Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236674 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9132
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We study the nonlinear taxation of internationally mobile workers in general equilibrium. Contrary to conventional wisdom, in general equilibrium, migration lowers the bottom tax rate but raises the top tax rate, making the optimal tax system more progressive and moving tax rates closer to those in an economy with fixed wages. The intuition is that governments attract high-skilled workers by amplifying pre-tax wage inequality and partly offsetting trickle-down forces from production complementarities. This finding raises doubts about the importance of trickle-down for optimal taxation and offers a novel explanation for why globalization may increase tax progressivity and wage inequality.
Subjects: 
optimal taxation
general equilibrium
trickle-down effects
migration
tax/subsidy competition
JEL: 
H21
H24
H73
F22
R13
Document Type: 
Working Paper
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