Thursday, February 3, 2011
& Efraim Sadka
(both of Tel Aviv University, Eitan Berglas School of Economics) have posted Tax Competition and Migration: The Race-to-The-Bottom Hypothesis Revisited
on NBER. Here is the abstract
The literature on tax competition with free capital mobility cites several reasons for the race-to-the-bottom hypothesis in the sense that tax competition may yield significantly lower tax rates than tax coordination. With a fixed (exogenously given) population that can move from one fiscal jurisdiction to another, the Tiebout paradigm suggests that tax competition among these jurisdictions yields an effcient outcome, so that there are no gains from tax coordination. This paper suggests that when a group of host countries faces an upward supply of immigrants, tax competition does not indeed lead to a race to the bottom; competition may lead to higher taxes than coordination.