Tax Incentives for High Skilled Migrants: Evidence from a Preferential Tax Scheme in the Netherlands

Lisa Marie Timm (), Massimo Giuliodori and Paul Muller
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Lisa Marie Timm: University of Amsterdam
Massimo Giuliodori: University of Amsterdam

No 15582, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper examines to what extent an income tax exemption affects international mobility and wages of skilled immigrants. We study a preferential tax scheme for foreigners in the Netherlands, which introduced an income threshold for eligibility in 2012 and covers a large share of the migrant income distribution. By using detailed administrative data in a difference-in-differences setup, we find that the number of migrants in the income range closely above the threshold more than doubles, whereas there is little empirical support for a decrease of migration below the threshold. Our results indicate that these effects are driven mainly by additional migration, while wage bargaining responses are fairly limited. We conclude that the preferential tax scheme is highly effective in attracting more skilled migrants.

Keywords: wage bargaining; income tax benefits; international migration; bunching (search for similar items in EconPapers)
JEL-codes: F22 H24 H31 J61 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2022-09
New Economics Papers: this item is included in nep-eur, nep-int, nep-lab, nep-pbe and nep-ure
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Citations:

Forthcoming - forthcoming as 'Tax Incentives for Migrants With Mid-Level Earnings: Evidence From the Netherlands' in: American Economic Journal: Applied Economics

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Working Paper: Tax incentives for high skilled migrants: evidence from a preferential tax scheme in the Netherlands (2022)
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