The effect of the foreigner preferential tax scheme on mobility and wages of high-skilled immigrants in the Netherlands

This study analyses the effect of a preferential tax scheme for foreigners on the migration decision and wages of highly skilled immigrants in the Netherlands. Analyzing a large administrative dataset of employment and migration framework, I find that immigrants react to an income threshold for eligibility introduced in 2012. Specifically, I find a sizeable positive increase of immigration for employees above but close to the threshold, which is increasing over time. The effect for immigrants with income below the threshold is small and ambiguous. This suggests that an extensive margin response for immigrants with income close to and above the threshold is likely the driver of this dynamic in high skilled immigration. The findings of an extensive margin response for high income immigrants are in line with the policy goal of attracting highly skilled immigrants to the Netherlands.