We would like to thank Oscar Amerighi, Mihir Desai, Clemens Fuest, Andreas Haufler, Rainer Niemann and a referee for helpful comments on an earlier draft. We gratefully acknowledge financial support from the Austrian Science Fund (FWF) through grant number P17713-G05.
The Influence of Labour Taxes on the Migration of Skilled Workers
Article first published online: 25 AUG 2009
© 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd
The World Economy
Special Issue: EUROPE SPECIAL ISSUE -- TAXATION AND THE GLOBALISATION PROCESS
Volume 32, Issue 9, pages 1365–1379, September 2009
How to Cite
Egger, P. and Radulescu, D. M. (2009), The Influence of Labour Taxes on the Migration of Skilled Workers. World Economy, 32: 1365–1379. doi: 10.1111/j.1467-9701.2009.01213.x
- Issue published online: 25 AUG 2009
- Article first published online: 25 AUG 2009
This paper investigates empirically the role of taxes on labour for the stock of expatriates and the migration flows of skilled workers. Given the increasing mobility of labour, especially of high-skilled people and expatriates, it is interesting to see to what extent labour income taxes and social security contributions determine migration flows. We collect data on personal income tax profiles for 49 economies and the year 2002. In particular, we determine the component of labour taxes which is borne by employers and that which is borne by employees, following the OECD's Taxing Wages Approach. For the latter, we calculate the progressivity of personal income tax rates between the average wage and five times the average wage. This may be interpreted as the tax progression which is relevant for well-paid workers. Then, we use the personal income tax variables to estimate their effect on bilateral stocks of expatriates into OECD countries and the migration of skilled workers into these countries. Personal income tax rates turn out to have a robust negative effect on cross-border flows of skilled workers in the OECD.