Tax Incentives for Migrants with Mid-level Earnings: Evidence from the Netherlands

We examine how income taxes affect international mobility and wages. We study a Dutch preferential tax scheme for migrants, which introduced an income threshold for eligibility in 2012. The threshold is low relative to similar schemes in other countries, thereby offering eligibility to migrants with mid-level earnings. We find migration more than doubles closely above the income threshold, while migration below the threshold remains unchanged. These effects appear to be driven by additional migration, while wage bargaining responses are limited. We estimate a migration elasticity ranging from 1.6 to 2.7, somewhat higher than most studies on high-income migrants have found.