Eric C. Ohrn
1216 Park St.
Grinnell, IA 50112
Institutional Affiliation: Grinnell College
NBER Working Papers and Publications
|February 2019||Tax Policy and Local Labor Market Behavior|
with Daniel G. Garrett, Juan Carlos Suárez Serrato: w25546
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 differences in policy generosity interacted with county-level variation in industry concentration. Places that experience larger decreases in investment costs see a level increase in employment that implies a $53,000 cost-per-job. We find no positive effects on average earnings. In contrast, we document a persistent growth in capital. These results imply a capital-labor substitution elasticity that grows over time and can exceed unity.