Education, mobility of labour and tax competition

Panu Poutvaara

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: We show that wage-tax financed subsidies encourage investment in riskyeducation and offer welfare gains. Tax competition and labour mobilitymay lead to substantial erosion of regional taxation. On the other hand,mobility insures against region-specific shocks encouraging investmentin education. Thus, welfare effects on the educated and the owners ofthe fixed factor may go in either direction. Tax competition isespecially fierce if the governments care about the owners of the fixedfactor. Elimination of their interests from the governments’ objectivefunctions results in a Pareto-improvement in a federation with taxcompetition.

Date: 2000
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Citations: View citations in EconPapers (16)

Published in International Tax and Public Finance 6 7(2000): pp. 699-719

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Journal Article: Education, Mobility of Labour and Tax Competition (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:19303

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