Distributive policy with labor mobility and the Samaritanfs dilemma
We consider a model with two countries in which each government redistributes income between two types of individuals (the rich and the poor). This model shows that an increase in the mobility of individuals induces intensive tax competition across countries and lowers the level of redistribution undertaken by each country. However, this lower level of redistribution enhances individualsf efforts to raise his own labor income and alleviates the consequences of the Samaritanfs dilemma. Welfare evaluation of economic integration should be based on the balance of these two competing effects.
|Date of creation:||Jan 2009|
|Date of revision:||Jan 2009|
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