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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/19101
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| Title: | | Artificial time inconsistency as a remedy for the race to the bottom  |
| Authors: | | Weichenrieder, Alfons J. Busch, Oliver |
| Issue Date: | | 2005 |
| Series/Report no.: | | CESifo working papers 1637 |
| Abstract: | | A long-standing concern in the literature has been that household mobility implies a serious threat to the viability of redistributive taxation. This paper considers the effects of deferred integration of migrants into the redistributive system of the target country. In a model of symmetric regions, deferred integration introduces a time consistency problem into governments' tax plans which reduces a region's incentive to undercut other regions' tax rates and can bring tax competition to a halt. On the one hand, rich migrants cease to benefit from the lower tax rate in the current period. On the other hand, the region's promise of a continuing low rate in the future is not credible. We also explore the case where poor recipients of social assistance are mobile while the rich are immobile. |
| Subjects: | | tax competition federalism mobility social assistance time consistency |
| JEL: | | H25 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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