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Job creation tax credits and job growth: whether, when, and where?

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  • Robert S. Chirinko
  • Daniel J. Wilson

Abstract

This paper studies the effects of Job Creation Tax Credits (JCTCs) enacted by U.S. states over the past 20 years. First, we investigate whether JCTCs stimulate within-state job growth. Second, we assess from where any increased employment comes from – in-state or out-of-state? Third, we evaluate when JCTCs' effects occur. In particular, we test for negative anticipation effects between JCTC enactment and when legislation goes into effect. We investigate these questions using a difference-in-differences estimator applied to monthly panel data on employment, the JCTC value, the JCTC effective and legislative dates, and various controls.

Suggested Citation

  • Robert S. Chirinko & Daniel J. Wilson, 2010. "Job creation tax credits and job growth: whether, when, and where?," Working Paper Series 2010-25, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfwp:2010-25
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    References listed on IDEAS

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    1. repec:nbr:nberch:13348 is not listed on IDEAS
    2. Kesselman, Jonathan R & Williamson, Samuel H & Berndt, Ernst R, 1977. "Tax Credits for Employment Rather Than Investment," American Economic Review, American Economic Association, vol. 67(3), pages 339-349, June.
    3. Karel Mertens & MortenO. Ravn, 2010. "Measuring the Impact of Fiscal Policy in the Face of Anticipation: A Structural VAR Approach," Economic Journal, Royal Economic Society, vol. 120(544), pages 393-413, May.
    4. Karel Mertens & Morten O. Ravn, 2012. "Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 145-181, May.
    5. Karel Mertens & Morten Overgaard Ravn, 2011. "Understanding the Aggregate Effects of Anticipated and Unanticipated Tax Policy Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 27-54, January.
    6. Perloff, Jeffrey M & Wachter, Michael L, 1979. "The New Jobs Tax Credit: An Evaluation of the 1977-78 Wage Subsidy Program," American Economic Review, American Economic Association, vol. 69(2), pages 173-179, May.
    7. Alan J. Auerbach & William G. Gale, 2009. "Activist fiscal policy to stabilize economic activity," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 327-374.
    8. Edlin Aaron S. & Phelps Edmund, 2009. "Getting Serious about Job Creation: Part I," The Economists' Voice, De Gruyter, vol. 6(5), pages 1-5, April.
    9. Eric M. Leeper & Todd B. Walker & Shu‐Chun Susan Yang, 2013. "Fiscal Foresight and Information Flows," Econometrica, Econometric Society, vol. 81(3), pages 1115-1145, May.
    10. Timothy J. Bartik, 2001. "Jobs for the Poor: Can Labor Demand Policies Help?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number tjb2001, November.
    11. Christopher L. House & Matthew D. Shapiro, 2008. "Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation," American Economic Review, American Economic Association, vol. 98(3), pages 737-768, June.
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    Cited by:

    1. Moretti, Enrico & Wilson, Daniel J., 2014. "State incentives for innovation, star scientists and jobs: Evidence from biotech," Journal of Urban Economics, Elsevier, vol. 79(C), pages 20-38.
    2. Kenneth A. Couch & Douglas J. Besharov & David Neumark, 2013. "Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 32(1), pages 142-171, January.
    3. Emefa Sewordor & David L. Sjoquist, 2016. "Lights, Camera, Action: The Adoption of State Film Tax Credits," Public Budgeting & Finance, Wiley Blackwell, vol. 36(2), pages 5-25, June.
    4. Neumark, David & Grijalva, Diego, 2014. "State hiring credits and recent job growth," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    5. repec:eee:wdevel:v:96:y:2017:i:c:p:87-101 is not listed on IDEAS
    6. David Neumark & Diego Grijalva, 2013. "The Employment Effects of State Hiring Credits During and After the Great Recession," NBER Working Papers 18928, National Bureau of Economic Research, Inc.
    7. Pierre Cahuc & Stéphane Carcillo & Thomas Le Barbanchon, 2014. "Do Hiring Credits Work in Recessions?: Evidence from France," Sciences Po publications 8330, Sciences Po.
    8. Timothy J. Bartik & George A. Erickcek, 2012. "Simulating the Effects of Michigan's MEGA Tax Credit Program on Job Creation and Fiscal Benefits," Upjohn Working Papers and Journal Articles 12-185, W.E. Upjohn Institute for Employment Research.

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    Keywords

    Tax credits ; Tax incentives ; Public policy;

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