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Tax Competition and Fiscal Sustainability

Kazutoshi Miyazawa (), Hikaru Ogawa and Toshiki Tamai
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Hikaru Ogawa: Faculty of Economics, The University of Tokyo

No CIRJE-F-1104, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We develop a model in which ethnic minorities can either assimilate to the majority's norm or reject it by trading o higher productivity and wages with a greater social distance to their culture of origin. We show that "oppositional" minorities reside in more segregated areas, have worse outcomes (in terms of income) but are not necessary worse off in terms of welfare than assimilated minorities who live in less segregated areas. We nd that a policy that reduces transportation cost decreases rather than increases assimilation in cities. We also nd that when there are more productivity spillovers between the two groups, ethnic minorities are more likely not to assimilate and to reject the majority's norm. Finally, we show that ethnic minorities tend to assimilate more in bigger and more expensive cities.

Pages: 52 pages
Date: 2018-12
New Economics Papers: this item is included in nep-mig and nep-ure
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