Essays in Nonlinear Labor Income Taxation with Tax-Driven Migrations.
Degree: PhD, Economics, 2018, Texas A&M University
This dissertation includes two essays in nonlinear labor income taxation with tax-driven migrations. In the first essay, we study optimal nonlinear income taxation in an open economy with migration possibilities and social comparisons. Recent evidence suggests that globalization has not just reduced the barriers to international labor mobility but also induced more cross-country comparisons. In an open economy with tax-driven migrations and consumption externalities motivated by altruism or jealousy, we derive an optimal tax formula that subsumes existing ones obtained under maximin social objective and additively separable utility, and identify the sign of second-best marginal tax rates for all skill levels. We establish thresholds of the elasticity and level of migration to determine when relativity and inequality are complementary (or substitutive) in shaping the optimal top tax rates. These thresholds are in general different between altruism-type and jealousy-type relativity. Surprisingly, there exist reasonable combinations of relativity, mobility and inequality such that tax competition results in higher equilibrium top tax rates than proposed in autarky. Also, under both Nash and Stackelberg tax competition, we have the following numerical finding by plugging realistic parameter values in our tax formula. If the migration probability of top-income workers is around 50%, then the country facing labor inflow (respectively, outflow) of these types of workers implements around 10% lower (respectively, higher) top tax rates than suggested by the autarky equilibrium which does not allow for migration possibilities.
In the second essay, we study majority voting over selfishly optimal nonlinear income tax schedules proposed by a continuum of workers who can migrate between two competing jurisdictions at the expense of some migration cost. Both skill and migration cost are the private information of each worker. Assuming quasilinear-in-consumption preferences, the tax schedule proposed by the median skill type is the Condorcet winner that redistributes incomes from the rich and poor toward the middle. While it features negative marginal tax rates for low skills, it features positive marginal tax rates for high skills who have elasticities of migration smaller than a threshold. In a comparison with the autarky economy, we establish the skill-dependent threshold of migration elasticity for all types of workers. If their migration elasticities are higher than their respective threshold, then migrations induce lower marginal tax rates than does autarky; otherwise migrations induce higher marginal tax rates for the jurisdiction facing net labor inflow in low skills while net labor outflow in high skills. Counterfactual simulations using empirical parameter estimates show that eliminating migrations in the U.S. would generate top tax rates over 20% higher than the 42.5% that was actually implemented.
Advisors/Committee Members: Tian, Guoqiang (advisor), Jansen, Dennis W. (committee member), Zhang, Yuzhe (committee member), Li, Quan (committee member).
Subjects/Keywords: Relative consumption; Income inequality; Maximin; Optimal income taxation; Tax competition; Migration; Redistributive taxation; Nonlinear income tax; Majority voting; Median voter
This dissertation studies redistributive labor income taxation… …follow the mechanism design approach
and aim to design redistributive-taxation policies… …government budget constraint.
In the first essay1 , we study redistributive taxation policies in an… …geographic mobility affects the design of redistributive taxation, the
literature (see, e.g… …would the schedule of redistributive taxation look like when
workers can vote both in the…
to Zotero / EndNote / Reference
APA (6th Edition):
Dai, D. (2018). Essays in Nonlinear Labor Income Taxation with Tax-Driven Migrations. (Doctoral Dissertation). Texas A&M University. Retrieved from http://hdl.handle.net/1969.1/173527
Chicago Manual of Style (16th Edition):
Dai, Darong. “Essays in Nonlinear Labor Income Taxation with Tax-Driven Migrations.” 2018. Doctoral Dissertation, Texas A&M University. Accessed August 03, 2020.
MLA Handbook (7th Edition):
Dai, Darong. “Essays in Nonlinear Labor Income Taxation with Tax-Driven Migrations.” 2018. Web. 03 Aug 2020.
Dai D. Essays in Nonlinear Labor Income Taxation with Tax-Driven Migrations. [Internet] [Doctoral dissertation]. Texas A&M University; 2018. [cited 2020 Aug 03].
Available from: http://hdl.handle.net/1969.1/173527.
Council of Science Editors:
Dai D. Essays in Nonlinear Labor Income Taxation with Tax-Driven Migrations. [Doctoral Dissertation]. Texas A&M University; 2018. Available from: http://hdl.handle.net/1969.1/173527