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Emigration and tax revenue

Author

Listed:
  • Yuanyuan Gu
  • Jhorland Ayala Garcia

Abstract

The World Migration Report 2020 shows that the number of international migrants increased from 84 million in 1970–272 million in 2019, accounting for 3.5% of the world’s population. This paper investigates the aggregated effect of emigration on the tax revenue of sending countries with a focus on developing nations. Using a gravity approach, we construct a time-varying exogenous instrument out of measures of changes in transportation technology from geographic time-invariant dyadic characteristics. Then, we follow an instrumental variable approach where we use our predicted emigration rate as an instrument of the observed migration rate. The results show that the predicted emigration rate is a good instrument of the current emigration rate for developing countries, and that there is a positive aggregated effect of emigration on tax revenue of sending countries. The results vary depending on the type of tax: emigration increases goods and services tax revenue, but it decreases income, profit, and capital gains tax revenue.

Suggested Citation

  • Yuanyuan Gu & Jhorland Ayala Garcia, 2025. "Emigration and tax revenue," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 34(6), pages 1517-1533, August.
    • Handle: RePEc:taf:jitecd:v:34:y:2025:i:6:p:1517-1533
    DOI: 10.1080/09638199.2024.2389875
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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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