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Immigration, Inequality and Income Taxes

Author

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  • Bächli, Mirjam

    (University of Lausanne)

  • Glitz, Albrecht

    (Universitat Pompeu Fabra)

Abstract

Immigration may affect income inequality not only by changing factor prices but also by inducing policy makers to adjust the prevailing income tax system. We assess the relative importance of these economic and political channels using administrative data from Switzerland where local authorities have a high degree of tax autonomy. We show that immigrant inflows not only raise gross earnings inequality but also reduce the progressivity of local income taxes, further increasing after-tax inequality. Our estimates suggest that around 10 percent of the impact of immigration on the net interquartile and interdecile earnings gaps can be attributed to the political channel.

Suggested Citation

  • Bächli, Mirjam & Glitz, Albrecht, 2024. "Immigration, Inequality and Income Taxes," IZA Discussion Papers 17523, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp17523
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    References listed on IDEAS

    as
    1. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    2. George J. Borjas, 2021. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 9, pages 235-274, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    immigration; income taxes; earnings inequality;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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