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Tax Incentives for Migrants with Mid-level Earnings: Evidence from the Netherlands

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  • Lisa Marie Timm
  • Massimo Giuliodori
  • Paul Muller

Abstract

We examine how income taxes affect international mobility and wages. We study a Dutch preferential tax scheme for migrants, which introduced an income threshold for eligibility in 2012. The threshold is low relative to similar schemes in other countries, thereby offering eligibility to migrants with mid-level earnings. We find migration more than doubles closely above the income threshold, while migration below the threshold remains unchanged. These effects appear to be driven by additional migration, while wage bargaining responses are limited. We estimate a migration elasticity ranging from 1.6 to 2.7, somewhat higher than most studies on high-income migrants have found.

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  • Lisa Marie Timm & Massimo Giuliodori & Paul Muller, 2025. "Tax Incentives for Migrants with Mid-level Earnings: Evidence from the Netherlands," American Economic Journal: Applied Economics, American Economic Association, vol. 17(3), pages 42-79, July.
    • Handle: RePEc:aea:aejapp:v:17:y:2025:i:3:p:42-79
    DOI: 10.1257/app.20230438
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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
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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