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Education policy and tax competition with imperfect student and labor mobility

  • Tim Krieger

    ()

  • Thomas Lange

    ()

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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File URL: http://hdl.handle.net/10.1007/s10797-010-9129-9
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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 17 (2010)
Issue (Month): 6 (December)
Pages: 587-606

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Handle: RePEc:kap:itaxpf:v:17:y:2010:i:6:p:587-606
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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  18. Justman, Moshe & Thisse, Jacques-Francois, 1997. "Implications of the mobility of skilled labor for local public funding of higher education," Economics Letters, Elsevier, vol. 55(3), pages 409-412, September.
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