Education, mobility of labour and tax competition
We show that wage-tax financed subsidies encourage investment in riskyeducation and offer welfare gains. Tax competition and labour mobilitymay lead to substantial erosion of regional taxation. On the other hand,mobility insures against region-specific shocks encouraging investmentin education. Thus, welfare effects on the educated and the owners ofthe fixed factor may go in either direction. Tax competition isespecially fierce if the governments care about the owners of the fixedfactor. Elimination of their interests from the governments’ objectivefunctions results in a Pareto-improvement in a federation with taxcompetition.
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|Date of creation:||2000|
|Publication status:||Published in International Tax and Public Finance 6 7(2000): pp. 699-719|
|Contact details of provider:|| Postal: Ludwigstr. 28, 80539 Munich, Germany|
Web page: http://www.vwl.uni-muenchen.de
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- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
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- Hamilton, Jonathan H, 1987. "Optimal Wage and Income Taxation with Wage Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 373-388, June. Full references (including those not matched with items on IDEAS)
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