Working Paper: CEPR ID: DP8134
Authors: Henrik Kleven; Camille Landais; Emmanuel Saez
Abstract: This paper analyzes the effects of top earnings tax rates on the international migration of top football players in Europe. We construct a panel data set of top earnings tax rates, football player careers, and club performances in the first leagues of 14 European countries since 1980. We identify the effects of top earnings tax rates on migration using a number of tax and institutional changes: (a) the 1995 Bosman ruling which liberalized the European football market, (b) top tax rate reforms within countries, and (c) special tax schemes offering preferential tax rates to immigrant football players. We start by presenting reduced-form graphical evidence showing large and compelling migration responses to country-specific tax reforms and labor market regulation. We then set out a theoretical model of taxation and migration, which is structurally estimated using all sources of tax variation simultaneously. Our results show that (i) the overall location elasticity with respect to the net-of-tax rate is positive and large, (ii) location elasticities are extremely large at the top of the ability distribution but negative at the bottom due to ability sorting effects, and (iii) cross-tax effects of foreign players on domestic players (and vice versa) are negative and quite strong due to displacement effects. Finally, we estimate tax revenue maximizing rates and draw policy conclusions.
Keywords: football; migration; superstars; taxation
JEL Codes: H2; H3; J2; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher net-of-tax rates (H29) | more players (Z22) |
| high-ability players (Z22) | migrate to lower-tax countries (H26) |
| low-ability players (Z22) | remain in higher-tax countries (H87) |
| foreign players' presence (F29) | negatively impacts domestic players' migration decisions (F22) |
| top earnings tax rates (H21) | migration of football players (Z22) |