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Migration, wages and fiscal competition

  • Jean Gabszewicz

    ()

    (CORE, Universite catholique de Louvain, Belgique)

  • Ornella Tarola

    ()

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

  • Skerdilajda Zanaj

    ()

    (CREA, Université du Luxembourg)

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.

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File URL: http://wwwfr.uni.lu/content/download/64283/810771/file/2013-19%20-%20Migration,%20wages%20and%20fi?scal%20competition.pdf
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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 13-19.

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Date of creation: 2013
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Handle: RePEc:luc:wpaper:13-19
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  1. Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Papers 819, Queen's University, Department of Economics.
  2. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  3. Fuest, Clemens & Huber, Bernd & Mintz, Jack, 2005. "Capital Mobility and Tax Competition," Foundations and Trends(R) in Microeconomics, now publishers, vol. 1(1), pages 1-62, December.
  4. repec:cup:cbooks:9780521630351 is not listed on IDEAS
  5. Justman, Moshe & Thisse, Jacques-François & van Ypersele, Tanguy, 2001. "Taking the Bite Out of Fiscal Competition," CEPR Discussion Papers 3109, C.E.P.R. Discussion Papers.
  6. Patrice Pieretti & Skerdilajda Zanaj, 2009. "On tax competition, public goods provision and jurisdictions' size," CREA Discussion Paper Series 09-14, Center for Research in Economic Analysis, University of Luxembourg.
  7. Assaf Razin, 2013. "Migration into the Welfare State: Tax and Migration Competition," CESifo Working Paper Series 4230, CESifo Group Munich.
  8. Hansen, Nico A. & Kessler, Anke S., 2001. "(Non-)Existence of Equilibria in Multicommunity Models," Journal of Urban Economics, Elsevier, vol. 50(3), pages 418-435, November.
  9. Jonathan Hamilton & Pierre Pestieau, 2005. "Optimal Income Taxation and the Ability Distribution: Implications for Migration Equilibria," International Tax and Public Finance, Springer, vol. 12(1), pages 29-45, January.
  10. Alain Trannoy, Laurent Simula and, 2009. "Optimal Income Tax under the Threat of Migration by Top-Income Earners," Working Paper Series, Center for Fiscal Studies 2009:8, Uppsala University, Department of Economics.
  11. Ben Zissimos & Myrna Wooders, 2003. "Public Good Differentiation and the Intensity of Tax Competition," Vanderbilt University Department of Economics Working Papers 0710, Vanderbilt University Department of Economics.
  12. Hindriks, Jean & Peralta, Susana & Weber, Shlomo, 2008. "Competing in taxes and investment under fiscal equalization," Journal of Public Economics, Elsevier, vol. 92(12), pages 2392-2402, December.
  13. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  14. Wallace E. Oates, 1968. "The Theory of Public Finance in a Federal System," Canadian Journal of Economics, Canadian Economics Association, vol. 1(1), pages 37-54, February.
  15. M. Socorro Puy, 2003. "External Equilibrium in Mobility and Redistribution Economies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 363-379, 04.
  16. WILDASIN, David, . "Nash equilibria in models of fiscal competition," CORE Discussion Papers RP -804, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Jeffrey Grogger & Gordon H. Hanson, 2008. "Income Maximization and the Selection and Sorting of International Migrants," NBER Working Papers 13821, National Bureau of Economic Research, Inc.
  18. Luca MARCHIORI & Jean-François MAYSTADT & Ingmar SCHUMACHER, 2011. "The Impact of Weather Anomalies on Migration in sub-Saharan Africa," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  19. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  20. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August.
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