Measuring the Effect of Job Creation Tax Credits. A presentation by Laura Wheeler (FRC Senior Research Associate) at the annual […

Christie, Tamoya

Gurmu, Shiferaw

Hawley, Zachary

Sjoquist, David

Wheeler, Laura

English

Georgia State University

Georgia State University 
ScholarWorks @ Georgia State University 
CSLF Working Papers Center for State and Local Finance 
11-8-2013 
Measuring the Effect of Job Creation Tax Credits 
Tamoya Christie 
Georgia State University 
Shiferaw Gurmu 
Georgia State University 
Zachary Hawley 
Georgia State University 
David Sjoquist 
Georgia State University 
Laura Wheeler 
Georgia State University 
Follow this and additional works at: https://scholarworks.gsu.edu/ays_cslf_workingpapers 
Recommended Citation 
Christie, Tamoya; Gurmu, Shiferaw; Hawley, Zachary; Sjoquist, David; and Wheeler, Laura, "Measuring the 
Effect of Job Creation Tax Credits" (2013). CSLF Working Papers. 42. 
https://scholarworks.gsu.edu/ays_cslf_workingpapers/42 
This Article is brought to you for free and open access by the Center for State and Local Finance at ScholarWorks 
@ Georgia State University. It has been accepted for inclusion in CSLF Working Papers by an authorized 
administrator of ScholarWorks @ Georgia State University. For more information, please contact 
scholarworks@gsu.edu. 
Measuring the Effect of Job 
Creation Tax Credits 
By  
 
Tamoya Christie, University of the West Indies 
Shiferaw Gurmu, Georgia State University 
Zachary Hawley, Texas Christian University 
David L. Sjoquist, Georgia State University 
Laura Wheeler, Georgia State University 
Most States have a jobs tax credit. 
 
Prominent Credit at the state level 
Tax Year 2009 = $42m utilized, Tax Year 2010 = $53m utilized 
 
Does the credit just move jobs around? 
Are the jobs permanent? 
What kind of jobs are created?   
Research Question – How effective are job tax 
credits in creating jobs that would not have 
otherwise been created? 
Georgia’s Job Tax Credit -  
•Began in 1991 
•Counties divided into 4 Tiers 
•Credit Value and Qualifications vary by tier 
•Tier designation is based on poverty level, per-capita income, 
unemployment rate 
•Typically does not include retail establishments 
•Credits taken for 5 years 
 
Other Significant Changes –  
•Expanded definition of eligible industries 
•Added Less Developed Census Tract status 
•Added Wage Requirement 
•Allowed the credit to be taken against withholding 
Tier 1 Tier 2 Tier 3 Tier 4 
1991-1992 Counties: 40 
Jobs:       10 
Credit:    
$1000 
Not Eligible Not Eligible Not Eligible 
1993 Counties: 40 
Jobs:       10 
Credit:    
$2000 
Counties: 40 
Jobs:     10  
Credit:  
$1000 
Not Eligible Not Eligible 
1994-2000 Counties: 53 
Jobs:       10 
Credit:    
$2500 
Counties: 53 
Jobs:     25  
Credit:  
$1500 
Counties: 53 
Jobs:     50  
Credit:  $500 
N/A 
2001-Present Counties:71 
Jobs:       5 
Credit:    
$3500 
Counties:35 
Jobs:     10 
Credit:  
$2500 
Counties:35 
Jobs:     15 
Credit:  
$1250 
Counties:18 
Jobs:     25 
Credit:  $750 
General Parameters -  
Source: Georgia Department of Community Affairs 
Related Literature 
 
Jobs Tax Credit Evaluation -  
•Gabe and Kraybill (2002) 
•Chirinko and Wilson (2010) 
•Faulk (2002) 
•Hicks and LaFaive (2011) 
 
Enterprise Zone Evaluation -  
•Papke (1994) 
•Greenbaum and Engberg (2004) 
•Bondonio and Greenbaum (2007) 
•Hanson (2009) 
 
