International Tax and Public Finance

, Volume 16, Issue 1, pp 1–24

Education, redistribution and the threat of brain drain

Article

DOI: 10.1007/s10797-007-9054-8

Cite this article as:
Haupt, A. & Janeba, E. Int Tax Public Finance (2009) 16: 1. doi:10.1007/s10797-007-9054-8

Abstract

We analyze how the threat of brain drain affects redistributive government policies and net incomes of skilled and unskilled workers. Our analysis is based on a model that captures human capital formation, credit market constraints and tax avoidance activities. We characterize how decreasing migration costs for skilled workers shape the time-consistent policies of a government that wants to shift resources from skilled to unskilled workers. Starting from a closed economy, declining migration costs first increase net incomes of both skilled and unskilled workers, and then decrease net incomes of all households. There is a conflict of interest only for very low migration costs. In this case, skilled workers start to benefit from a further rise in their mobility, but now at the expense of the unskilled labor force.

Keywords

Brain drain Human capital Redistribution Time-consistent policy Credit market imperfections 

JEL

F22 H2 I2 

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Plymouth Business SchoolUniversity of PlymouthPlymouthUK
  2. 2.Department of EconomicsUniversity of MannheimMannheimGermany

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