Migration and Fiscal Competition within a Union
NBER Working Paper No. 19282
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.
This paper was revised on December 27, 2013
Document Object Identifier (DOI): 10.3386/w19282
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