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Migration and tax policy:Evidence from Finnish full population data

Author

Listed:
  • Salla Kalin

    (University of Helsinki)

  • Ilpo Kauppinen

    (VATT Institute for Economic Research)

  • Kaisa Kotakorpi

    (Tampere University)

  • Jukka Pirttilä

    (University of Helsinki and VATT Institute for Economic Research)

Abstract

While evidence on the impact of taxation on the international migration of certain special groups of workers has expanded, evidence on the links between taxes and migration of the general population is extremely limited. We aim to fill this gap by estimating the impact of taxation on the migration decisions of the entire working population in a high-tax source country, Finland. We find that the average domestic elasticity of migration with respect to the domestic tax rate is very small (around 0.001). This holds for various occupational and income groups of interest. We also provide a first empirical implementation of the theoretical results of Lehmann et al. (2014), who show that if a fully nonlinear income tax schedule at the top is used, the key sufficient statistic for the optimal tax is a semi-elasticity of migration. Our estimates indicate that the migration responses increase for top earners, but remain very small, at least up to the top per mille of income earners.

Suggested Citation

  • Salla Kalin & Ilpo Kauppinen & Kaisa Kotakorpi & Jukka Pirttilä, 2022. "Migration and tax policy:Evidence from Finnish full population data," Working Papers 1, Finnish Centre of Excellence in Tax Systems Research.
    • Handle: RePEc:fit:wpaper:1
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    References listed on IDEAS

    as
    1. George J Borjas & Ilpo Kauppinen & Panu Poutvaara, 2019. "Self-selection of Emigrants: Theory and Evidence on Stochastic Dominance in Observable and Unobservable Characteristics," The Economic Journal, Royal Economic Society, vol. 129(617), pages 143-171.
    2. David R. Agrawal & Dirk Foremny, 2019. "Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms," The Review of Economics and Statistics, MIT Press, vol. 101(2), pages 214-232, May.
    3. Etienne Lehmann & Laurent Simula & Alain Trannoy, 2014. "Tax me if you can! Optimal Nonlinear Income Tax Between Competing Governments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1995-2030.
    4. Tomer Blumkin & Efraim Sadka & Yotam Shem-Tov, 2015. "International tax competition: zero tax rate at the top re-established," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(5), pages 760-776, October.
    5. Salla Kalin & Ilpo Kauppinen & Kaisa Kotakorpi & Jukka Pirttilä, 2022. "Migration and tax policy:Evidence from Finnish full population data," Working Papers 1, Finnish Centre of Excellence in Tax Systems Research.
    6. Enrico Moretti & Daniel J. Wilson, 2017. "The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists," American Economic Review, American Economic Association, vol. 107(7), pages 1858-1903, July.
    7. Henrik Jacobsen Kleven & Camille Landais & Esben Schultz, 2014. "Migration and Wage Effects of Taxing Top Earners: Evidence from the Foreigners' Tax Scheme in Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 333-378.
    8. repec:oup:qjecon:v:129:y:2013:i:1:p:333-378 is not listed on IDEAS
    9. Schmidheiny, Kurt & Slotwinski, Michaela, 2018. "Tax-induced mobility: Evidence from a foreigners' tax scheme in Switzerland," Journal of Public Economics, Elsevier, vol. 167(C), pages 293-324.
    10. Henrik Jacobsen Kleven & Camille Landais & Emmanuel Saez, 2013. "Taxation and International Migration of Superstars: Evidence from the European Football Market," American Economic Review, American Economic Association, vol. 103(5), pages 1892-1924, August.
    11. Martínez, Isabel Z., 2022. "Mobility responses to the establishment of a residential tax haven: Evidence from Switzerland," Journal of Urban Economics, Elsevier, vol. 129(C).
    12. Katrine Jakobsen & Henrik Kleven & Jonas Kolsrud & Camille Landais & Mathilde Muñoz, 2024. "Taxing Top Wealth: Migration Responses and their Aggregate Economic Implications," NBER Working Papers 32153, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Kalin, Salla & Kauppinen, Ilpo & Kotakorpi, Kaisa & Pirttilä, Jukka, 2022. "Migration and tax policy: Evidence from Finnish full population data," Working Papers 150, VATT Institute for Economic Research.
    2. Ilpo Kauppinen & Panu Poutvaara, 2023. "Decomposing Migrant Self-Selection: Education, Occupation, and Unobserved Abilities," CESifo Working Paper Series 10334, CESifo.

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    More about this item

    Keywords

    taxation; emigration;

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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