Immigrant Inventors and Local Income Taxes: Evidence from Swiss Municipalities

Abstract

This paper studies the relationship between local personal income tax rates and the attractiveness of municipalities as residential locations for immigrant inventors in Switzerland. Exploiting sharp differences in top income tax rates across state borders, I find an elasticity of the probability that an inventor takes residence in a municipality with respect to the top net-of-tax rate of around 4. Additional evidence suggests that inventors’ residential location choices are consequential for the localization of entrepreneurial activity and local knowledge spillovers.