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Investment Tax Credits and the Response of Firms

Author

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  • Lerche, Adrian

    (Institute for Employment Research (IAB), Nuremberg, Germany ; LMU Munich ; IZA)

Abstract

"This paper estimates the direct effects of investment tax credits on firms’ production behavior and the additional indirect effects arising from agglomeration economies. Exploiting a change in tax credit rates by firm size in Germany, I find that manufacturing firms increase capital and employment, with labor demand in information and communication technology-intensive industries shifting towards college-educated workers. Using geolocation data, I show that agglomeration benefits lead to a sizable further firm production expansion with these benefits materializing within distances of 5 kilometers. Worker flows from the service sector and from non-employment, rather than between manufacturing firms, explain the employment effects." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Lerche, Adrian, 2022. "Investment Tax Credits and the Response of Firms," IAB-Discussion Paper 202228, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:202228
    DOI: 10.48720/IAB.DP.2228
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    Cited by:

    1. Gundert, Hannah & Nicolay, Katharina & Steinbrenner, Daniela & Wickel, Sophia, 2023. "The tax attractiveness of EU locations for corporate investments: A stocktaking of past developments and recent reforms," ZEW Discussion Papers 23-066, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

    Bundesrepublik Deutschland ; Ostdeutschland ; IAB-Open-Access-Publikation ; Auswirkungen ; Ballungsraum ; Beschäftigungseffekte ; IAB-Beschäftigtenhistorik ; Industrieproduktion ; Investitionsförderung ; Investitionsquote ; Investitionsverhalten ; Investitionszulage ; Kapitalstock ; labour turnover ; produzierendes Gewerbe ; regionale Wirtschaftsförderung ; qualifikationsspezifische Faktoren ; Steuerentlastung ; Arbeitskräftenachfrage ; Umsatzentwicklung ; Unternehmen ; 1995-2004;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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