Immigration, Inequality and Income Taxes

Mirjam Bächli () and Albrecht Glitz ()
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Mirjam Bächli: University of Lausanne
Albrecht Glitz: Universitat Pompeu Fabra

No 17523, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Immigration may affect income inequality not only by changing factor prices but also by inducing policy makers to adjust the prevailing income tax system. We assess the relative importance of these economic and political channels using administrative data from Switzerland where local authorities have a high degree of tax autonomy. We show that immigrant inflows not only raise gross earnings inequality but also reduce the progressivity of local income taxes, further increasing after-tax inequality. Our estimates suggest that around 10 percent of the impact of immigration on the net interquartile and interdecile earnings gaps can be attributed to the political channel.

Keywords: immigration; income taxes; earnings inequality (search for similar items in EconPapers)
JEL-codes: H23 H24 H71 J31 J61 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2024-12
New Economics Papers: this item is included in nep-int, nep-lab, nep-mig, nep-pbe and nep-pub
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