Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267405 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
IZA Discussion Papers No. 15668
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper estimates the direct effects of investment tax credits on firms' production behavior and the additional indirect effects arising from agglomeration economies. Exploiting a change in tax credit rates by firm size in Germany, I find that manufacturing firms increase capital and employment, with labor demand in information and communication technology-intensive industries shifting towards college-educated workers. Using geolocation data, I show that agglomeration benefits lead to a sizable further firm production expansion with these benefits materializing within distances of 5 kilometers. Worker flows from the service sector and from non-employment, rather than between manufacturing firms, explain the employment effects.
Subjects: 
investment tax incentives
capital
labor demand
agglomeration
JEL: 
D22
H25
H32
J23
R11
Document Type: 
Working Paper

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