Economic Stimulus at the Expense of Routine-Task Jobs

Abstract

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 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 skilled employees; however, they reduce their routine-task employees after a delay of up to two years. These opposing effects constitute an overall insignificant effect on the firms' total employment and shed light on the nuances of job creation through investment incentives.

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