NBER

Ufuk Akcigit, Salomé Baslandze, Stefanie Stantcheva

Bibliographic Information

NBER Working Paper No. 21024
Issued in March 2015, Revised in October 2015
NBER Program(s):LS, PE, PR

A non-technical summary of this paper is available in the June 2015 NBER Digest.  You can sign up to receive the NBER Digest by email.

Published: Ufuk Akcigit & Salomé Baslandze & Stefanie Stantcheva, 2016. "Taxation and the International Mobility of Inventors," American Economic Review, American Economic Association, vol. 106(10), pages 2930-2981, October. citation courtesy of

This paper was revised on October 26, 2015

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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.

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