Migration and Fiscal Competition within a Union

Assaf Razin and Efraim Sadka

No 19282, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a stylized EU-type model of a union consisting of rich, capital-abundant and high productivity countries, and poor, capital-scarce and low productivity countries. We address two main issues: the efficiency of tax competition and the effect of factor mobility on the size of the welfare state. We identify a fiscal externality which impairs the efficiency of tax competition. We also demonstrate how capital mobility within the union strengthens the competition over migrants from outside of the union.

JEL-codes: F2 H2 (search for similar items in EconPapers)
Date: 2013-08
Note: IFM
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