An Analysis of the Employment Effects of the Washington High Technology Business and Occupation (B&O) Tax Credit
AbstractThis paper estimates the effects of an R&D tax credit in the state of Washington on job creation. The research uses micro-data on the job creation and tax credits received by individual firms in the state of Washington from 2004 to 2009. We correct for the endogeneity of R&D tax credits received by individual firms by using instrumental variables based in part on national industry factor shares for R&D. We estimate that this tax credit created jobs, but at a high cost. The cost per job-year created is estimated to be between $40,000 and $50,000. The credit was so high cost in part because the credit was non-refundable. As a result, about one-quarter of the firms receiving credits were maxed out on credit eligibility, so that the credit provided no marginal incentive for additional R&D spending or job creation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 12-187.
Date of creation: Jun 2012
Date of revision:
R&D tax credits; business incentives; state economic development policies; job creation;
Find related papers by JEL classification:
- R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-GEO-2012-12-22 (Economic Geography)
- NEP-INO-2012-12-22 (Innovation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jed Kolko & David Neumark, 2009.
"Do Some Enterprise Zones Create Jobs?,"
NBER Working Papers
15206, National Bureau of Economic Research, Inc.
- Matias Busso & Jesse Gregory & Patrick Kline, 2013.
"Assessing the Incidence and Efficiency of a Prominent Place Based Policy,"
American Economic Review,
American Economic Association, vol. 103(2), pages 897-947, April.
- Matias Busso & Jesse Gregory & Patrick M. Kline, 2010. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," NBER Working Papers 16096, National Bureau of Economic Research, Inc.
- Matias Busso & Jesse Gregory & Patrick Kline, 2011. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," Working Papers 11-07, Center for Economic Studies, U.S. Census Bureau.
- Dye, Richard F. & Merriman, David F., 2000. "The Effects of Tax Increment Financing on Economic Development," Journal of Urban Economics, Elsevier, vol. 47(2), pages 306-328, March.
- Yoonsoo Lee, 2004.
"Geographic redistribution of U.S. manufacturing and the role of state development policy,"
0415, Federal Reserve Bank of Cleveland.
- Lee, Yoonsoo, 2008. "Geographic redistribution of US manufacturing and the role of state development policy," Journal of Urban Economics, Elsevier, vol. 64(2), pages 436-450, September.
- Michael Wasylenko, 1997. "Taxation and economic development: the state of the economic literature," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 37-52.
- William Hoyt & Christopher Jepsen & Kenneth Troske, 2009. "Business Incentives and Employment: What Incentives Work and Where?," Working Papers 2009-02, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
- David F. Merriman & Mark L. Skidmore & Russ D. Kashian, 2011. "Do Tax Increment Finance Districts Stimulate Growth in Real Estate Values?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(2), pages 221-250, 06.
- Michael I. Luger & Suho Bae, 2005. "The Effectiveness of State Business Tax Incentive Programs: The Case of North Carolina," Economic Development Quarterly, , vol. 19(4), pages 327-345, November.
- Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
- Tonya J. Hansen & Laura Kalambokidis, 2010. "How Are Businesses Responding to Minnesota's Tax-Free Zone Program?," Economic Development Quarterly, , vol. 24(2), pages 180-192, May.
- Peter T. Calcagno & Henry Thompson, 2004. "State Economic Incentives: Stimulus or Reallocation?," Public Finance Review, , vol. 32(6), pages 651-665, November.
- Michael J. Hicks & Michael LaFaive, 2011. "The Influence of Targeted Economic Development Tax Incentives on County Economic Growth: Evidence From Michigan's MEGA Credits," Economic Development Quarterly, , vol. 25(2), pages 193-205, May.
- Ron Jarmin, 1998. "Manufacturing Extension And Productivity Dynamics," Working Papers 98-8, Center for Economic Studies, U.S. Census Bureau.
- Robert S. Chirinko & Daniel J. Wilson, 2010. "State business taxes and investment: state-by-state simulations," Economic Review, Federal Reserve Bank of San Francisco, pages 13-28.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Kevin Hollenbeck, 2008. "Is There a Role for Public Support of Incumbent Worker On-the-Job Training?," Upjohn Working Papers and Journal Articles 08-138, W.E. Upjohn Institute for Employment Research.
- Alan H. Peters & Peter S. Fisher, 2002. "State Enterprise Zone Programs: Have They Worked?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number sezp.
- Todd M. Gabe & David S. Kraybill, 2002. "The Effect of State Economic Development Incentives on Employment Growth of Establishments," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 703-730.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.