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Education policy and tax competition with imperfect student and labor mobility

  • Tim Krieger

    ()

    (University of Paderborn)

  • Thomas Lange

    ()

    (Ifo institute for economic research & University of Konstanz)

In this paper we analyze the effect of increasing labor (i.e. graduates’/ academics’) and student mobility on net tax revenues when revenuemaximizing governments compete for human capital by means of income tax rates and amenities offered to students (positive expenditure) or rather tuition fees (negative expenditure). We demonstrate that these instruments are strategic complements and that increasing labor mobility due to ongoing globalization not necessarily implies intensified tax competition and an erosion of revenues. On the contrary, the equilibrium tax rate even increases in mobility. Amenities offered to students (or rather tuition fees) may either increase or decrease, and, overall, net revenues increase. An increase in student mobility, however, erodes revenues due to intensified tax and amenity competition.

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File URL: http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/ciepap/WP08.pdf
File Function: First version, 2008
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Paper provided by University of Paderborn, CIE Center for International Economics in its series Working Papers CIE with number 8.

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Length: 31 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:pdn:ciepap:8
Contact details of provider: Postal: 05251/05251/60-2108
Phone: 05251/05251/60-2108
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Web page: http://wiwi.uni-paderborn.de/center/cie/Email:


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  1. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer, vol. 7(3), pages 247-258, May.
  2. Dreher, Axel & Poutvaara, Panu, 2005. "Student Flows and Migration: An Empirical Analysis," IZA Discussion Papers 1612, Institute for the Study of Labor (IZA).
  3. Panu Poutvaara, 2000. "Education, Mobility of Labour and Tax Competition," International Tax and Public Finance, Springer, vol. 7(6), pages 699-719, December.
  4. Fredrik Andersson & Kai A. Konrad, 2002. "Human Capital Investment and Globalization in Extortionary States," CESifo Working Paper Series 703, CESifo Group Munich.
  5. Panu Poutvaara, 2004. "Educating Europe," CESifo Working Paper Series 1114, CESifo Group Munich.
  6. 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.
  7. Robin Boadway & Nicolas Marceau & Maurice Marchand, 1992. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Working Papers 860, Queen's University, Department of Economics.
  8. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
  9. Alexander Kemnitz, 2010. "Educational Federalism and the Quality Effects of Tuition Fees," CESifo Working Paper Series 3193, CESifo Group Munich.
  10. Miriam Henseler & Joachim Plesch, 2009. "How Can Scholarship Institutions Foster the Return of Foreign Students?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(4), pages 382-409, August.
  11. Alexander Haupt & Tim Krieger, 2009. "The role of mobility in tax and subsidy competition," Working Papers CIE 21, University of Paderborn, CIE Center for International Economics.
  12. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2008. "Financing Higher Education and Labor Mobility," CESifo Working Paper Series 2362, CESifo Group Munich.
  13. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
  14. Baruch, Yehuda & Budhwar, Pawan S. & Khatri, Naresh, 2007. "Brain drain: Inclination to stay abroad after studies," Journal of World Business, Elsevier, vol. 42(1), pages 99-112, March.
  15. Poutvaara, Panu, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," Munich Reprints in Economics 19296, University of Munich, Department of Economics.
  16. Panu Poutvaara & Vesa Kanniainen, 2000. "Why Invest in Your Neighbor? Social Contract on Educational Investment," International Tax and Public Finance, Springer, vol. 7(4), pages 547-562, August.
  17. Justman, M. & Thisse, J.-F., . "Implications of the mobility of skilled labor for local public funding of higher education," CORE Discussion Papers RP -1296, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  18. Alexander Haupt & Eckhard Janeba, 2009. "Education, redistribution and the threat of brain drain," International Tax and Public Finance, Springer, vol. 16(1), pages 1-24, February.
  19. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer, vol. 17(6), pages 587-606, December.
  20. Alexander Haupt & Wolfgang Peters, 2003. "Voting on public pensions with hands and feet," Economics of Governance, Springer, vol. 4(1), pages 57-80, 04.
  21. Thomas Lange, 2009. "Public Funding of Higher Education when Students and Skilled Workers are Mobile," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(2), pages 178-199, June.
  22. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer, vol. 28(2), pages 203-218, June.
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