Abstract
This paper investigates how tax incentives for high-skill immigrants affect productivity. I collect data covering 90 percent of Italian faculty between 2000 and 2020 and use it to evaluate a 2004 tax break offering a temporary 90 percent reduction in taxable income for researchers. First, the evidence is consistent with the program attracting substantial return migration and positive selection of beneficiaries. Second, among groups that make an eligible hire, I find evidence consistent with higher-productivity hires significantly increasing their academic group’s average productivity, roughly split between their direct contribution and indirect responses of local faculty. Third, this indirect effect is largely explained by higher-productivity local researchers sorting into the treated group, rather than by productivity spillovers on incumbent researchers. An instrumental variable strategy based on perfect assortative matching corroborates the main findings.