Personal Taxes and Firm Skill Hiring: Evidence from 27 Million Job Postings

Murillo Campello (), Janet Gao () and Qiping Xu ()
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Murillo Campello: Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853; National Bureau of Economic Research, Cambridge, Massachusetts 02138
Janet Gao: McDonough School of Business, Georgetown University, Washington, DC 20006
Qiping Xu: Gies College of Business, University of Illinois, Champaign, Illinois 61820

Management Science, 2024, vol. 70, issue 10, 7215-7241

Abstract: Using big data on U.S. job postings, we show that firms increase skill requirements when hiring workers in states that cut personal income taxes. We trace a significant driver of this effect to companies’ reallocation of skilled job postings across states based on tax differentials. The tax-induced upskilling is observed within occupations and is more pronounced for high-skill positions within firms. It is accompanied and amplified by concurrent increases in information technology expenditures at local-level establishments. In characterizing the mechanism at play, we show that job upskilling is triggered by tax changes affecting middle- and upper middle-class workers. It is pronounced for high-growth firms, for firms in tradable industries, and in urban areas, but it is mitigated among profitable firms. A narrative-based analysis helps us establish causal inferences.

Keywords: state tax policy; personal income taxes; skilled labor; firm organizational form; local labor markets (search for similar items in EconPapers)
Date: 2024
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