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Welfare and labor supply implications of tax competition for mobile labor

Author

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  • Vilen Lipatov

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  • Alfons Weichenrieder

Abstract

We introduce tax competition for mobile labor into an optimal-taxation model with two skill levels and analyze a subgame-perfect Nash equilibrium of the game between two governments and two taxpayer populations. Tax competition reduces the distortion from the informational asymmetry and increases labor supply of the less productive individuals. When one of the countries has a larger population, this effect is more pronounced in the smaller country. Tax competition generally tends to make societies more libertarian. Particular welfare effects for high and low skilled depend on the form of the government objective function. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Vilen Lipatov & Alfons Weichenrieder, 2015. "Welfare and labor supply implications of tax competition for mobile labor," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(2), pages 457-477, September.
  • Handle: RePEc:spr:sochwe:v:45:y:2015:i:2:p:457-477
    DOI: 10.1007/s00355-015-0898-z
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:eecrev:v:110:y:2018:i:c:p:41-60 is not listed on IDEAS
    2. Gietl, Daniel & Haufler, Andreas, 2018. "Bonus taxes and international competition for bank managers," European Economic Review, Elsevier, vol. 110(C), pages 41-60.

    More about this item

    Keywords

    H21; F22; H71; D63;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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