Optimal Tax and Expenditure Policy in the Presence of Emigration: Are Credit Restrictions Important?
2014 (English)In: Indian Growth and Development Review, ISSN 1753-8254, E-ISSN 1753-8262, Vol. 7, no 2, 98-117 p.Article in journal (Refereed) Published
Purpose - Empirical studies have found an 'inverted U-curve' relationship between emigration and per capita income. In this paper, a theoretical underpinning for this phenomenon is presented based on credit restrictions. The implications for tax policy are also analyzed.Design/methodology/approach - Using an intertemporal general equilibrium model, the authors characterize how the presence of an 'inverted U-curve' relationship between emigration and per capita income will influence the optimal tax and expenditure policy in a country where agents have the option to move abroad.Findings - Among the results it is shown that if age dependent taxes are available, the presence of an 'inverted U-curve' provides an incentive to tax young labor harder, but old labor less hard, than otherwise.
Place, publisher, year, edition, pages
Emerald Group Publishing Limited, 2014. Vol. 7, no 2, 98-117 p.
Optimal taxation, labor mobility, intertemporal consumer choice
Research subject Economics
IdentifiersURN: urn:nbn:se:umu:diva-93196DOI: 10.1108/IGDR-09-2012-0040ScopusID: 2-s2.0-84913599099OAI: oai:DiVA.org:umu-93196DiVA: diva2:746368
FunderThe Jan Wallander and Tom Hedelius Foundation