An Analysis of the Employment Effects of the Washington High Technology Business and Occupation (B&O) Tax Credit

Timothy Bartik () and Kevin Hollenbeck ()
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Kevin Hollenbeck: W.E. Upjohn Institute for Employment Research, http://www.upjohn.org/AboutUs/Staff/Hollenbeck

No 12-187, Upjohn Working Papers from W.E. Upjohn Institute for Employment Research

Abstract: This paper estimates the effects of an R&D tax credit in the state of Washington on job creation. The research uses micro-data on the job creation and tax credits received by individual firms in the state of Washington from 2004 to 2009. We correct for the endogeneity of R&D tax credits received by individual firms by using instrumental variables based in part on national industry factor shares for R&D. We estimate that this tax credit created jobs, but at a high cost. The cost per job-year created is estimated to be between $40,000 and $50,000. The credit was so high cost in part because the credit was non-refundable. As a result, about one-quarter of the firms receiving credits were maxed out on credit eligibility, so that the credit provided no marginal incentive for additional R&D spending or job creation.

Keywords: R&D tax credits; business incentives; state economic development policies; job creation (search for similar items in EconPapers)
JEL-codes: H71 J23 R38 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-geo and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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