Brain drain is a key policy concern for many countries. In this paper we study whether tax incentives are an effective policy to attract high-skilled expatriates back to their home country, exploiting a generous income tax break for Italian returnees. Using administrative data and a Triple Differences design, we find that eligible individuals are 27\% more likely to return to Italy. Additionally, we uncover significant effects throughout the wage distribution, revealing that tax-induced migration is a broad phenomenon beyond top earners. A cost-benefit analysis shows that the tax scheme can pay for itself by targeting young high-skilled individuals.

Top earners contribute to a large share of economic output and fiscal revenue. While there is evidence of migration responses to top tax rates, two important questions remain. First, what the extent of the phenomenon is outside of specific groups and second, how much of a constraint it poses for policy making. We use UK administrative data and leverage two major top tax rate reforms in France and the UK to evaluate how much top earners respond to general tax reforms by migrating. We observe a significant response, but it is concentrated among those who were the most likely to leave in the first place. We turn structural estimation to estimate the long term impact of tax changes on the stock of migrants among UK top earners and find that even modest responses can lead to significant stock changes in the long run.

This study investigates the impact of tax-induced reallocation of innovative activity on local economies. Leveraging US state-level R&D tax credit changes over time, we analyze the reallocation of patents and inventors within firm networks as proxies for shifts in innovative activities. We find a 0.8 percent decrease in successful patent applications at one firm location in response to a 1 percentage point increase in the average R&D tax credit rate establishments within the same firm network experience in other states. The decline in innovative activity also generates spillover effects on surrounding firms. Our results suggest a 0.8 percent decrease in patenting activity of local businesses without a nexus in other states if multi-state firms in their commuting zone are affected by changes in out-of-state R&D tax credits. Our findings highlight the broader implications of tax competition for innovation and overall welfare, offering insights for optimal tax policy design.

We use a novel rich-list data set to estimate the sensitivity of the location choice of super-rich foreigners to a special tax regime, under which wealthy foreigners are taxed on their living expenses, rather than their true income and wealth. We are the first to evaluate this controversial Swiss policy, and show that when some Swiss cantons abolished this practice, their stock of super-rich foreigners dropped by 43% as a consequence. We find no response for the Swiss super-rich, who were unaffected by the policy change.