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Migration, wages and fiscal competition

Author

Listed:
  • Jean Gabszewicz

    () (CORE, Universite catholique de Louvain, Belgique)

  • Ornella Tarola

    () (DAES, University of Rome, La Sapienza, Italy)

  • Skerdilajda Zanaj

    () (CREA, Université du Luxembourg)

Abstract

We analyze the effects of labor migration flows on income taxation between two countries (regions) differing by the size of their population and the level of productive efficiencies. Residents, otherwise identical, are heterogeneous because they incur different migration costs. Each resident compares the post-tax amount of money at home with the one obtained abroad, including the cost of migration. The government in each coun- try maximizes the tax receipt in order to provide the largest possible amount of public good. We prove the existence of an equilibrium for any configuration of wage and any different relative size of the countries (re- gions). Then, we compute and characterize the equilibrium for any set of parameters, size and wage differential. Finally, we show how equili- brium migration flows affect the level of income taxation in the origin and destination country.

Suggested Citation

  • Jean Gabszewicz & Ornella Tarola & Skerdilajda Zanaj, 2013. "Migration, wages and fiscal competition," CREA Discussion Paper Series 13-19, Center for Research in Economic Analysis, University of Luxembourg.
  • Handle: RePEc:luc:wpaper:13-19
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    References listed on IDEAS

    as
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    Cited by:

    1. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, Elsevier.

    More about this item

    Keywords

    migration; income tax; fiscal competition;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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