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Taxation and the International Mobility of Inventors

March 15, 2015
By Ufuk Akcigit, Salomé Baslandze, Stefanie Stantcheva

This study, published by the National Bureau of Economic Research, examines the effect of tax rates on inventors’ migration patterns over the past 38 years, especially “superstar” inventors holding the most valuable patents, as measured by data from the

tax documents

This study, published by the National Bureau of Economic Research, examines the effect of tax rates on inventors’ migration patterns over the past 38 years, especially “superstar” inventors holding the most valuable patents, as measured by data from the United States and European Patent Offices.

In their paper, University of Pennsylvania economists Ufuk Akcigit and Salomé Baslandze, and Harvard University economist Stefanie Stantcheva write “inventors seem to be more mobile than the general population, which is consistent with a positively documented relation between skill and mobility.”

“We find that superstar top 1-percent inventors are significantly affected by top tax rates when deciding where to locate. The elasticity of the number of domestic inventors to the net-of-tax rate is relatively small, between 0.04 and 0.06, while the elasticity of the number of foreign inventors is much larger, around 1.3,” they write. “The elasticities to top net-of-tax rates decline as one moves down the quality distribution of inventors. Inventors who work in multinational companies are more likely to take advantage of tax differentials.”