Immigration, Inequality and Income Taxes

Bächli, Mirjam and Albrecht Glitz

No 19747, CEPR Discussion Papers from Centre for Economic Policy Research

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 (search for similar items in EconPapers)
JEL-codes: H23 H24 H71 J31 J61 (search for similar items in EconPapers)
Date: 2024-12
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