CEF.UP – ECO Seminar/Webinar

Tuesday – April 11^th, 2023, at 1:00 p.m. | Room 305| Online

“Treasure islands, treasure jobs? Exploring the wage premium in Madeira’s Free Trade Zone”

João Pereira dos Santos – ISEG

Abstract:

“International corporate tax avoidance involving tax havens and other low-tax jurisdictions has been shown to have important distributional repercussions for high-tax countries. In contrast, the implications of those activities for zero/low-tax jurisdictions are largely unexplored likely due to data opacity. This paper is a first step to filling that gap. We draw on a rich administrative dataset with information about the workers employed by firms in the Madeira’s Free Trade Zone – a scheme operating in the island of Madeira that offers a highly advantageous corporate tax regime – and investigate to what extent those workers benefit from a wage premium. We find evidence of a positive wage premium for workers with a high labor force attachment, suggesting a potential role for rent sharing and/or for a premium on activities that may be perceived as less moral and ethical. The effect is concentrated on more educated individuals. We do not find a positive premium for movers.”