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Education, mobility of labour and tax competition

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  • Poutvaara, Panu

Abstract

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.

Suggested Citation

  • Poutvaara, Panu, 2000. "Education, mobility of labour and tax competition," Munich Reprints in Economics 19303, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:19303
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    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    2. Sinn, Hans-Werner, 1994. "How Much Europe? Subsidiarity, Centralization and Fiscal Competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(1), pages 85-107, February.
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    Cited by:

    1. Andersson, Fredrik & Konrad, Kai A, 2003. "Globalization and Risky Human-Capital Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(3), pages 211-228, May.
    2. Panu Poutvaara & Vesa Kanniainen, 2000. "Why Invest in Your Neighbor? Social Contract on Educational Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 547-562, August.
    3. Panu Poutvaara, 2008. "On human capital formation with exit options: comment and new results," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(3), pages 679-684, July.
    4. Delpierre, Matthieu & Verheyden, Bertrand, 2014. "Student and worker mobility under university and government competition," Journal of Public Economics, Elsevier, vol. 110(C), pages 26-41.
    5. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(6), pages 587-606, December.
    6. Panu Poutvaara, 2004. "Public Education in an Integrated Europe: Studying for Migration and Teaching for Staying?," Public Economics 0406006, EconWPA.
    7. 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.
    8. Poutvaara, Panu, 1999. "Federation's alternative tax constitutions and risky education," ZEW Discussion Papers 99-42, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    9. Poutvaara, Panu, 2001. "Alternative tax constitutions and risky education in a federation," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 355-377, April.
    10. Alexander Kemnitz, 2009. "Native welfare losses from high skilled immigration," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(4), pages 560-570, August.
    11. 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.
    12. Panu Poutvaara & Vesa Kanniainen, 1999. "Why to Invest in your Neighbor? Social Contract on Educational Investment," CESifo Working Paper Series 202, CESifo Group Munich.
    13. Morten I. Lau & Panu Poutvaara, 2006. "Social Security Incentives and Human Capital Investment," Finnish Economic Papers, Finnish Economic Association, vol. 19(1), pages 16-24, Spring.
    14. Jens Südekum, 2005. "The Pitfalls of Regional Education Policy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(3), pages 327-327, November.
    15. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA.

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