Economic Stimulus at the Expense of Routine-Task Jobs
49 Pages Posted: 20 Nov 2017 Last revised: 15 Jun 2018
Date Written: June 6, 2018
Do investment tax incentives improve job prospects for workers? Using two massive establishment-level datasets on occupational employment and computer investment, we study the causal effect of a major tax incentive for investment on labor outcomes. The incentive, Section 179, indirectly reduces the after-tax price of equipment investment for eligible small businesses but not for ineligible ones. By exploring the variation in states' adoption of this incentive for state taxes, we find that when states increase investment incentive, eligible firms increase their equipment investments, yet, they experience little change in total employment. A further investigation shows that these firms significantly reduce their routine-task employees, while they slightly increase their nonroutine-task employees. Our results highlight the importance of heterogeneous worker skills for policy outcomes, and provide evidence that cheaper access to investment-specific technologies may reduce certain jobs.
Keywords: Routine-Biased Technological Change; Investment Tax Incentives; Section 179; Small Businesses; Investment-Specific Technology Shocks.
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