It is often argued that tax competition may lead to a ‘race to the bottom’. This result may indeed hold in the case of factor mobility (such as capital). However, in this paper we emphasize the unique feature of labor migration, that may nullify the’race to the bottom’ hypothesis. Labor...

The aging of the population shakes the public finance of pay-as-you-go social security systems. We develop a political-economy framework in which this demographic change leads to the downsizing of the social security system, and, as a consequence, to the emergence of supplemental individual...

Migration of young workers (as distinct from retirees), even when driven in by the generosity of the welfare state, slows down the trend of increasing dependency ratio. But, even though low-skill migration improves the dependency ratio, it nevertheless burdens the welfare state. Recent studies...

The intratemporal redistribution feature of the welfare state makes it an attractive destination for immigrants, particularly for low-skill immigrants. George Borjas (1994) reports that foreign-born households in the United States accounted for 10 percent of households receiving public...

We develop a simple information-based model of FDI flows. On the one hand, the relative abundance of “intangible" capital in specialized industries in the source countries, which presumably generates expertise in screening investment projects in the host countries, enhances FDI flows. On the...

We model an overlapping-generations economy with two skill levels: skilled and unskilled. The welfare-state is modeled simply by a proportional tax on labor income to finance a demogrant in a balanced-budget manner. Therefore, some (the unskilled workers and old retirees) are net beneficiaries...

In this paper we extend the zero tax at the top result obtained in the closed economy case with bounded skill distributions for the case of unbounded skill distributions in the presence of international labor mobility and tax competition. We show that in the equilibrium for the tax competition...

Minimum wage legislation is a standard policy tool in most countries. However, the overall merits of minimum wage are controversial due to its potential adverse effects on unemployment. In this paper we construct a simple model in which minimum wage plays an important re-distributive role,...

We illustrate a novel informational feature of education, which the government may utilize. Discretionary decisions of individuals to acquire education may serve as an additional signal (to earned labor income) on the underlying unobserved innate earning ability, thereby mitigating the...

We consider the notion of welfare stigma à la Besley and Coate (1992b). This stigma is attributed to welfare claimants by society when they are perceived as undeserving in the sense that they falsely claim to be eligible for welfare benefits. However, due to imperfect information, this stigma...