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The Influence of Labor Taxes on the Migration of Skilled Workers

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  • Peter Egger
  • Doina Radulescu

Abstract

This paper investigates empirically the role of taxes on labor for the stock of expatriates and the migration flows of skilled workers. Given the increasing mobility of labour, especially of high-skilled people and expatriates, it is interesting to see to what extent labour income taxes and social security contributions determine migration flows. We collect data on personal income tax profiles for 49 economies and the year 2002. In particular, we determine the component of labor taxes which is borne by employers and the one that is borne by employees, following the OECD’s Taxing Wages Approach. For the latter, we calculate the progressivity of personal income tax rates between the average wage and five times the average wage. This may be interpreted as the tax progression which is relevant for well-paid workers. Then, we use the personal income tax variables to estimate their effect on bilateral stocks of expatriates into OECD countries and the migration of skilled workers into these countries. Personal income tax rates turn out to have a robust negative effect on cross-border flows of skilled workers in the OECD.

Suggested Citation

  • Peter Egger & Doina Radulescu, 2008. "The Influence of Labor Taxes on the Migration of Skilled Workers," CESifo Working Paper Series 2462, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2462
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    References listed on IDEAS

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    Cited by:

    1. Volker Grossmann & David Stadelmann, 2013. "Wage Effects of High-Skilled Migration: International Evidence," World Bank Economic Review, World Bank Group, vol. 27(2), pages 297-319.
    2. Thushyanthan Baskaran & Zohal Hessami, 2012. "Public education spending in a globalized world:," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(5), pages 677-707, October.
    3. Peter Huber, 2015. "What Institutions help immigrants Integrate?," WWWforEurope Working Papers series 77, WWWforEurope.
    4. Daniel Meierrieks & Laura Renner, 2017. "Stymied ambition: does a lack of economic freedom lead to migration?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(3), pages 977-1005, July.
    5. Mario Morger, 2013. "What Do Immigrants Value Most About Switzerland? Evidence of the Relative Importance of Income Taxes," CESifo Working Paper Series 4134, CESifo Group Munich.
    6. Klaus Nowotny, 2011. "Welfare Magnets, Taxation and the Location Decisions of Migrants to the EU," ERSA conference papers ersa11p133, European Regional Science Association.
    7. Baskaran, Thushyanthan & Hessami, Zohal, 2010. "Globalization and the Composition of Public Education Expenditures: A Dynamic Panel Analysis," MPRA Paper 25750, University Library of Munich, Germany.
    8. Yabiku, Scott T. & Agadjanian, Victor & Cau, Boaventura, 2012. "Labor migration and child mortality in Mozambique," Social Science & Medicine, Elsevier, vol. 75(12), pages 2530-2538.
    9. Nowotny, Klaus, 2013. "Institutions and the Location Decisions of Highly Skilled Migrants to Europe," Working Papers in Economics 2013-3, University of Salzburg.
    10. Denvil Duncan & Klara Sabirianova Peter, 2016. "Unequal inequalities: Do progressive taxes reduce income inequality?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(4), pages 762-783, August.
    11. Zohal Hessami & Thushyanthan Baskaran, 2015. "Has Globalisation Affected Collective Bargaining? An Empirical Test, 1980–2009," The World Economy, Wiley Blackwell, vol. 38(12), pages 1880-1911, December.
    12. Jesus Crespo Cuaresma & Peter Huber & Anna Raggl, 2015. "Reaping the Benefits of Migration in an Ageing Europe," WWWforEurope Policy Brief series 7, WWWforEurope.
    13. Bertoli, Simone & Fernández-Huertas Moraga, Jesús, 2012. "Visa Policies, Networks and the Cliff at the Border," IZA Discussion Papers 7094, Institute for the Study of Labor (IZA).
    14. Peter Huber & Klaus Nowotny & Julia Bock-Schappelwein, 2010. "Qualification Structure, Over- and Underqualification of the Foreign Born in Austria and the EU," FIW Research Reports series II-008, FIW.
    15. Denvil Duncan & Ed Gerrish, 2014. "Personal income tax mimicry: evidence from international panel data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 119-152, February.
    16. Petr Huber & Julia Bock-Schappelwein, 2013. "The Impact of Migration Policy on Migrants' Education Structure: Evidence from an Austrian Policy Reform," MENDELU Working Papers in Business and Economics 2013-35, Mendel University in Brno, Faculty of Business and Economics.
    17. Andrew Hughes Hallett & Drew Scott, 2010. "Scotland: A New Fiscal Settlement," CDMA Working Paper Series 201009, Centre for Dynamic Macroeconomic Analysis.
    18. Peter Huber & Julia Bock-Schappelwein, 2013. "The Impact of Migration Policy on Migrants’ Education Structure: Evidence from Austrian Policy Reform," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-21, March.
    19. Jeffrey Overall, 2017. "Practice what you preach: the failure of the welfare state and the discovery of total equality through capitalism," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 13(1/2), pages 69-85.
    20. Ulrich Hendel, 2014. "The Influence of Altruistic Preferences on the Race to the Bottom of Welfare States," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(2), pages 200-217, June.
    21. Thushyanthan Baskaran & Zohal Hessami, 2011. "Public Education Spending in a Globalized World: Is there a Shift in Priorities Across Educational Stages?," Working Paper Series of the Department of Economics, University of Konstanz 2011-42, Department of Economics, University of Konstanz.
    22. Hendel, Ulrich, 2012. "The Influence of Altruistic Preferences on the Race to the Bottom of Welfare States," Discussion Papers in Economics 13999, University of Munich, Department of Economics.
    23. Peter Huber & Julia Bock-Schappelwein, 2014. "The Effects of Liberalizing Migration on Permanent Migrants' Education Structure," Journal of Common Market Studies, Wiley Blackwell, vol. 52(2), pages 268-284, March.

    More about this item

    Keywords

    labor taxation; skilled workers; migration; expatriates;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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