NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Migration and Fiscal Competition within a Union

Assaf Razin, Efraim Sadka

NBER Working Paper No. 19282
Issued in August 2013
NBER Program(s):   IFM

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.

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This paper was revised on December 27, 2013

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Document Object Identifier (DOI): 10.3386/w19282

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