Job Creation Tax Credits, Fiscal Foresight, and Job Growth: Evidence from US States

Robert S. Chirinko and Daniel Wilson

National Tax Journal, 2023, vol. 76, issue 3, 481 - 523

Abstract: We study fiscal foresight using state panel variation in job creation tax credits (JCTCs) and their implementation lags. Using inverse probability weighting to address potential endogeneity, we estimate the dynamic effects of JCTCs during implementation lags, when they go into effect, and afterward. Failing to account for the distorting effects of fiscal foresight results in upwardly biased estimates of their initial impact by about one-third. The true initial impact is small. However, the longer-run cumulative effect is economically significant and implies a fairly low cost per job of approximately $15,000 and a local fiscal multiplier of 1.11–4.22.

Date: 2023
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Related works:
Working Paper: Job Creation Tax Credits, Fiscal Foresight, and Job Growth: Evidence from U.S. States (2016)
Working Paper: Job creation tax credits, fiscal foresight,and job growth: evidence from U.S. States (2016)
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