Labour economics

Philosophy

Financial capital

Tax policy

Depreciation (economics)

Economics

Market economy

Stimulus (psychology)

Tax reform

Psychology

Politics

Political science

Monetary economics

Earnings

Psychotherapist

Human capital

Capital formation

Finance

Theology

Investment (military)

Generosity

American Economic Review Insights

Since 2002, the US government has encouraged business investment using accelerated depreciation policies that significantly reduce investment costs. We provide the first in-depth analysis of this stimulus on employment and earnings. Our local labor markets approach exploits cross-industry variation in policy generosity interacted with county-level industry location data. This strategy identifies the partial equilibrium effects of accelerated depreciation. Places that experience larger decreases in investment costs see an increase in employment and earnings. In contrast, the policy does not have positive effects on earnings-per-worker. Overall, our findings suggest federal corporate tax policy has large effects on local labor markets. (JEL D25, G31, H25, H32, J23, J31, R23)

Tax Policy and Local Labor Market Behavior