Tax Policy and Local Labor Market Behavior

Daniel G. Garrett, Eric C. Ohrn and Juan Carlos Suárez Serrato

No 25546, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Since 2002, the US government has encouraged business investment using accelerated depreciation policies that significantly reduce investment costs. We provide the first in-depth analysis of this stimulus on employment and earnings. Our local labor markets approach exploits cross-industry differences in policy generosity interacted with county-level variation in industry concentration. Places that experience larger decreases in investment costs see a level increase in employment that implies a $53,000 cost-per-job. We find no positive effects on average earnings. In contrast, we document a persistent growth in capital. These results imply a capital-labor substitution elasticity that grows over time and can exceed unity.

JEL-codes: E62 H25 H32 J23 J38 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-lma, nep-mac, nep-pbe, nep-pub and nep-ure
Note: EFG LS PE
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Published as Daniel G. Garrett & Eric Ohrn & Juan Carlos Suárez Serrato, 2020. "Tax Policy and Local Labor Market Behavior," American Economic Review: Insights, vol 2(1), pages 83-100.

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Journal Article: Tax Policy and Local Labor Market Behavior (2020)
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