Working papers

"State Business Taxes and Business Dynamism in the United States" - Job Market Paper (new draft)

Business dynamism has been linked to innovation and employment creation, yet there is little empirical research on the relationship between business taxation and business operations births and deaths. Using several identification strategies taking into account the potential endogeneity between tax changes and local economic conditions, I document a negative effect of the state corporate tax on establishments and firms entry: an increase in the top state corporate tax rate of 1 percentage point leads to a decline in the entry rate of about -1.5 to -3.5%. The effect on exits is positive, but smaller (0.5-1.5%) and usually not statistically significant. I evaluate the presence of spillovers across state borders at the county and census tract level and find no evidence that they are significant, or driving the main findings. However, spillovers can be large in areas in close proximity to the border - within 3 to 5 miles. These findings are robust to changes in other state level policies, sample restrictions, and different identification strategies.

"The Effect of the Great Recession on Local Property Taxes" (with Chiara Ferrero) - draft available soon

We use newly collected data on property tax rates, assessment values and property tax levies to study the role of falling home prices associated with the Great Recession on local property tax revenues. We tease out the mechanical channel through which home values affected assessed values, and the policy channel through which policymakers responded to changes in the tax base. We find that the resilience of property tax revenues can be attributed to two main factors: 1) a small correlation between home price changes and assessed values after 2007, 2) large increases in property tax rates in areas facing a negative shock in their tax base. Contrary to some popular beliefs, we find that the recession had a small but negative and lasting impact on the tax base. Negative shocks were offset by as much as 80-85% in the long run, implying that a 10% decrease in the tax base lead to only a 1.5% decline in property tax revenues. We document a large variation in responses, and look at the role of property tax rate and levy limits during and post-recession. Rate limits seem to reduce the ability of policymakers to offset negative shocks in the tax base and lead to a bigger decline in revenues. Jurisdictions with a levy limit are much more likely to smooth out negative and positive shocks.

"Structural Shocks, Robotization, and Local Public Finance"

I document the effect of increased exposure to robotization on local public finance outcomes - revenues, taxes, transfers, and expenditures - as well as the role of local fiscal autonomy and local tax limits. We find that an additional robot per thousand worker in the United States leads to a decline of roughly 1.5-2% in total local revenue, and around 2.5% in tax collections, while the overall effect on expenditure is around 1-1.5%. We show that these results are driven by states with high fiscal autonomy - defined as states that grant cities functional home rule - where the decline in revenues and expenditures is larger in magnitude. Using a newly collected data-set on property tax rates and assessment values in the United States, we show that in low autonomy areas, increased exposure to robotization leads to a relative decline in property tax rates, while rates are largely unaffected in high autonomy jurisdictions. We highlight the importance of accounting for policy changes when investigating outcomes that are highly policy dependent. Including property tax changes in our estimation shows that the mechanical effect of the shocks - through lower relative economic activity and property values - is similar across jurisdictions. The relative decline in low autonomy area creates a negative bias and the small increase in taxes in high autonomy area leads to a small positive bias on the effect of robotization on property tax collections.

Work in progress

"The Effectiveness of Job Creation Tax Credits on State Employment"

Job creation tax credits (JCTCs) - subsidies given to firms who create new jobs - have become prevalent policies at the state level, with more than 120 JCTCs in place in 2015. We find some evidence that firms anticipate credits and shift hiring a few months or more to take advantage of the policy. However, JCTCs are not associated with a higher growth rate of employment during and after the Great Recession. The most effective credits are ones without additional investment in capital required and those that do not specify a minimum wage for eligibility. We estimate an average value of benefits per job created for the set of JCTCs introduced after 2000, and find that the average credit per job created is about $4,600 in 2002 dollars. The median is lower, around $3,800 in 2002 dollars, as a large number of JCTCs provide relatively low benefits. Credits of higher value do not seem to be more effective. Employment in firms of medium size - between 50 and 250 employees - shows the strongest reaction to the introduction of the policy.