Emigration and Entrepreneurial Drain (with Massimo Anelli, Gaetano Basso and Giovanni Peri)

American Economic Journal: Applied Economics, Vol. 15, No. 2, April 2023, Pp. 218-52

Emigration of young, highly educated individuals may deprive origin countries of entrepreneurs. We identify exogenous variation in emigration from Italy by interacting past diaspora networks and current economic pull factors in destination countries. We find that a one standard deviation increase in the emigration rate generates a 4.8% decline in firms creation in the local labor market of origin. An accounting exercise decomposes the estimated effect into four components: subtraction of individuals with average entrepreneurial propensity, selection of young and college-educated among emigrants, negative spillovers on firm creation and selection on unobservable characteristics positively associated with entrepreneurship.

In the media:, L'Espresso, Il Sole 24 Ore

Working papers

Can Tax Incentives Bring Brains Back? Returnees Tax Schemes and High-Skilled Migration in Italy (with Jacopo Bassetto)

CESifo Working Paper No. 10271    [New version coming soon!]

Brain drain is a growing concern for many countries experiencing large emigration rates of their highly educated citizens. While several European countries have designed preferential tax schemes to attract high-skilled individuals, there is limited empirical evidence on the effectiveness of fiscal incentives in a context of brain drain, and on migration responses beyond top earners. In this paper we investigate the effects of the Italian 2010 tax scheme “Controesodo”, which granted a generous income tax exemption to young high-skilled expatriates who relocate to Italy. Eligibility requires a college degree as well as being born in 1969 or later, which creates suitable quasi-experimental conditions to identify the effect of tax incentives. Using a Triple Difference design and administrative data on return migration, we find that eligible individuals are 27% more likely to move back to Italy post-reform. Additionally, using social security data from the main origin country of Italian returnees (Germany), we uncover significant effects throughout the wage distribution, suggesting that mobility in response to tax incentives is a broad phenomenon not limited to top earners. A cost-benefit analysis reveals that the direct fiscal impact of the reform – a lower bound of the total effect in the presence of human capital externalities – is marginally positive, by virtue of the tax scheme targeting young high-skilled individuals.

In the media:, L'Opinion, Domani, Il Foglio, Radio 1, Il Post, Radio 24

Work in progress

Firm-level Effects of Tax-Induced High-Skilled Migration (with Jacopo Bassetto and Giovanni Peri) 

[Awarded with the 2023 Early Career Research Award (Upjohn Institute)]

We study the effects of tax-induced immigration on receiving firms. In 2010, Italy introduced a preferential tax scheme for high-skilled immigrants, which lowered income taxes on high-skilled expatriates and foreigners relocating to Italy by two thirds. Leveraging pre-existing variation in firms’ exposure to the eligible workers combined with the introduction of the tax schemes, we estimate the effects of hiring high-skilled returnees on productivity, wages, employment, and other firm-level outcomes using Italian Social Security data.

Do Local Tax Differentials Affect Internal Migration?  (draft available upon request)

There is increasing evidence on the geographical mobility of high-earners in response to tax differentials, both across and within countries. However, an open question is the extent to which these mobility responses reflect a true movement of human capital or merely a relocation of tax bases for fiscal purposes. In this paper I study internal migration between Italian municipalities in response to changes in local tax differentials. Using administrative data on bilateral transfers of residence between municipalities, and exploiting variation in local tax rates between location pairs over time, I document three findings. First, changes in local income tax differentials induce transfers of residence towards low-income-tax municipalities, in line with the existing literature. Second, individuals move towards locations with higher property tax rates, after a reform in 2009 exempted primary residences from property taxation, consistent with homeowners transferring their fiscal residence to high-tax municipalities to take advantage of a greater tax exemption. Last, preliminary results using a novel administrative data source, linking individuals' job locations to their residence, point towards no effect of changes in local tax differentials on work- and study-related transfers between municipalities. These findings can inform policymakers to what extent raising local taxes results in losing human capital, in addition to tax revenue.

Football and Anti-Immigration Sentiment: Evidence from the FIFA World Cup (with Thiago de Lucena)  [Draft coming soon!]

Do major sport events influence natives' attitudes towards immigration? We investigate whether the performance of national football teams with a high immigrant presence affects natives' sentiment towards immigration, as measured in the Eurobarometer data. Using a triple difference design, we find that respondents in countries with a high immigrant share in their national team, which over-performed in the FIFA World Cup, show an improvement in their sentiment towards immigration from outside the EU. Comparing respondents interviewed shortly before vs. after World Cup qualifier matches, we also show that victories are associated with more positive feelings toward immigration. In both cases, we do not observe any increase in proxies for national pride or attitudes towards EU-immigration.

Political Polarization, US-Mexico Migration Networks and Migrant Selection (with Maria Esther Caballero and Giovanni Peri)

In this paper, we study how changes in anti-immigrant sentiment affected the inflow of Mexican-born migrants in the period after the U.S. presidential election of 2016. We use and validate the matricula consular data to construct proxies for the 2008-2019 yearly inflows of Mexican-born individuals from each Mexican municipio to each U.S. county and shocks to the local strength of the pro-Trump republican party vote to measure changes in anti-immigrant sentiment. Then, we establish how the increase in anti-immigration sentiment affected the inflow of Mexican-born migrants to the U.S., using a bilateral panel of flows. Finally, we analyze whether the political shocks diverted Mexican-born migrants from one origin to new or alternative destination counties, and to what extent it contributes to explaining the evolution of migrant networks.