The Impact of Place-Based Employment Tax Credits on Local Labor: Evidence from Tax Data

Patricia Tong () and Li Zhou ()
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Patricia Tong: US Department of the Treasury, Postal: 1500 Pennsylvania Ave, NW, Washington, DC 20220

No 2014-6, Working Papers from University of Alberta, Department of Economics

Abstract: Using administrative tax data that contain information on firm credit take-up and employee residence, we examine the impact of the Empowerment Zone and Renewal Community employment tax credits on local labor. We find modest evidence that zone designation improves labor market outcomes among residents. However, when we specifically estimate the impact of the place-based employment tax credit and disentangle the impact based on where workers live and work, we find strong evidence that the employment tax credits have significant and positive impacts on both zone and non-zone residents employed at firms that claim these credits. We determine that firms claiming the employment tax credit represent a small share of the overall labor demand of zone residents. As a result, utilizing data that include information on which firms receive place-based tax incentives is crucial to evaluate how these policies impact local labor, and evaluations looking at outcomes of broader populations may not be able to identify significant improvements in outcomes if a limited fraction of the population is directly affected.

Keywords: employment tax credits; place-based programs; business incentives; empowerment zones; renewal communities (search for similar items in EconPapers)
JEL-codes: H25 J38 R23 R58 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2014-07-01
New Economics Papers: this item is included in nep-geo, nep-lab, nep-lma, nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2014_006

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