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Labor Mobility and Income Tax Competition

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  • Gwenael Piaser

    (CORE, Universtité catholique de Louvain)

Abstract

This paper provides a model of nonlinear income taxation in a context of international mobility. We consider two identical countries, in which each government chooses non-cooperatively redistributive taxes. It is shown that when skilled workers can move at low cost, the income taxation does not involve distortions. When the cost to move becomes high for skilled workers, taxation policy is less redistributive but qualitatively similar to the taxation policy in autarky. Moreover, the mobility of the unskilled workers does not affect the income taxation when both countries have Rawlsian objectives.

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File URL: http://128.118.178.162/eps/pe/papers/0302/0302002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0302002.

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Length: 26 pages
Date of creation: 04 Feb 2003
Date of revision:
Handle: RePEc:wpa:wuwppe:0302002

Note: Type of Document - Acrobat PDF; prepared on UNIX/BSD; to print on HP/PostScript/Franciscan monk; pages: 26; figures: included. 26 pages, PDF, prepared from dvips and ps2pdf - figures included
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Web page: http://128.118.178.162

Related research

Keywords: Fiscal Competition; Labor Mobility; Optimal Taxation; Mechanism Design;

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References

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  1. Gordon, Roger H, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 567-86, November.
  2. CREMER, Helmuth & FOURGEAUD, Virginie & LEITE MONTEIRO, Manuel & MARCHAND, Maurice, 1995. "Mobility and Redistribution : A Survey," CORE Discussion Papers 1995066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Martimort, David, 1999. "Renegotiation Design with Multiple Regulators," Journal of Economic Theory, Elsevier, vol. 88(2), pages 261-293, October.
  4. Michael Peters, 1999. "Common Agency and the Revelation Principle," Working Papers peters-99-01, University of Toronto, Department of Economics.
  5. repec:ebl:ecbull:v:8:y:2002:i:2:p:1-6 is not listed on IDEAS
  6. David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
  7. Rochet, Jean-Charles & Stole, Lars A, 2002. "Nonlinear Pricing with Random Participation," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 277-311, January.
  8. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  9. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  10. Joseph E. Stiglitz, 1981. "Self-Selection and Pareto Efficient Taxation," NBER Working Papers 0632, National Bureau of Economic Research, Inc.
  11. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  12. HAMILTON, Jonathan & PESTIEAU, Pierre, 2002. "Optimal income taxation and the ability distribution: implications for migration equilibria," CORE Discussion Papers 2002036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
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Citations

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Cited by:
  1. Laurent Simula & Alain Trannoy, 2011. "Shall we Keep the Highly Skilled at Home? The Optimal Income Tax Perspective," CESifo Working Paper Series 3326, CESifo Group Munich.
  2. Vilen Lipatov & Alfons Weichenrieder, 2010. "Optimal Income Taxation with Tax Competition," CESifo Working Paper Series 3108, CESifo Group Munich.
  3. GABSZEWICZ, Jean & TAROLA, Ornella, 2011. "Migration, wage differentials and fiscal competition," CORE Discussion Papers 2011065, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Etienne Lehmann & Laurent Simula & Alain Trannoy, 2013. "Tax Me If You Can! Optimal Nonlinear Income Tax between Competing Governments," CESifo Working Paper Series 4351, CESifo Group Munich.
  5. HAMILTON, Jon & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, . "Rawlsian governments and the race to the bottom," CORE Discussion Papers RP -1649, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Felix Bierbrauer & Craig Brett & John A. Weymark, 2011. "Strategic Nonlinear Income Tax Competition with Perfect Labor Mobility," CESifo Working Paper Series 3329, CESifo Group Munich.
  7. Laurent Simula, 2013. "Tax Competition and Migration," 2013 Meeting Papers 1126, Society for Economic Dynamics.
  8. Tomer Blumkin & Efraim Sadka & Yotam Shem-Tov, 2012. "International Tax Competition: Zero Tax Rate at the Top Re-established," CESifo Working Paper Series 3820, CESifo Group Munich.
  9. Tomer Blumkin & Efraim Sadka & Yotam Shem-Tov, 2011. "Labor Migration and the Case for Flat Tax," CESifo Working Paper Series 3471, CESifo Group Munich.
  10. Andrea Attar & Eloisa Campioni & Gwenaël Piaser, 2014. "Competing Mechanisms Communication under Exclusivity Clauses," Working Papers 2014-048, Department of Research, Ipag Business School.

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