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The Employment Effects of State Hiring Credits During and After the Great Recession

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  • David Neumark
  • Diego Grijalva

Abstract

State and federal policymakers grappling with the aftermath of the Great Recession sought ways to spur job creation, in many cases adopting hiring credits to encourage employers to create new jobs. However, there is virtually no evidence on the effects of these kinds of counter-recessionary hiring credits – the only evidence coming from much earlier studies of the federal New Jobs Tax Credit in the 1970s. This paper provides evidence on the effects of state hiring credits on job growth. For many of the types of hiring credits we examine we do not find positive effects on job growth. However, some specific types of hiring credits – most notably including those targeting the unemployed, those that allow states to recapture credits when job creation goals are not met, and refundable hiring credits – appear to have succeeded in boosting job growth, more so during the Great Recession period or perhaps recessions generally. At the same time, some credits appear to generate hiring without increasing employment or to generate much more hiring than net employment growth, consistent with these credits leading to churning of employees that raises the costs of producing jobs via hiring credits.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:18928
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    File URL: http://www.nber.org/papers/w18928.pdf
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    References listed on IDEAS

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    Cited by:

    1. repec:tul:wpaper:1506 is not listed on IDEAS
    2. Alessio Brown & Johannes Koettl, 2015. "Active labor market programs - employment gain or fiscal drain?," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-36, December.
    3. Neumark, David & Simpson, Helen, 2015. "Place-Based Policies," Handbook of Regional and Urban Economics, Elsevier.
    4. Robert S. Chirinko & Daniel J. Wilson, 2016. "Job creation tax credits, fiscal foresight,and job growth: evidence from U.S. States," Working Papers 6, Department of the Treasury, Ministry of the Economy and of Finance.
    5. Sachiko Kazekami, 2016. "Incidence, Optimal Use and Rationale of Place-Based Job Creation Programs," SERIES 02-2016, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2016.
    6. repec:sae:ilrrev:v:71:y:2018:i:2:p:365-393 is not listed on IDEAS
    7. Heider, Florian & Ljungqvist, Alexander, 2015. "As certain as debt and taxes: Estimating the tax sensitivity of leverage from state tax changes," Journal of Financial Economics, Elsevier, vol. 118(3), pages 684-712.
    8. Matthew D. Webb & Arthur Sweetman & Casey Warman, 2016. "Targeting Tax Relief at Youth Employment," Canadian Public Policy, University of Toronto Press, vol. 42(4), pages 415-430, December.
    9. repec:bla:joares:v:55:y:2017:i:3:p:669-707 is not listed on IDEAS
    10. Sachiko Kazekami, 2017. "Evaluating place-based job creation programs in Japan," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-27, December.
    11. Paolo Sestito & Eliana Viviano, 2016. "Hiring incentives and/or firing cost reduction? Evaluating the impact of the 2015 policies on the Italian labour market," Questioni di Economia e Finanza (Occasional Papers) 325, Bank of Italy, Economic Research and International Relations Area.
    12. Neumark, David & Grijalva, Diego, 2014. "State hiring credits and recent job growth," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    13. Alexander Ljungqvist & Liandong Zhang & Luo Zuo, 2017. "Sharing Risk with the Government: How Taxes Affect Corporate Risk Taking," Journal of Accounting Research, Wiley Blackwell, vol. 55(3), pages 669-707, June.
    14. David Neumark, 2016. "Policy levers to increase jobs and increase income from work after the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-38, December.
    15. Patrick Button, 2018. "Expanding Employment Discrimination Protections for Individuals with Disabilities: Evidence from California," ILR Review, Cornell University, ILR School, vol. 71(2), pages 365-393, March.
    16. Sjögren, Anna & Vikström, Johan, 2015. "How long and how much? Learning about the design of wage subsidies from policy changes and discontinuities," Labour Economics, Elsevier, vol. 34(C), pages 127-137.
    17. Pierre Cahuc & Stéphane Carcillo & Thomas Le Barbanchon, 2014. "Do Hiring Credits Work in Recessions?: Evidence from France," Sciences Po publications 8330, Sciences Po.

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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