Optimal Linear Income Tax When Highly-Skilled Individuals Vote with Their Feet

FinanzArchiv Public Finance Analysis, September 2006

23 Pages Posted: 26 Apr 2006

See all articles by Laurent Simula

Laurent Simula

Ecole des Hautes Etudes en Sciences Sociales (EHESS); Research Group in Quantitative Economics of Aix-Marseilles (GREQAM); Paris Jourdan Sciences Economiques

Alain Trannoy

National Center for Scientific Research (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS)

Abstract

Individuals living in a Mirrleesian economy A have outside options consisting in moving to a laissez-faire country while paying migration costs. Three social points of view are distinguished according to the agents whose welfare is to count and type-dependent participation constraints taken into account. The first-best allocations are characterized by a curse of the middle-skilled workers. In the second-best, we extend Mirrlees's and Diamond's formulae when A prevents emigration of its nationals and implement the latter numerically using French data. We then examine for which individuals the participation constraints should be introduced and show that it depends on countervailing incentives.

Keywords: Optimal Tax, Income Tax, Migration, Participation Constraints

JEL Classification: H21, H31, D82, F22

Suggested Citation

Simula, Laurent and Trannoy, Alain, Optimal Linear Income Tax When Highly-Skilled Individuals Vote with Their Feet. FinanzArchiv Public Finance Analysis, September 2006. Available at SSRN: https://ssrn.com/abstract=898340

Laurent Simula (Contact Author)

Ecole des Hautes Etudes en Sciences Sociales (EHESS) ( email )

54, boulevard Raspail
Paris, 75006
France

HOME PAGE: http://www.ehess.fr

Research Group in Quantitative Economics of Aix-Marseilles (GREQAM) ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

Paris Jourdan Sciences Economiques ( email )

48, BD Jourdan
75014 Paris
France

Alain Trannoy

National Center for Scientific Research (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) ( email )

54, boulevard Raspail
Paris, 75006
France

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