Data Sources –  
1. County level data 
2. Firm level data from Georgia Department of Revenue 
merged with Establishment level data from Georgia 
Department of Labor 
Methodology –  
1. Simple OLS/Time and Year Fixed Effects 
2. Regression Discontinuity Model 
3. Border County Comparisons 
MEANS Tier 1 Tier 2 Tier 3 Tier 4 All Tiers 
Number of Observations 714 347 349 180 1,590 
Total Employment 4,825 19,512 35,529 48,864 19,755 
County Population 19,020 53,098 95,820 154,466 58,648 
County Area 406 346 359 329 374 
Interstate dummy 0.23 0.49 0.57 0.62 0.40 
Value of Tier Credit $3,500 $2,500 $1,250 $750 $2,477 
Percent of Population 
with BA degree, 2000 
10.50 13.45 16.33 24.59 13.98 
Total qualified 
employment 
2,287 9,295 17,755 25,840 10,062 
Change in Qualified 
Employment -33.02 46.05 6.47 258.28 28.27 
Descriptive Statistics, by Tier Status, 2002-2011 
Variables [1] [2] [3] [4] [5]# 
Credit 16.70** -1.06 3.64 1.57 36.55 
(7.47) (9.06) (8.77) (8.67) (41.05) 
Interstate 98.89 99.93 91.65 
(89.30) (86.68) (84.66) 
BA 13.32 8.74 8.01 
(8.69) (8.38) (8.21) 
Population -3.74*** -3.34 -3.33 
(0.45) (0.43) (0.42) 
Area 0.15 0.06 0.07 
(0.26) (0.26) (0.25) 
JobGrowth 0.41*** 0.38*** 0.38 
(0.03) (0.03) (0.31) 
Year dummies No No No Yes Yes 
County fixed effects No No No No Yes 
Constant -340.41 -175.32 -174.14 -400.15 -890.78 
(103.13) (221.79) (215.78) (248.47) (581.02) 
R2 0.003 0.060 0.153 0.198 0.146 
N 1542 1542 1510 1510 1510 
Table 7. The Effect of the Job Tax Credit on County Employment in Qualified 
Industries (standard errors in parentheses) 
Table 8. Regression Discontinuity Analysis  
(standard errors in parentheses) 
Variable [1] [2] [3] 
Treatment 102.30 -205.10 -427.02 
(122.37) (516.93) (622.96) 
Rank 6.67 -47.12 -53.94 
(9.71) (40.91) (48.57) 
Constant -645.88 4837.99 7770.00 
(748.24) (4623.86) (7193.16) 
R2 0.002 0.008 0.004 
N 333 362 359 
Table 9. Employment Growth Across Border Counties (standard 
errors in parentheses) 
Border Counties 
Variables 
[1] 
Tiers 1 & 2 
[2] 
Tiers 2 & 3 
[3] 
Tiers 3 & 4 
DiffCredit -154.82 -46.40 -5136.42*** 
(109.92) (452.08) (1887.00) 
Constant 807.67 666.81 12543.43*** 
(568.76) (2901.02) (4878.57) 
R2 0.003 0.000 0.020 
N 649 452 359 
Future Work –  
1. Incorporate establishment level data 
2. Account for interaction between less developed 
census tracts and tier effects 
3. Control for spatial effects 
4. Firm Duration 
Comments and Suggestions 
appreciated. 
 
 
 
Thank you. 


