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The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists

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  • Enrico Moretti
  • Daniel J. Wilson

Abstract

We quantify how sensitive is migration by star scientists to changes in personal and business tax differentials across states. We uncover large, stable, and precisely estimated effects of personal and corporate taxes on star scientists' migration patterns. The long-run elasticity of mobility relative to taxes is 1.8 for personal income taxes, 1.9 for state corporate income tax, and —1.7 for the investment tax credit. While there are many other factors that drive when innovative individuals and innovative companies decide to locate, there are enough firms and workers on the margin that state taxes matter.

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  • Enrico Moretti & Daniel J. Wilson, 2017. "The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists," American Economic Review, American Economic Association, vol. 107(7), pages 1858-1903, July.
    • Handle: RePEc:aea:aecrev:v:107:y:2017:i:7:p:1858-1903
    Note: DOI: 10.1257/aer.20150508
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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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