Abstract
This paper analyzes the optimal nonlinear schedule of taxes and subsidies on remittances from emigrants. The analysis identifies conditions under which emigrants remitting small amounts of income face positive average and marginal subsidies on their remittances, whereas emigrants remitting relatively large amounts of income face positive marginal taxes. In this way, the tax system improves the distribution of income by indirectly taxing the “brain drain,” while simultaneously encouraging remittances that tend to go to low-income residents.
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