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Keywords Inventor mobility; Personal income taxes; Regional development Highlights * This study exploits drops in top personal net-of-tax rates across Swiss state borders. * Finds a local elasticity in immigrant inventors' location choices of 3.2. * These choices matter for the localization of new ventures and knowledge spillovers. Abstract This paper studies the relationship between local personal income tax rates and the attractiveness of municipalities as residential locations for immigrant inventors in Switzerland. Exploiting sharp differences in top income tax rates across state borders, I find an elasticity of the probability that an inventor takes residence in a border municipality with respect to the top net-of-tax rate of around 3.2. Additional evidence suggests that inventors' residential location choices are consequential for the localization of entrepreneurial activity and local knowledge spillovers. Author Affiliation: Max Planck Institute for Innovation and Competition, Germany Article History: Received 26 October 2020; Revised 19 October 2022; Accepted 16 January 2023 (footnote)[white star] I thank Benjamin F. Jones, Craig Garthwaite, Nicola Persico, David Besanko, Matthew Notowidigdo, Fabian Gaessler, Pere Arqué-Castells, Nicola Bianchi, Elena Prager, Michael Powell, Christopher Ody, Amanda Starc, Dietmar Harhoff, Raphael Parchet, Martin Wörter, Kurt Schmidheiny and Enrico Berkes. Moreover, I would like to thank the editor, two anonymous referees and seminar participants at Kellogg School of Management, the Swiss Workshop on Local Public Finance and Regional Economics, the Geography of Innovation conference, LMU Munich, EPFL Lausanne, Max-Planck Institute for Innovation and Competition, TU Munich and at the University of Wisconsin at Whitewater for their feedback. I am indebted to Raphael Parchet, Ernest Miguélez and Carsten Fink for providing me with data. I gratefully acknowledge financial support from the General Motors Research Center and the Kellogg School of Management. Byline: Rainer Widmann [rainer.widmann@ip.mpg.de]

Keywords Multinational enterprises; Cross-border expansion; Target choice; Corporation income tax; Mixed logit Abstract We use firm-level data to investigate the impact of taxes on the international location of targets in M&A, allowing for domestic acquisitions and heterogeneous responses by companies. The statutory tax rate in the target country is found to have a negative impact on the probability of an acquisition in that country. In addition, the estimated size of the effect is found to depend on whether (i) acquirer is a domestic or a multinational enterprise; (ii) the acquisition is domestic or cross-border; and (iii) the acquirer's country has a worldwide or territorial tax system. Author Affiliation: (a) Department of Economics, University of Warwick, Coventry CV4 7AL, UK (b) Oxford University Centre for Business Taxation, Said Business School, Oxford OX1 1HP, UK (c) IZA, Germany (d) Oslo Fiscal Studies, Oslo, Norway (e) ETH Zurich, MTEC, Zurich 8092, Switzerland * Corresponding author. Article History: Received 14 February 2017; Revised 24 May 2019; Accepted 31 May 2019 (footnote)[white star] This paper was previously circulated under the title, 'How do taxes affect cross-border acquisitions?'. Financial support from the ETPF and the Economic and Social Research Council (ESRC) (grant number RES-060-25-0033) is gratefully acknowledged. We thank Giorgia Maffini, Simon Loretz and Socrates Mokkas for providing the BvD and tax data. We thank the Editor, two anonymous referees, and Steve Bond, Luis Candelaria, Valentina Corradi, Clemens Fuest, Bill Greene, Simon Loretz, Peter Neary, David Ulph, members of the European Tax Policy Forum, and seminar participants in Oxford, Bayreuth, the 2011 Public Economics UK workshop, the IIPF Congress in Michigan, and the UNC 2012 Tax Symposium for helpful comments. We remain responsible for any errors. Byline: Wiji Arulampalam [wiji.arulampalam@warwick.ac.uk] (a,b,c,d), Michael P. Devereux [michael.devereux@sbs.ox.ac.uk] (b,*), Federica Liberini [liberini@kof.ethz.ch] (e)