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The Influence of Labour Taxes on the Migration of Skilled Workers

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  • Peter Egger
  • Doina Maria Radulescu

Abstract

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.

Suggested Citation

  • Peter Egger & Doina Maria Radulescu, 2009. "The Influence of Labour Taxes on the Migration of Skilled Workers," The World Economy, Wiley Blackwell, vol. 32(9), pages 1365-1379, September.
    • Handle: RePEc:bla:worlde:v:32:y:2009:i:9:p:1365-1379
    DOI: 10.1111/j.1467-9701.2009.01213.x
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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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