The Employment and Wage Effects of Tax-Induced Migration
Early Career Research Award
Several countries have preferential tax schemes to attract high-skilled workers from abroad. While these schemes are motivated by the positive productivity effects of tax-induced immigration on receiving countries, due to human capital externalities and agglomeration spillovers (Kerr et al. 2016), there is limited empirical evidence on these spillovers in the context of tax-induced immigration. Further, recent work suggests that high-skilled immigration may crowd-out native employment (Doran, Gelber, and Isen 2022). In this project, we plan to build on Bassetto and Ippedico (2023) and to investigate the effects of tax-induced return migration to Italy on receiving firms, by studying the effects of the 2010 preferential tax scheme, which reduced substantially income taxes on young high-skilled workers returning from abroad. By leveraging pre-existing variation in firms’ exposure to workers eligible for the policy – combined with the introduction of the tax scheme –, and using Italian Social Security data, we will estimate the effects of these high-skilled returnees on productivity, wages, employment and other firm-level and local-level outcomes.