Tax Burden and Migration: a Political Economy Theory and Evidence

Assaf Razin, Efraim Sadka and Phillip Swagel

Working Papers from Tel Aviv

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 conventi onal 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 populati on leads to a lower tax rate on labor income, even after controlling for the gen erosity 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: TAXATION; INCOME REDISTRIBUTION; MIGRATION; ECONOMIC GROWTH (search for similar items in EconPapers)
JEL-codes: E62 H20 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1998
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Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Tax burden and migration: a political economy theory and evidence (2002)
Working Paper: Tax Burden and Migration: A Political Economy Theory and Evidence (1998)
Working Paper: Tax Burden and Migration: A Political Economy Theory and Evidence (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:teavfo:15-98

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