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Taxation and Internal Migration: Evidence from the Swiss Census Using Community-Level Variation in Income Tax Rates

  • Liebig, Thomas

    ()

    (OECD)

  • Puhani, Patrick A.

    ()

    (Leibniz University of Hannover)

  • Sousa-Poza, Alfonso

    ()

    (University of Hohenheim)

We investigate the relationship between income tax rate variation and internal migration for the unique case of Switzerland, whose system of determining tax rates primarily at the community level results in enough variation to permit analysis of their influence on migration. Specifically, using Swiss census data, we analyze migratory responses to tax rate variations for various groups defined by age, education, and nationality/residence permit. The results suggest that young Swiss college graduates are most sensitive to tax rate differences, but the estimated effects are not large enough to offset the revenue-increasing effect of a rise in tax rate. The migratory responses of foreigners and other age-education groups are even smaller, and reverse causation seems negligible.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2374.

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Length: 39 pages
Date of creation: Oct 2006
Date of revision:
Publication status: published in: Journal of Regional Science, 2007, 47 (4), 807-836
Handle: RePEc:iza:izadps:dp2374
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