Investment tax credits and the response of firms

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IAB-Discussion Paper ; No. 28/2022

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Business Taxes and Subsidies including sales and value-added (VAT) ; Fiscal Policies and Behavior of Economic Agents: Firm ; Labor Demand ; Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
• Subject: Agglomeration ; Capital ; Investment Tax Incentives ; Labor Demand

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lerche, Adrian
• Event: Veröffentlichung
• (who): Institut für Arbeitsmarkt- und Berufsforschung (IAB)
• (where): Nürnberg
• (when): 2022

Further information

• DOI: doi:10.48720/IAB.DP.2228
• Handle: http://hdl.handle.net/10419/270319
• Last update: 10.03.2025, 11:41 AM CET