Competition for Migrants in a Federation: Tax or Transfer Competition?
ETH Zurich - Department of Management, Technology and Economics; KOF Swiss Economic Institute; CESifo (Center for Economic Studies and Ifo Institute)
January 26, 2012
CESifo Working Paper Series No. 3709
The paper provides an equilibrium analysis of how countries compete for migrants. The type of competition (tax or transfer competition) depends on whether the competing countries have similar policy preferences. With symmetric preferences, countries compete in taxes for migrants. With asymmetric preferences, migration competition takes place in income support levels. The results are robust to the degree of mobility and to whether high-income or low-income households are mobile. The results are relevant, e.g., for federal policies that tackle inefficient migration competition and for evaluating whether a country may wish to adopt unilateral ‘migration-purchase’ policies.
Number of Pages in PDF File: 23
Keywords: migration, redistribution, income taxation, government strategy, endogenous type of competition
JEL Classification: H700, J200, F200
Date posted: January 26, 2012