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Brain-drain taxes for non-benevolent governments

  • Wilson, John Douglas
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    This paper investigates the welfare effects of brain-drain taxes levied by non-benevolent governments, whereby a country collects a tax from skilled emigrants but potentially wastes a sizable portion of the revenue. Using a model in which taxes are chosen to maximize expected political rents, I show that the availability of a brain-drain tax increases a weighted sum of citizen utilities. However, the government's optimal brain-drain tax is found to be higher than the level that maximizes this weighted sum. In another model, a brain-drain tax is found to be desirable when governments use public good expenditures to compete for mobile residents.

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    Article provided by Elsevier in its journal Journal of Development Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 1 (May)
    Pages: 68-76

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    Handle: RePEc:eee:deveco:v:95:y:2011:i:1:p:68-76
    Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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    1. Facchini, Giovanni & Willmann, Gerald, 2005. "The political economy of international factor mobility," Journal of International Economics, Elsevier, vol. 67(1), pages 201-219, September.
    2. Wilson, John Douglas, 2005. "Welfare-improving competition for mobile capital," Journal of Urban Economics, Elsevier, vol. 57(1), pages 1-18, January.
    3. Alexander Haupt & Eckhard Janeba, 2009. "Education, redistribution and the threat of brain drain," International Tax and Public Finance, Springer, vol. 16(1), pages 1-24, February.
    4. Bourguignon, F. & Verdier, T., 1997. "Oligarchy, Democracy, Inequality and Growth," DELTA Working Papers 97-10, DELTA (Ecole normale supérieure).
    5. Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
    6. Roger H. Gordon & John D. Wilson, 2001. "Expenditure Competition," NBER Working Papers 8189, National Bureau of Economic Research, Inc.
    7. Epstein, Gil S & Hillman, Arye L & Ursprung, Heinrich W, 1999. "The King Never Emigrates," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 107-21, June.
    8. Docquier, Frederic & Rapoport, Hillel, 2003. "Ethnic discrimination and the migration of skilled labor," Journal of Development Economics, Elsevier, vol. 70(1), pages 159-172, February.
    9. K. Hamada & J. N. Bhagwati, 1975. "Domestic Distortions, Imperfect Information and the Brain Drain," Working papers 161, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
    11. Michel, BEINE & Frédéric, DOCQUIER & Hillel, RAPOPORT, 2006. "Brain drain and human capital formation in developing countries : winners and losers," Discussion Papers (ECON - Département des Sciences Economiques) 2006023, Université catholique de Louvain, Département des Sciences Economiques.
    12. Mihir A. Desai & Devesh Kapur & John McHale, 2004. "Sharing the Spoils: Taxing International Human Capital Flows," International Tax and Public Finance, Springer, vol. 11(5), pages 663-693, 09.
    13. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
    14. Michael Keen & Jenny Ligthart, 2006. "Information Sharing and International Taxation: A Primer," International Tax and Public Finance, Springer, vol. 13(1), pages 81-110, January.
    15. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    16. Mirrlees, J. A., 1982. "Migration and optimal income taxes," Journal of Public Economics, Elsevier, vol. 18(3), pages 319-341, August.
    17. Hamada, Koichi & Bhagwati, Jagdish, 1975. "Domestic distortions, imperfect information and the brain drain," Journal of Development Economics, Elsevier, vol. 2(3), pages 265-279, September.
    18. Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series 100, Institute for Advanced Studies.
    19. Wilson, John Douglas, 2008. "A voluntary brain-drain tax," Journal of Public Economics, Elsevier, vol. 92(12), pages 2385-2391, December.
    20. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
    21. Mountford, Andrew, 1997. "Can a brain drain be good for growth in the source economy?," Journal of Development Economics, Elsevier, vol. 53(2), pages 287-303, August.
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