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Welfare Magnets, Taxation and the Location Decisions of Migrants to the EU

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  • Klaus Nowotny

Abstract

Migrants are among the groups most vulnerable to economic fluctuations. As predicted by the 'welfare magnet' hypothesis, migrants can therefore be expected to--ceteris paribus--prefer countries with more generous welfare provisions to insure themselves against labor market risks. This paper analyzes the role of the welfare magnet hypothesis for migrants to the EU-15 at the regional level. The empirical analysis based on a random parameters logit model shows that the regional location decisions of migrants are mostly governed by income opportunities, labor market conditions, ethnic networks and a common language. There is no strong evidence for the welfare magnet hypothesis in the EU, but the empirical model shows that the design of the (income) tax system has a large and consistent effect on locational choice.

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  • Klaus Nowotny, 2011. "Welfare Magnets, Taxation and the Location Decisions of Migrants to the EU," ERSA conference papers ersa11p133, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa11p133
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    2. Stanislav Cernosa, 2011. "Openness to Trade, Migration and Foreign Direct Investments of the EU," WIFO Working Papers 401, WIFO.
    3. Peter Huber, 2015. "What Institutions Help Immigrants Integrate? WWWforEurope Working Paper No. 77," WIFO Studies, WIFO, number 57884.
    4. Mario Morger, 2013. "What Do Immigrants Value Most About Switzerland? Evidence of the Relative Importance of Income Taxes," CESifo Working Paper Series 4134, CESifo.

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