Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98602
Authors: 
Bartik, Timothy J.
Hollenbeck, Kevin
Year of Publication: 
2012
Series/Report no.: 
Upjohn Institute Working Paper 12-187
Abstract: 
This paper estimates the effects of an R&D tax credit in the state of Washington on job creation. The research uses micro-data on the job creation and tax credits received by individual firms in the state of Washington from 2004 to 2009. We correct for the endogeneity of R&D tax credits received by individual firms by using instrumental variables based in part on national industry factor shares for R&D. We estimate that this tax credit created jobs, but at a high cost. The cost per job-year created is estimated to be between $40,000 and $50,000. The credit was so high cost in part because the credit was non-refundable. As a result, about one-quarter of the firms receiving credits were maxed out on credit eligibility, so that the credit provided no marginal incentive for additional R&D spending or job creation.
Subjects: 
R&D tax credits
business incentives
state economic development policies
job creation
JEL: 
R38
H71
J23
Document Type: 
Working Paper

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