Tax Burden and Migration

Assaf Razin, Efraim Sadka and Phillip Swagel

No 59, Economics Series from Institute for Advanced Studies

Abstract: The extent of taxation and redistribution Policy is generally determined as a political-economy equilibrium by a balance between those who gain from higher taxes/transfers and those who lose. In a stylized model of migration and human capital formation, we show - somewhat against the conventional wisdom - that low-skill immigration may lead to a lower tax burden and less redistribution than would be the case with no immigration, even though migrants (naturally) join the pro-tax/transfer coalition. Data on 11 European countries over the period 1974 to 1992 are consistent with the implications of the theory: a higher share of immigrants in the population leads to a lower tax rate on labor income, with the effect statistically significant even after controlling for the generosity and size of the welfare state, demographics, and the international exposure of the economy. As predicted by the theory, it is the increased share of low-education immigrants that leads to the smaller tax burden.

Keywords: Migration; Political-economy Equilibrium; Tax-transfer Policy (search for similar items in EconPapers)
JEL-codes: D3 D7 F22 J61 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1998-11
References: Add references at CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
https://irihs.ihs.ac.at/id/eprint/1103 First version, 1998 (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:ihs:ihsesp:59

Ordering information: This working paper can be ordered from
Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria

Access Statistics for this paper

More papers in Economics Series from Institute for Advanced Studies Josefstädterstr. 39, A-1080 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Doris Szoncsitz ().