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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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