Distributive Policy with Labor Mobility and the Samaritan's Dilemma
28 Pages Posted: 21 Feb 2009
Date Written: January 21, 2009
We consider a model with two countries in which each government redistributes income between two types of individuals (the rich and the poor). This model shows that an increase in the mobility of individuals induces intensive tax competition across countries and lowers the level of redistribution undertaken by each country. However, this lower level of redistribution enhances individuals' efforts to raise his own labor income and alleviates the consequences of the Samaritan's dilemma. Welfare evaluation of economic integration should be based on the balance of these two competing effects.
Keywords: Redistribution, Samaritan's dilemma, Migration, Economic integration, Psychological attachment
JEL Classification: C72, F15, F22, H53
Suggested Citation: Suggested Citation