In this paper, we estimate the effect on emigration of the permanent income tax reductions implemented in Israel during the period 2004-2010. We find that emigration flows from Israel declined, especially for brackets that benefited from a larger tax reduction. We also find that the effect is stronger for younger workers than for older ones, a result consistent with the former group deriving expected tax benefits over a longer duration of time.
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We are grateful to Oren Tirosh, Barak Ben Avraham, Assaf Weksler, and Maiian Tropper Wachtel for superb research assistance, and to Adi Finkelstein for preparing the data set during the first stage of the research; thanks are also due to Yotam Shem-Tov for helpful remarks, and to two anonymous referees and the Editor of the Journal for their remarks which substantially improved the article. We are grateful to Sapir Center at Tel Aviv University for its financial support. We received helpful additional remarks from participants in seminars at: The Federman School of Public Policy of the Hebrew University of Jerusalem, The Israeli Economic Association, The IIPF Conference held in Tokyo and The Bank of Israel.
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- Permanent tax cut