On redistributive taxation under the threat of high-skill emigration

The increasing international mobility of high-skill individuals is often seen as posing a threat to domestic social welfare, by limiting the ability of governments to tax these individuals and redistribute to the poor. In this note, we examine a simple dynamic nonlinear income tax model without commitment. In this setting, it is shown that the threat of emigration by high-skill individuals facilitates redistribution and increases social welfare in the short run, and has no e¤ect on social welfare over the long run. Keywords: nonlinear taxation; migration; commitment. JEL Classi…cations: H21; H24; F22. Department of Economics and Related Studies, University of York, Heslington, York, YO10 5DD, U.K. E-mail: [email protected].