Education, redistribution and the threat of brain drain
- First Online:
- Cite this article as:
- Haupt, A. & Janeba, E. Int Tax Public Finance (2009) 16: 1. doi:10.1007/s10797-007-9054-8
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.