Tax Competition and Migration: The Race-to-the-Bottom Hypothesis Revisited
Oates reminds us that tax competition among localities in the presence of capital mobility, may lead to inefficiently low tax rates (and benefits). In contrast, the Tiebout paradigm suggests that tax competition yields an efficient outcome, so that there are no gains from tax coordination. This paper demonstrates that when a group of host countries faces an upward supply of migrants, labor and capital income tax rate under competition are higher than under tax coordination, due to a fiscal externality.
|Date of creation:||Jan 2011|
|Date of revision:|
|Publication status:||published as Assaf Razin and Efraim Sadka "Tax Competition and Migration: The Race ‐ to ‐ the ‐ Bottom Hypothesis Revisited" forthcoming in CESifo Economic Studies , Volume 58, Number 1, March 2012, Oxford University Press.|
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- Razin, Assaf & Sadka, Efraim, 1991.
"International tax competition and gains from tax harmonization,"
Elsevier, vol. 37(1), pages 69-76, September.
- Assaf Razin & Efraim Sadka, 1989. "International Tax Competition and Gains from Tax Harmonization," NBER Working Papers 3152, National Bureau of Economic Research, Inc.
- Assaf Razin & Efraim Sadka, 2010.
"Fiscal and Migration Competition,"
CESifo Working Paper Series
3075, CESifo Group Munich.
- Lans Bovenberg & Sijbren Cnossen & Ruud de Mooij, 2003. "Introduction: Tax Coordination in the European Union," International Tax and Public Finance, Springer, vol. 10(6), pages 619-624, November.
- Mendoza, Enrique G. & Tesar, Linda L., 2005. "Why hasn't tax competition triggered a race to the bottom? Some quantitative lessons from the EU," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 163-204, January.
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