1. What features of the EU do you think increase the labor elasticity? With the formation of the European Union (EU), mobility of labor across Europe became quite easy. This is especially true for highly educated Europeans, who often have skills that are useful in many different areas and who may be multilingual.

Despite sharing many policies centrally, countries in the EU are free to set their own income tax rates. As a result, there has been considerable debate on whether countries are using tax rates to lure highly skilled, highly productive people from other countries. Having read this chapter, you should see that the key economic question involves elasticity:

how elastic (responsive) are highly skilled workers to changes in tax rates on their income?