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Education policy and tax competition with imperfect student and labor mobility

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  • Tim Krieger

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  • Thomas Lange

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Abstract

In this paper we analyze the effect of increasing labor (i.e. graduates’/ academics’) and student mobility on net tax revenues when revenuemaximizing governments compete for human capital by means of income tax rates and amenities offered to students (positive expenditure) or rather tuition fees (negative expenditure). We demonstrate that these instruments are strategic complements and that increasing labor mobility due to ongoing globalization not necessarily implies intensified tax competition and an erosion of revenues. On the contrary, the equilibrium tax rate even increases in mobility. Amenities offered to students (or rather tuition fees) may either increase or decrease, and, overall, net revenues increase. An increase in student mobility, however, erodes revenues due to intensified tax and amenity competition.
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  • Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(6), pages 587-606, December.
  • Handle: RePEc:kap:itaxpf:v:17:y:2010:i:6:p:587-606
    DOI: 10.1007/s10797-010-9129-9
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alexander Haupt & Tim Krieger, 2009. "The role of mobility in tax and subsidy competition," Working Papers CIE 21, Paderborn University, CIE Center for International Economics.
    2. Alexander Haupt & Tim Krieger & Thomas Lange, 2011. "Competition for the International Pool of Talent: Education Policy and Student Mobility," Working Papers CIE 35, Paderborn University, CIE Center for International Economics.
    3. Alexander Haupt & Tim Krieger & Thomas Lange, 2016. "Competition for the international pool of talent," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(4), pages 1113-1154, October.
    4. Delpierre, Matthieu & Verheyden, Bertrand, 2014. "Student and worker mobility under university and government competition," Journal of Public Economics, Elsevier, vol. 110(C), pages 26-41.
    5. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(6), pages 587-606, December.
    6. Thomas Lange, 2013. "Return migration of foreign students and non-resident tuition fees," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 703-718, April.
    7. Silke Uebelmesser & Marcel Gérard, 2014. "Financing Higher Education when Students and Graduates are Internationally Mobile," Jena Economic Research Papers 2014-009, Friedrich-Schiller-University Jena.
    8. Tina Haussen & Silke Uebelmesser, 2018. "No Place Like Home? Graduate Migration in Germany," Growth and Change, Wiley Blackwell, vol. 49(3), pages 442-472, September.
    9. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2014. "Financing Higher Education in a Mobile World," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 343-371, June.
    10. Krieger, Tim & Renner, Laura & Ruhose, Jens, 2018. "Long-term relatedness between countries and international migrant selection," Journal of International Economics, Elsevier, vol. 113(C), pages 35-54.
    11. Haupt, Alexander & Krieger, Tim & Lange, Thomas, 2013. "Education policy, student migration, and brain gain," Discussion Paper Series 2013-05, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
    12. Hübner, Malte, 2012. "The welfare effects of discriminating between in-state and out-of-state students," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 364-374.
    13. Tim Krieger & Laura Renner & Jens Ruhose, 2015. "Genetic Distance and International Migrant Selection," CESifo Working Paper Series 5453, CESifo Group Munich.
    14. Dwenger, Nadja & Storck, Johanna & Wrohlich, Katharina, 2012. "Do tuition fees affect the mobility of university applicants? Evidence from a natural experiment," Economics of Education Review, Elsevier, vol. 31(1), pages 155-167.
    15. Bernard Franck & Robert F. Owen, 2015. "Human Capital Formation, International Labor Mobility and the Optimal Design of Educational Grants," Working Papers hal-01158239, HAL.
    16. Thomas Lange, 2008. "Local Public Funding of Higher Education when Students and Skilled Workers are Mobile," Working Papers CIE 11, Paderborn University, CIE Center for International Economics.

    More about this item

    Keywords

    Labor mobility; Student mobility; Higher education; Tax competition; Public expenditure competition; I22; J61; F22; H2; H87;

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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