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Migration, wages and fiscal competition

Author

Listed:
  • Jean Gabszewicz

    (CORE, Universite catholique de Louvain, Belgique)

  • Ornella Tarola

    (DAES, University of Rome, La Sapienza, Italy)

  • Skerdilajda Zanaj

    (CREA, Université du 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.

Suggested Citation

  • Jean Gabszewicz & Ornella Tarola & Skerdilajda Zanaj, 2013. "Migration, wages and fiscal competition," DEM Discussion Paper Series 13-19, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:13-19
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    File URL: https://hdl.handle.net/10993/13265
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    References listed on IDEAS

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    Cited by:

    1. Augusto Cerqua & Guido Pellegrini & Ornella Tarola, 2022. "Can regional policies shape migration flows?," Papers in Regional Science, Wiley Blackwell, vol. 101(3), pages 515-536, June.
    2. Patrice Pieretti & Giuseppe Pulina & Skerdilajda Zanaj, 2024. "Fiscal competition and two-way migration," BCL working papers 183, Central Bank of Luxembourg.
    3. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1123-1196, Elsevier.
    4. Patrice Pieretti & Giuseppe Pulina & Andreas Sintos & Skerdilajda Zanaj, 2024. "Fiscal Competition and Migration Patterns," DEM Discussion Paper Series 24-04, Department of Economics at the University of Luxembourg.
    5. Yutao Han & Patrice Pieretti, 2020. "On tax competition, international migration, and occupational choice," DEM Discussion Paper Series 20-07, Department of Economics at the University of Luxembourg.

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    More about this item

    Keywords

    migration; income tax; fiscal competition;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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