Migration Incentives and Taxation: Do Marginal Taxes Matter?

University of Aarhus Economics Working Paper No. 2004-7

12 Pages Posted: 27 Sep 2004

See all articles by Bo Sandemann Rasmussen

Bo Sandemann Rasmussen

Aarhus University - Department of Economics and Business Economics

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Date Written: March 8, 2004

Abstract

Faced with ageing populations many European countries may be tempted to attract immigrants. One way to do this is to offer tax incentives. Since the decision to migrate is a discrete choice it should be average taxes that are important for the migration decision. If, however, the supply of working hours is endogenous it is shown that marginal taxes are also important for the migration decision, even after controlling for average taxes. Hence, countries interested in attracting immigrants can do so even without reducing average taxes by having less progressive tax systems than other countries.

Keywords: Migration, average taxes, marginal taxes, labor supply, population aging

JEL Classification: F22, H24

Suggested Citation

Rasmussen, Bo Sandemann, Migration Incentives and Taxation: Do Marginal Taxes Matter? (March 8, 2004). University of Aarhus Economics Working Paper No. 2004-7, Available at SSRN: https://ssrn.com/abstract=595542 or http://dx.doi.org/10.2139/ssrn.595542

Bo Sandemann Rasmussen (Contact Author)

Aarhus University - Department of Economics and Business Economics ( email )

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