Do Place-Based Tax Incentives Create Jobs?

Ku, Hyejin; Schönberg, Uta; Schreiner, Ragnhild C.

doi:10.3386/w25115

Cited by 10 publications

(8 citation statements)

References 17 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This estimate implies labor demand elasticities that vary between 2.90 and 4.16, depending on the years and the firm category we consider, which matter because payroll tax rates vary slightly across years and firm categories. The magnitude of our elasticity estimates are consistent with other recent estimates presented in the literature (see, for example, Lichter et al [2015] for a survey of labor demand elasticity estimates and Ku et al [2020] for a recent estimate using payroll tax variation).…”

Section: Resultssupporting

confidence: 90%

Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production

Benzarti

Harju

2021

SSRN Journal

View full text Add to dashboard Cite

This paper uses quasi-experimental variation in payroll tax rates in Finland to investigate how firms use their input factors. We find that higher payroll tax rates lead to large employment responses and have no effects on employee-level earnings. As payroll taxes increase, firms substitute away from low-skilled, routine and manual workers. Higher firm-level payroll tax rates also slightly decrease the total output of firms. Our results imply that firm-level production and input factor choices are clearly affected by payroll taxes.

show abstract

Section: Resultssupporting

confidence: 90%

Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production

Benzarti

Harju

2021

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Relatedly, our results have implications for the effectiveness of stimulus programs. Our paper is closely related to Ku et al (2020), who show that place-based payroll tax cuts are partially shifted to employees and have large employment effects. We complement their analysis by focusing on the effect of place-based payroll tax cuts during periods of severe economic downturns.…”

Section: Introductionmentioning

confidence: 74%

Can payroll tax cuts help firms during recessions?

Benzarti¹,

Harju

2021

Journal of Public Economics

View full text Add to dashboard Cite

This paper estimates the effect of payroll tax cuts on firm-level employment and balance-sheet outcomes during economic downturns. We use two regional payroll tax cuts in Finland as well as the onset of the Great Recession to estimate the effect of the recession on firms treated by the payroll tax cuts compared to a similar control group. When implemented, prior to the Great Recession, we estimate that the payroll tax cuts had limited effects on employment and balance-sheet outcomes of firms located in the treated regions. However, when the recession starts, some of its negative effects were substantially hampered by the previously enacted payroll tax cuts in treated firms. These employment effects are exacerbated for men and low-skilled employees. We also find that sales and profits in treated firms respond differently in treated firms during the recession. We provide some evidence showing that firms that are liquidity constrained are the ones that exhibit the strongest response. This shows that payroll tax cuts can make firms more resilient during downturns, possibly by relaxing liquidity constraints.

show abstract

“…These papers primarily study shocks that likely affect the employer-employee surplus, such as demand shocks or geographic variation, or they take a structural approach. In Sweden and Norway, respectively, Saez, Schoefer & Seim (2019) and Ku, Schoenberg & Schreiner (2020) find evidence that permanent tax policy changes affect firm rent sharing with workers.…”

Section: Introductionmentioning

confidence: 99%

Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms

Howell¹,

Brown²

2020

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper examines how employee earnings at small firms respond to a cash flow shock in the form of a government R&D grant. We use ranking data on applicant firms, which we link to IRS W2 earnings and other U.S. Census Bureau datasets. In a regression discontinuity design, we find that the grant increases average earnings with a rent-sharing elasticity of 0.07 (0.21) at the employee (firm) level. The beneficiaries are incumbent employees who were present at the firm before the award. Among incumbent employees, the effect increases with worker tenure. The grant also leads to higher employment and revenue, but productivity growth cannot fully explain the immediate effect on earnings. Instead, the data and a grantee survey are consistent with a backloaded wage contract channel, in which employees of financially constrained firms initially accept relatively low wages and are paid more when cash is available. JEL Classification:G32, G35, J31, J41

show abstract

Do Place-Based Tax Incentives Create Jobs?

Cited by 10 publications

References 17 publications

Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production

Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production

Can payroll tax cuts help firms during recessions?

Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms

Contact Info

Product

Resources

About