This article presents a simple model in which a part of a heterogeneous labor force may find it optimal to flee a state (or a country) negatively affected by an adverse economic shock. Crucially, a non-benevolent government, choosing the tax rate to maximize public revenue, has to take workers’ ”participation constraint” into consideration. It is found that a negative shock lasting for a prolonged period might induce higher or lower tax rates, depending on how severe migration costs are.
migration; taxation; shocks