Resource title

Artificial time inconsistency as a remedy for the race to the bottom

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Resource description

A long-standing concern in the literature has been that household mobility implies a serious threat to the viability of redistributive taxation. This paper considers the effects of deferred integration of migrants into the redistributive system of the target country. In a model of symmetric regions, deferred integration introduces a time consistency problem into governments' tax plans which reduces a region's incentive to undercut other regions' tax rates and can bring tax competition to a halt. On the one hand, rich migrants cease to benefit from the lower tax rate in the current period. On the other hand, the region's promise of a continuing low rate in the future is not credible. We also explore the case where poor recipients of social assistance are mobile while the rich are immobile.

Resource author

Alfons J. Weichenrieder, Oliver Busch

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19101

Resource license

Adapt according to the presented license agreement and reference the original author.