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Education policy and tax competition with imperfect student and labor mobility

Tim Krieger and Thomas Lange ()
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Thomas Lange: Ifo institute for economic research & University of Konstanz

No 8, Working Papers CIE from Paderborn University, CIE Center for International Economics

Abstract: In this paper we analyze the effect of increasing labor (i.e. graduates’/ academics’) and student mobility on net tax revenues when revenuemaximizing governments compete for human capital by means of income tax rates and amenities offered to students (positive expenditure) or rather tuition fees (negative expenditure). We demonstrate that these instruments are strategic complements and that increasing labor mobility due to ongoing globalization not necessarily implies intensified tax competition and an erosion of revenues. On the contrary, the equilibrium tax rate even increases in mobility. Amenities offered to students (or rather tuition fees) may either increase or decrease, and, overall, net revenues increase. An increase in student mobility, however, erodes revenues due to intensified tax and amenity competition.

Keywords: labor mobility; student mobility; higher education; tax competition; public expenditure competition (search for similar items in EconPapers)
JEL-codes: I22 J61 F22 H2 H87 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-04
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http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/ciepap/WP08.pdf First version, 2008 (application/pdf)

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Journal Article: Education policy and tax competition with imperfect student and labor mobility (2010) Downloads
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