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ESSAYS IN MIGRATION AND TAXATION

Author
Kingi, Hautahi Rawiri
Abstract
Exploration is in our nature. Throughout human history, migration has been
vital to our survival, and continues to be central to our political discussions and
economic fortunes. This dissertation contributes to an understanding of the effects
of migration on welfare and taxation.
In chapter 1, I examine the welfare effects of immigration on United States
workers. I build a dynamic search and matching model in which immigrants and
natives differ according to their outside options, separation rates, wealth holdings
and skill composition. Immigration affects native-born welfare by i) altering the
skill composition of the labor force, ii) lowering the expected hiring cost of firms,
and iii) altering the rate of return on wealth. I demonstrate that the transition
period, during which the economy adjusts to immigration, involves both higher
returns to wealth and inferior labor market conditions in comparison to the long
run steady state. Accounting for transition dynamics therefore shifts the welfare
effects of immigration in favor of wealthy households at the expense of workers.
In chapter 2, I shift the discussion from the movement of labor across national
boundaries to the internal movement of labor from rural to urban locations. I analyze
the welfare effects of a policy of modern sector enlargement (MSENL), and
a policy of increasing the efficiency of on-the-job search from the urban informal
sector (IEOS) in a generalized Harris-Todaro model. I show that MSENL causes a Lorenz worsening of the income distribution and IEOS causes a Lorenz improvement.
In a rare direct application of the Atkinson theorem, I conclude that MSENL
decreases social welfare and IEOS increases social welfare for all anonymous, increasing
and Schur-concave social welfare functions.
In chapter 3, I return to international migration by investigating its effect on
the ability of governments to raise tax revenue. I construct Laffer curves using
a static two country neoclassical model with international labor mobility. I show
that international migration i) shifts the peak of the Laffer curve to the left, and ii)
is quantitatively more important than the labor supply elasticity in determining
the shape and position of the Laffer curve. Asimple calibration reveals that almost
every country in the EU-14 is currently located on the “slippery slope” portion of
both the labor tax and capital tax Laffer curves.In chapter 4, I depart from the theme of migration while retaining the focus on
the tax system. Kyle Rozema and I analyze the effect of tax expenditures on the stabilizing power of the tax system. We propose a microsimulation strategy which exploits links that we identify between automatic stabilizers, tax expenditures,
and effective marginal tax rates. Using the Survey of Consumer Finances from
1988 to 2009, we estimate that, on average, the Mortgage Interest Deduction and the Charitable Contributions Deduction increased the sensitivity of consumption to income fluctuations from a baseline of 0.14 by 1.13% and 0.97%, respectively.
Date Issued
2017-05-30Subject
Economics; labor markets; macroeconomics; migration; welfare
Committee Chair
Mertens, Karel Abowd, John Maron
Committee Member
Huckfeldt, Christopher Kiehl
Degree Discipline
Economics
Degree Name
Ph. D., Economics
Degree Level
Doctor of Philosophy
Type
dissertation or thesis