In this article published in the 'American Economic Review', IAB-researcher Adrian Lerche 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, Adrian Lerche find that manufacturing firms increase capital and employment, with labor demand in information and communication technology-intensive industries shifting towards college-educated workers.
- American Economic Review: Direct and Indirect Effects of Investment Tax Incentives
- First version of the article published as IAB-Discussion Paper 28/2022: Investment Tax Credits and the Response of Firms