Nonlinear Taxation and International Mobility in General Equilibrium

Eckhard Janeba and Karl Schulz

No 9132, CESifo Working Paper Series from CESifo

Abstract: We study the nonlinear taxation of internationally mobile workers in general equilibrium. Contrary to conventional wisdom, in general equilibrium, migration lowers the bottom tax rate but raises the top tax rate, making the optimal tax system more progressive and moving tax rates closer to those in an economy with fixed wages. The intuition is that governments attract high-skilled workers by amplifying pre-tax wage inequality and partly offsetting trickle-down forces from production complementarities. This finding raises doubts about the importance of trickle-down for optimal taxation and offers a novel explanation for why globalization may increase tax progressivity and wage inequality.

Keywords: optimal taxation; general equilibrium; trickle-down effects; migration; tax/subsidy competition (search for similar items in EconPapers)
JEL-codes: F22 H21 H24 H73 R13 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-mig, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Nonlinear taxation and international mobility in general equilibrium (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9132

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