Taxation and International Migration of Superstars: Evidence from the European Football Market
This paper analyzes the effects of top earnings tax rates on the international migration of football players in Europe. We construct a panel dataset of top earnings tax rates, football player careers, and club performances in the first leagues of 14 Western European countries since 1985. 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 develop a multinomial regression framework to exploit all sources of tax variation simultaneously. Our results show that (i) the overall location responses to the net-of-tax rate is positive and large, with an elasticity of the number of foreign players to the net-of-tax rate around one (and an elasticity of the number of domestic players around .15), (ii) location elasticities are even larger 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. Those results can be rationalized in a simple model of migration and taxation with rigid labor demand.
We would like to thank Raj Chetty, Caroline Hoxby, Lawrence Katz, Wojciech Kopczuk, Claus Kreiner, Thomas Piketty, James Poterba, Guttorm Schjelderup, Dan Silverman, Joel Slemrod, three anonymous referees, and numerous seminar participants for helpful comments and discussions. We thank Jori Pinje for sharing the individual football earnings data he collected for his Ph.D. research. We are also grateful to Filip Rozsypal, Ben Eisenpress and Emily Tian for outstanding research assistance. Financial support from the Center for Equitable Growth at UC Berkeley, the European Tax Policy Forum, and NSF Grant SES-0850631 is gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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Henrik Jacobsen Kleven & Camille Landais & Emmanuel Saez, 2013. "Taxation and International Migration of Superstars: Evidence from the European Football Market," American Economic Review, American Economic Association, vol. 103(5), pages 1892-1924, August. citation courtesy of