Labor Mobility and Fiscal Coordination

Assaf Razin, Chi-Wa Yuen

NBER Working Paper No. 5433 (Also Reprint No. r2185)
Issued in January 1996
NBER Program(s):International Finance and Macroeconomics Program

Using a human capital based growth model, we show the essential role of labor mobility and cross-country tax harmonization in equalizing income levels of countries that start off from different initial income positions. Knowledge spillovers cum labor mobility are the driving forces behind the income level equalization process. In the absence of tax harmonization within an economic union, equality in income levels is not achievable. Coordination of educational subsidies necessary for the internalization of knowledge spillovers may or may not be necessary. These considerations constitute the basis for our efficient growth agenda for an economic union such as the EU.

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Document Object Identifier (DOI): 10.3386/w5433

Published: Journal of Public Economics, 1997.

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