Capital Investment and Labor Demand

E Curtis, Daniel G. Garrett, Eric C. Ohrn, Kevin A. Roberts and Juan Carlos Suárez Serrato

No 29485, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how tax policies that lower the cost of capital impact investment and labor demand. Difference-in-differences estimates using confidential Census Data on manufacturing establishments show that tax policies increased both investment and employment, but did not stimulate wage or productivity growth. Using a structural model, we find that the primary effect of the policy was to increase the use of all inputs by lowering costs of production and that capital and production workers are complementary inputs in modern manufacturing. Our results show that tax policies that incentivize capital investment do not lead manufacturing plants to replace workers with machines.

JEL-codes: D22 H25 H32 J23 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-cfn, nep-lma and nep-pbe
Note: CF LS PE PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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