment
AbstractWe argue that labor mobility does not lead to a ''race to the bottom,'' where countries drastically cut redistributive transfers in order to attract skilled workers. The basis of our argument is that these cuts are not credible policies. We propose a two country model where competition for mobile factors is limited to credible policies. Both countries end up with positive redistribution, and the country with a technological advantage can sustain more redistribution. The model can address the interaction of redistribution and migration policies. In particular, we show that when countries have similar skill endowments but different technologies, migration policies enabling unskilled labor mobility lead to higher global welfare than policies enabling skilled labor mobility
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 547.
Date of creation: 03 Dec 2006
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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taxation; factor mobility; commitment;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- F15 - International Economics - - Trade - - - Economic Integration
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
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