Firm Responses to State Hiring Subsidies: Regression Discontinuity Evidence from a Tax Credit Formula

Benjamin Hyman, Matthew Freedman, Shantanu Khanna () and David Neumark

No 30664, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine firm responses to location-based hiring subsidies. We leverage institutional features of the California Competes Tax Credit (CCTC), a large-scale business incentive program that incorporates best practices from prior job creation policies. The CCTC award selection procedure combines formula-based and discretionary components. Leveraging applicant score eligibility cutoffs in a regression discontinuity design and taking advantage of rich longitudinal microdata on establishments and their parent firms, we find that firms expand activity in California in response to CCTC awards, particularly in disadvantaged parts of the state. Our results suggest that targeted and audited hiring subsidies can be effective in promoting local business expansions. We also examine the potential spillovers to other states and do not find strong evidence that the CCTC induces significant cross-state displacement effects.

JEL-codes: H25 H71 H73 J23 J38 R12 R38 R58 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-bec, nep-lma, nep-pbe, nep-pub and nep-ure
Note: LS PE
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