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Taxation and mobility in dualistic models – (and) Some neglected issues of fiscal federalism

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  • Ana Paula MARTINS

    (Portugal)

Abstract

In this paper we present and confront the expected outcome of a raise in earnings taxes on the regional or sectoral allocation of labor force and employment. The basic frameworks are the benchmark dualistic scenarios. A single-input analysis of an homogeneous product economy is provided once extensions were designed to highlight the role of mobility barriers and how they interact with local wage-setting rules to determine regional allocation rather than trade issues or factor substitution. We report the main effects on equilibrium local after-tax wages, supply, employment and aggregate welfare surplus of a unilateral as well as a simultaneous unit tax increase of the (a) basic two-sector model in six different scenarios: free market; partial (one-sector) coverage with perfect intersector mobility; partial (one-sector) coverage with imperfect mobility (Harris-Todaro); multiple (two-sector) coverage with imperfect mobility (Bhagwati-Hamada); partial (one-sector) coverage with affiliation restrictions in the covered sector; partial (one-sector) coverage with limited employment generation ability in the traditional uncovered sector. Needless to say, the results would apply to any other production factor, one or other scenario being more appropriate for inference of the consequences of differential taxation systems.

Suggested Citation

  • Ana Paula MARTINS, 2021. "Taxation and mobility in dualistic models – (and) Some neglected issues of fiscal federalism," Journal of Economics Library, EconSciences Journals, vol. 8(1), pages 1-21, March.
    • Handle: RePEc:cvv:journ5:v:8:y:2021:i:1:p:1-21
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R59 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Other
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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