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An Analysis of the Employment Effects of the Washington High Technology Business and Occupation (B&O) Tax Credit

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  • Timothy J. Bartik

    ()
    (W.E. Upjohn Institute for Employment Research)

  • Kevin Hollenbeck

    ()
    (W.E. Upjohn Institute for Employment Research)

Abstract

This 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.

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Bibliographic Info

Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 12-187.

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Date of creation: Jun 2012
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Handle: RePEc:upj:weupjo:12-187

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Keywords: R&D tax credits; business incentives; state economic development policies; job creation;

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References

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