18.12.2017

How Responsive Are Inventors to Local Income Taxes? Evidence From Residential Location Choices in Switzerland

Main event: Lectures "WIFO-Extern"
Persons: Rainer Widmann
Language: Englisch
Österreichisches Institut für Wirtschaftsforschung
This paper studies the relationship between personal income tax rates and the residential location choice of inventors in Switzerland. Exploiting sharp differences in tax rates across state borders, I find an elasticity of the number of inventors in a municipality with respect to the net-of-tax rate (after-tax income) of around 5.5. This estimate is considerably higher than the elasticities found in previous studies. Tax policies at the local level, where inventors may take advantage of tax differences by relocating over short distances, may have particularly strong effects on the location choice. In addition, I compare the effect of income tax rates to the effect of non-pecuniary amenities, such as commuting distance, and document the relevance of political attitudes in municipalities for the residential location choice of inventors.