Taxes and Job Mobility in the Swedish Labor Market

Based on income growth rates connected with moving and with staying, I determine a decision index and argue that a marginal tax decrease may increase or decrease job mobility . An empirical application shows that the effects of marginal tax reductions on net-of-tax incomes connected with moving and with staying and the effects of these income changes on the probability of moving are such that job mobility actually falls. The results suggest that one could expect the tax reform to have only a minor impact on job mobility rates. A sample of 1 134 individuals from the Level of Living Survey is used and their job changes during 1980 through 1990 are studied.