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Fiscal harmonization and migration in the European Union

  • Socrates Karidis
  • Michael A. Quinn

The focus of this paper is the impact of fiscal policies on international migration flows. The Tiebout hypothesis proposes that individuals consider differences in tax rates and social spending when making migration decisions. While evidence of the Tiebout hypothesis has been found in several domestic U.S. and Canadian studies, this is the first paper to test the Tiebout hypothesis using bilateral international migration flows. The Maastricht treaty has created a unique opportunity to study migration in an international context by removing legal barriers to migration within the European Union. Using data from EU countries throughout the 1980s and 1990s, this paper finds significant statistical support for the Tiebout hypothesis with regards to international migration flows. These results suggest that achieving greater fiscal harmonization across countries would lower migration flows. The results also imply that EU countries which are resistant to achieving fiscal harmonization with members may, as a result, have problems in attaining their other goal of reducing immigration (inward) from these countries.

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Article provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.

Volume (Year): 49 (2006)
Issue (Month): 4 ()
Pages: 333-352

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Handle: RePEc:bxr:bxrceb:y:2006:v:49:i:4:p:333-352
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