Migration, wages and fiscal competition

Jean Gabszewicz, Ornella Tarola and Skerdilajda Zanaj

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We analyze the effects of labor migration flows on income taxation between two countries (regions) differing by the size of their population and the level of productive efficiencies. Residents, otherwise identical, are heterogeneous because they incur different migration costs. Each resident compares the post-tax amount of money at home with the one obtained abroad, including the cost of migration. The government in each coun- try maximizes the tax receipt in order to provide the largest possible amount of public good. We prove the existence of an equilibrium for any configuration of wage and any different relative size of the countries (re- gions). Then, we compute and characterize the equilibrium for any set of parameters, size and wage differential. Finally, we show how equili- brium migration flows affect the level of income taxation in the origin and destination country.

Keywords: migration; income tax; fiscal competition (search for similar items in EconPapers)
JEL-codes: F22 H20 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mig, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://hdl.handle.net/10993/13265 (application/pdf)

Related works:
Journal Article: Migration, wages and income taxes (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:13-19

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