How Much are the Poor Losing from Tax Competition: The Welfare Effects of Fiscal Dumping in Europe

Mathilde Munoz
Additional contact information
Mathilde Munoz: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, WIL - World Inequality Lab

Working Papers from HAL

Abstract: This paper quantifies the welfare effects of tax competition in an union where individuals can respond to taxation through migration. I derive the optimal linear and non-linear tax and transfer schedules in a free mobility union composed by symmetric countries that can either compete or set a federal tax rate. I show how in the competition union, the mobility-responses to taxation affect the redistributive capacity of governments through several mechanisms. I then use empirical earnings' distribution and estimated migration elasticities to implement numerical calibrations and simulations. I use my formulas to quantify the welfare gains and losses of being in a tax competition union instead of a federal union, and show how these welfare effects vary along the earnings distribution. I show that the bottom fifty percent always loses from tax competition, and that being in a competition union rather than in a federal union could decrease poorer individuals welfare up to -20 percent.

Keywords: Tax Competition; Fiscal Dumping; Europe; Taxation rate; Migration; Migration elasticities; International taxation (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-pbe and nep-ure
Note: View the original document on HAL open archive server: https://pjse.hal.science/hal-02876988v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://pjse.hal.science/hal-02876988v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02876988

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().