DP9600 Migration and Tax Competition Within a Union
|Author(s):||Assaf Razin, Efraim Sadka|
|Publication Date:||August 2013|
|Keyword(s):||capital mobility, fiscal leakage, labor mobility|
|Programme Areas:||International Macroeconomics, International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9600|
We develop a stylized EU-type model of a union consisting of rich, capital-abundant and productive, countries, and poor,capital-scarce and low productivity, countries, in order to explain key features of tax policies and inter- and intra-migration flows. Our purpose is to explain the differences in the tax rates and the generosity of the welfare state, on the one hand, and migration flows, on the other hand, between rich and poor countries, within the union, and migration flows from the rest of the world. We identify a fiscal externality which makes the tax competition and the tax coordination regime to be different one from the other.