Migration, taxation and educational incentives

Globalization may change migration incentives, and therefore many countries are concerned about preserving their investments in human capital. With lower barriers to migration it is possible to change educational subsidies and taxation to prevent emigration of skilled workers and still maintain educational incentives so that the human capital basis of the labour force remains unaffected. It is shown that this requires a lowering of taxes on (skilled) mobile workers and reduced educational subsidies, and (provided that initial migration is low) a higher taxation of (unskilled) less mobile workers, i.e. the policy shifts has detrimental distributional consequences for unskilled relative to skilled workers.