Economic Stimulus at the Expense of Routine-Task Jobs
62 Pages Posted: 20 Nov 2017 Last revised: 15 Feb 2019
Date Written: February 14, 2019
Do investment tax incentives improve job prospects for workers? We explore states' adoption of a major federal tax incentive that accelerates the depreciation of equipment investments for eligible firms but not for ineligible ones. Analyzing two massive establishment-level datasets on occupational employment and computer investment, we find that when states expand investment incentives, eligible firms immediately increase their equipment and their number of skilled employees; however, they reduce their routine-task employees after a delay of up to two years. These opposing effects on the two distinct labor groups constitute an overall insignificant effect on firms' total employment and shed light on the nuances of job creation through investment incentives. Our findings support models in which equipment complements skilled labor and substitutes for routine-task labor.
Keywords: Routine-Biased Technological Change; Skill-Biased Technological Change; Investment Tax Incentives; Section 179; Small Businesses
JEL Classification: D21, D22, G31, H25, H32, J24, J82
Suggested Citation: Suggested Citation