International Tax and Public Finance

, Volume 22, Issue 5, pp 760–776 | Cite as

International tax competition: zero tax rate at the top re-established

  • Tomer Blumkin
  • Efraim SadkaEmail author
  • Yotam Shem-Tov


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 game, the optimal marginal income tax rate converges to zero as the income level tends to infinity. We further show in simulations that the zero-marginal tax result is not a local property: over a substantial range at the higher end of the income distribution, the optimal tax is approximately given by a lump-sum tax set at its Laffer rate. We further show that the range in which the optimal marginal tax is approximately set to zero is widening as migration costs decrease.


Tax competition Migration Zero-marginal tax at the top 

JEL Classification

D6 H2 H5 

Supplementary material

10797_2014_9335_MOESM1_ESM.docx (1.5 mb)
ESM 1 (DOCX 1,579 kb)


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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Tomer Blumkin
    • 1
    • 2
    • 3
  • Efraim Sadka
    • 2
    • 3
    • 4
    Email author
  • Yotam Shem-Tov
    • 5
  1. 1.Department of EconomicsBen-Gurion UniversityBeer-ShebaIsrael
  2. 2.CesIfoMunichGermany
  3. 3.IZABonnGermany
  4. 4.The Eitan Berglas School of EconomicsTel Aviv UniversityTel-AvivIsrael
  5. 5.Department of EconomicsUC BerkeleyBerkeleyUSA

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