Taxation and Migration: Evidence and Policy Implications
AbstractIn this article, we review a growing empirical literature on the effects of personal taxation on the geographic mobility of people and discuss its policy implications. We start by laying out the empirical challenges that prevented progress in this area and then discuss how recent work has made use of new data sources and quasi-experimental approaches to credibly estimate migration responses. This body of work has shown that certain segments of the labor market, especially high-income workers and professions with little location-specific human capital, may be quite responsive to taxes in their location decisions. When considering the implications for tax policy design, we distinguish between uncoordinated and coordinated tax policy. We highlight the importance of recognizing that mobility elasticities are not exogenous, structural parameters. They can vary greatly depending on the population being analyzed, the size of the tax jurisdiction, the extent of tax policy coordination, and a range of non-tax policies. While migration responses add to the efficiency costs of redistributing income, we caution against over-using the recent evidence of (sizeable) mobility responses to taxes as an argument for less redistribution in a globalized world.
CitationKleven, Henrik, Camille Landais, Mathilde Muñoz, and Stefanie Stantcheva. 2020. "Taxation and Migration: Evidence and Policy Implications." Journal of Economic Perspectives, 34 (2): 119-42. DOI: 10.1257/jep.34.2.119
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H71 State and Local Taxation, Subsidies, and Revenue
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- H87 International Fiscal Issues; International Public Goods