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Tax Burden and Migration: a Political Economy Theory and Evidence

NBER Working Paper No. w6734
1998
  • 20
    Citations
  • 6,380
    Usage
  • 2
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    20
    • Citation Indexes
      20
  • Usage
    6,380
    • Abstract Views
      6,315
    • Downloads
      65
  • Captures
    2
    • Readers
      2
      • SSRN
        2
  • Ratings
    • Download Rank
      696,744

Paper Description

The extent of taxation and redistribution policy is generally determined as a political-economy equilibrium by a balance between those who gain from higher taxes/transfers and those who lose. In a stylized model of migration and human capital formation, we show -- somewhat against the conventional wisdom -- that low-skill immigration may lead to a lower tax burden and less redistribution than would be the case with no immigration, even though migrants (naturally) join the pro-tax/transfer coalition. Data on 11 European countries over the period 1974 to 1992 are consistent with the implications of the theory: a higher share of immigrants in the population leads to a lower tax rate on labor income, even after controlling for the generosity and size of the welfare state, demographics, and the international exposure of the economy. As predicted by the theory, it is the increased share of low education immigrants that leads to the smaller tax burden.

Bibliographic Details

Assaf Razin; Efraim Sadka; Phillip Swagel

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