Working Paper: NBER ID: w21024
Authors: Ufuk Akcigit; Salom Baslandze; Stefanie Stantcheva
Abstract: This paper studies the effect of top tax rates on inventors' international mobility since 1977. We put special emphasis on “superstar” inventors, those with the most abundant and most valuable patents. We use panel data on inventors from the United States and European Patent Offices to track inventors' locations over time and combine it with international effective top tax rate data. We construct a detailed set of proxies for inventors' counterfactual incomes in each possible destination country including, among others, measures of patent quality and technological fit with each potential destination. Exploiting the differential impact of changes in the top tax rate on inventors of different qualities, we find that superstar top 1% inventors are significantly affected by top tax rates when deciding where to locate. The elasticity to the net-of-tax rate of the number of domestic superstar inventors is relatively small, around 0.03, while the elasticity of the number of foreign superstar inventors is around 1. Inventors who work in multinational companies are more likely to take advantage of tax differentials. On the other hand, if the company of an inventor has a higher share of its research activity in a given country, the inventor is less sensitive to the tax rate in that country.
Keywords: Taxation; International Mobility; Inventors; Top Tax Rates
JEL Codes: F22; H21; H24; H31; J61; O33; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 1986 US Tax Reform Act (H20) | number of foreign top 1 inventors in the US (F22) |
| Danish tax reform of 1992 (H29) | inflows of foreign inventors (F21) |
| top marginal income tax rate (H29) | elasticity of migration of domestic superstar inventors (J61) |
| top marginal income tax rate (H29) | elasticity of migration of foreign superstar inventors (F22) |
| top marginal income tax rate (H29) | migration decisions of inventors employed in multinational companies (F22) |
| top marginal income tax rate (H29) | migration decisions of inventors in research-intensive companies (J61) |