Working Paper: NBER ID: w28594
Authors: Matthew Freedman; David Neumark; Shantanu Khanna
Abstract: We evaluate the effects of one of a new generation of economic development programs, the California Competes Tax Credit (CCTC), on local job creation. Incorporating perceived best practices from previous initiatives, the CCTC combines explicit eligibility thresholds with some discretion on the part of program officials to select tax credit recipients. The structure and implementation of the program facilitates rigorous evaluation. We exploit detailed data on accepted and rejected applicants to the CCTC, including information on scoring of applicants with regard to program goals and funding decisions, together with restricted access American Community Survey (ACS) data on local economic conditions. Using a difference-in-differences approach, we find that each CCTC-incentivized job in a census tract increases the number of individuals working in that tract by over two – a significant local multiplier. We also explore the program’s distributional implications and impacts by industry. We find that CCTC awards increase employment among workers residing in both high income and low income communities, and that the local multipliers are larger for non-manufacturing awards than for manufacturing awards.
Keywords: California Competes Tax Credit; economic development; job creation; tax incentives; local multipliers
JEL Codes: H25; H71; J68; R11; R23; R58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| California Competes Tax Credit (CCTC) (H29) | local job creation (J68) |
| CCTC awards (Y10) | employment in high-income communities (R23) |
| CCTC awards (Y10) | employment in low-income communities (J68) |
| CCTC awards (Y10) | local employment multipliers (non-manufacturing) (J69) |
| CCTC awards (Y10) | local employment multipliers (manufacturing) (J69) |