Article (Scientific journals)
Optimal income taxation and the ability distribution: Implications for migration equilibria
Hamilton, J.; Pestieau, Pierre
2005In International Tax and Public Finance, 12 (1), p. 29-45
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Keywords :
optimal income taxation; tax competition; migration
Abstract :
[en] As recently argued by Diamond (1998), one of the key factors explaining the progressivity of an optimal non-linear income tax is the distribution of productivity among workers. Migration is one source of changes in the productivity distribution. How changes in the population's ability distribution affect optimal income tax schedules has received little attention. Changing the distribution generally affects both the objective function and the government budget constraint. We first consider the comparative statics of the fraction of highly-skilled workers with maximin and maximax welfare functions (so that only the second effect is present) and a quasi-linear utility function. We also present some results for a utilitarian social welfare function. We then study the interaction between mobility and redistributive taxation. We consider mobility by either the skilled or unskilled population under majority voting where governments take the population as fixed. If individuals choose to relocate independently, having identical ability distributions is always a stable equilibrium when the unskilled are the mobile group. However, this is not always the case when the skilled are mobile. If groups of individuals can choose where to locate, having identical ability distributions across regions is only an equilibrium when the mobile type has an overall majority.
Disciplines :
Economic systems & public economics
Author, co-author :
Hamilton, J.
Pestieau, Pierre  ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Economie publique
Language :
English
Title :
Optimal income taxation and the ability distribution: Implications for migration equilibria
Publication date :
January 2005
Journal title :
International Tax and Public Finance
ISSN :
0927-5940
eISSN :
1573-6970
Publisher :
Springer, Dordrecht, Netherlands
Volume :
12
Issue :
1
Pages :
29-45
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBi :
since 06 April 2014

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