In this paper we employ a tax-competition model to demonstrate that in the presence of migration the re-distributive advantage of a non-linear income tax system over a linear (flat) one is significantly mitigated relative to the autarky (no-migration) equilibrium. When migration threats are...

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...

In this paper, we challenge the conventional wisdom that due to the negative correlation between family size and earning ability, family size can be used as a 'tagging' device, and calls for subsidizing children (via child allowances) to enhance egalitarian objectives. We show that the case for...

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...

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...

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...

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...