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Should I stay or should I go?: the economic incentives of intergenerational taxes and transfers in Uruguay

Author

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  • Florencia Amábile

    (Universidad de la República)

  • Rómulo A. Chumacero

    (University of Chile)

Abstract

This paper develops a business cycle model of a small open economy with heterogeneous agents and international labor mobility, with a particular focus on taxes and transfer policies. Migration occurs as a result of the maximization problem of families and, combined with remittances, makes consumption smoothing possible. This paper shows how transfers from the government to young people and elders, funded with distortionary taxes, prompt the migration of people of working age and, among them, some of the most skilled members of the economy. The model is calibrated to match labor mobility in various age–skill groups and aggregate cycle dynamics of the Uruguayan economy, including government transfers and migration volatility.

Suggested Citation

  • Florencia Amábile & Rómulo A. Chumacero, 2023. "Should I stay or should I go?: the economic incentives of intergenerational taxes and transfers in Uruguay," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(2), pages 493-524, April.
    • Handle: RePEc:kap:itaxpf:v:30:y:2023:i:2:d:10.1007_s10797-021-09723-9
    DOI: 10.1007/s10797-021-09723-9
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    More about this item

    Keywords

    Uruguay; Migration; Heterogeneous agents; DSGE; Transfers;
    All these keywords.

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development

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