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Tax Policy and Local Labor Market Behavior

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

American Economic Review: Insights, 2020, vol. 2, issue 1, 83-100

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 variation in policy generosity interacted with county-level industry location data. This strategy identifies the partial equilibrium effects of accelerated depreciation. Places that experience larger decreases in investment costs see an increase in employment and earnings. In contrast, the policy does not have positive effects on earnings-per-worker. Overall, our findings suggest federal corporate tax policy has large effects on local labor markets.

JEL-codes: D25 G31 H25 H32 J23 J31 R23 (search for similar items in EconPapers)
Date: 2020
Note: DOI: 10.1257/aeri.20190041
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Handle: RePEc:aea:aerins:v:2:y:2020:i:1:p:83-100