Taxation and the International Mobility of Inventors

According to World Intellectual Property Organization data, inventors are highly mobile geographically with a migration rate of around 8 percent. But what determines their patterns of migration, and, in particular, how does tax policy affect migration? The fear of a “brain drain” and the exodus of economically valuable agents in response to higher taxation has led to a vivid public debate regarding the taxation of high-income people.

We find that the superstar top 1 percent inventors are significantly affected by top tax rates when choosing where to locate. An additional relevant consideration is that inventors may have strong spillover effects on their geographically close peers, making it even more important to attract and retain them domestically.

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