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Taxation and International Migration of Superstars: Evidence from the European Football Market

Author

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  • Kleven, Henrik
  • Landais, Camille
  • Saez, Emmanuel

Abstract

This paper analyzes the effects of top earnings tax rates on the international migration of top football players in Europe. We construct a panel data set of top earnings tax rates, football player careers, and club performances in the first leagues of 14 European countries since 1980. We identify the effects of top earnings tax rates on migration using a number of tax and institutional changes: (a) the 1995 Bosman ruling which liberalized the European football market, (b) top tax rate reforms within countries, and (c) special tax schemes offering preferential tax rates to immigrant football players. We start by presenting reduced-form graphical evidence showing large and compelling migration responses to country-specific tax reforms and labor market regulation. We then set out a theoretical model of taxation and migration, which is structurally estimated using all sources of tax variation simultaneously. Our results show that (i) the overall location elasticity with respect to the net-of-tax rate is positive and large, (ii) location elasticities are extremely large at the top of the ability distribution but negative at the bottom due to ability sorting effects, and (iii) cross-tax effects of foreign players on domestic players (and vice versa) are negative and quite strong due to displacement effects. Finally, we estimate tax revenue maximizing rates and draw policy conclusions.

Suggested Citation

  • Kleven, Henrik & Landais, Camille & Saez, Emmanuel, 2010. "Taxation and International Migration of Superstars: Evidence from the European Football Market," CEPR Discussion Papers 8134, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8134
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    References listed on IDEAS

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    1. Cremer, Helmuth & et al, 1996. "Mobility and Redistribution: A Survey," Public Finance = Finances publiques, , vol. 51(3), pages 325-352.
    2. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
    3. Justin M. Ross & Robert R. Dunn, 2007. "The Income Tax Responsiveness Of The Rich: Evidence From Free Agent Major League Baseball All-Stars," Contemporary Economic Policy, Western Economic Association International, vol. 25(4), pages 639-648, October.
    4. Feess, Eberhard & Muehlheusser, Gerd, 2003. "Transfer fee regulations in European football," European Economic Review, Elsevier, vol. 47(4), pages 645-668, August.
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    6. David E. Wildasin, 2005. "Fiscal Competition," Working Papers 2005-05, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
    7. Emmanuel Saez & Manos Matsaganis & Panos Tsakloglou, 2012. "Earnings Determination and Taxes: Evidence From a Cohort-Based Payroll Tax Reform in Greece," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 493-533.
    8. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
    9. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
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    More about this item

    Keywords

    Football; Migration; Superstars; Taxation;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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