Working Paper: CEPR ID: DP1342
Authors: Assaf Razin; Chiwa Yuen
Abstract: Using a human-capital-based growth model, we show the essential role of labour mobility and cross-country tax harmonization in equalizing income levels of countries that start off from different initial income positions. Knowledge spillovers cum labour mobility are the driving forces behind the income level equalization process. In the absence of tax harmonization within an economic union, equality of income levels is not achievable. Coordination of educational subsidies necessary for the internalization of knowledge spillovers may or may not be necessary. These considerations constitute the basis for our efficient growth agenda for an economic union such as the European Union.
Keywords: human capital; cross-country income level equality; knowledge spillovers; labour mobility; capital mobility; tax harmonization; education subsidies
JEL Codes: E21; E32; F33; H30; H40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor Mobility (J62) | Income Level Convergence (F62) |
| Knowledge Spillovers (O36) | Income Level Convergence (F62) |
| Tax Harmonization (H26) | Income Level Convergence (F62) |
| Labor Mobility + Knowledge Spillovers (J61) | Growth in Home Country of Migrants (F22) |
| Tax Harmonization (H26) | Growth Rates (O49) |