Measuring the Effect of Job
Creation Tax Credits

ScholarWorks @ Georgia State University

Georgia State University ScholarWorks @ Georgia State University CSLF Working Papers Center for State and Local Finance 11-8-2013 Measuring the Effect of Job Creation Tax Credits Tamoya Christie Georgia State University Shiferaw Gurmu Georgia State University Zachary Hawley Georgia State University David Sjoquist Georgia State University Laura Wheeler Georgia State University Follow this and additional works at: https://scholarworks.gsu.edu/ays_cslf_workingpapers Recommended Citation Christie, Tamoya; Gurmu, Shiferaw; Hawley, Zachary; Sjoquist, David; and Wheeler, Laura, "Measuring the Effect of Job Creation Tax Credits" (2013). CSLF Working Papers. 42. https://scholarworks.gsu.edu/ays_cslf_workingpapers/42 This Article is brought to you for free and open access by the Center for State and Local Finance at ScholarWorks @ Georgia State University. It has been accepted for inclusion in CSLF Working Papers by an authorized administrator of ScholarWorks @ Georgia State University. For more information, please contact scholarworks@gsu.edu. Measuring the Effect of Job Creation Tax Credits By   Tamoya Christie, University of the West Indies Shiferaw Gurmu, Georgia State University Zachary Hawley, Texas Christian University David L. Sjoquist, Georgia State University Laura Wheeler, Georgia State University Most States have a jobs tax credit.  Prominent Credit at the state level Tax Year 2009 = $42m utilized, Tax Year 2010 = $53m utilized  Does the credit just move jobs around? Are the jobs permanent? What kind of jobs are created?   Research Question – How effective are job tax credits in creating jobs that would not have otherwise been created? Georgia’s Job Tax Credit -  •Began in 1991 •Counties divided into 4 Tiers •Credit Value and Qualifications vary by tier •Tier designation is based on poverty level, per-capita income, unemployment rate •Typically does not include retail establishments •Credits taken for 5 years  Other Significant Changes –  •Expanded definition of eligible industries •Added Less Developed Census Tract status •Added Wage Requirement •Allowed the credit to be taken against withholding Tier 1 Tier 2 Tier 3 Tier 4 1991-1992 Counties: 40 Jobs:       10 Credit:    $1000 Not Eligible Not Eligible Not Eligible 1993 Counties: 40 Jobs:       10 Credit:    $2000 Counties: 40 Jobs:     10  Credit:  $1000 Not Eligible Not Eligible 1994-2000 Counties: 53 Jobs:       10 Credit:    $2500 Counties: 53 Jobs:     25  Credit:  $1500 Counties: 53 Jobs:     50  Credit:  $500 N/A 2001-Present Counties:71 Jobs:       5 Credit:    $3500 Counties:35 Jobs:     10 Credit:  $2500 Counties:35 Jobs:     15 Credit:  $1250 Counties:18 Jobs:     25 Credit:  $750 General Parameters -  Source: Georgia Department of Community Affairs Related Literature  Jobs Tax Credit Evaluation -  •Gabe and Kraybill (2002) •Chirinko and Wilson (2010) •Faulk (2002) •Hicks and LaFaive (2011)  Enterprise Zone Evaluation -  •Papke (1994) •Greenbaum and Engberg (2004) •Bondonio and Greenbaum (2007) •Hanson (2009)  Data Sources –  1. County level data 2. Firm level data from Georgia Department of Revenue merged with Establishment level data from Georgia Department of Labor Methodology –  1. Simple OLS/Time and Year Fixed Effects 2. Regression Discontinuity Model 3. Border County Comparisons MEANS Tier 1 Tier 2 Tier 3 Tier 4 All Tiers Number of Observations 714 347 349 180 1,590 Total Employment 4,825 19,512 35,529 48,864 19,755 County Population 19,020 53,098 95,820 154,466 58,648 County Area 406 346 359 329 374 Interstate dummy 0.23 0.49 0.57 0.62 0.40 Value of Tier Credit $3,500 $2,500 $1,250 $750 $2,477 Percent of Population with BA degree, 2000 10.50 13.45 16.33 24.59 13.98 Total qualified employment 2,287 9,295 17,755 25,840 10,062 Change in Qualified Employment -33.02 46.05 6.47 258.28 28.27 Descriptive Statistics, by Tier Status, 2002-2011 Variables [1] [2] [3] [4] [5]# Credit 16.70** -1.06 3.64 1.57 36.55 (7.47) (9.06) (8.77) (8.67) (41.05) Interstate 98.89 99.93 91.65 (89.30) (86.68) (84.66) BA 13.32 8.74 8.01 (8.69) (8.38) (8.21) Population -3.74*** -3.34 -3.33 (0.45) (0.43) (0.42) Area 0.15 0.06 0.07 (0.26) (0.26) (0.25) JobGrowth 0.41*** 0.38*** 0.38 (0.03) (0.03) (0.31) Year dummies No No No Yes Yes County fixed effects No No No No Yes Constant -340.41 -175.32 -174.14 -400.15 -890.78 (103.13) (221.79) (215.78) (248.47) (581.02) R2 0.003 0.060 0.153 0.198 0.146 N 1542 1542 1510 1510 1510 Table 7. The Effect of the Job Tax Credit on County Employment in Qualified Industries (standard errors in parentheses) Table 8. Regression Discontinuity Analysis  (standard errors in parentheses) Variable [1] [2] [3] Treatment 102.30 -205.10 -427.02 (122.37) (516.93) (622.96) Rank 6.67 -47.12 -53.94 (9.71) (40.91) (48.57) Constant -645.88 4837.99 7770.00 (748.24) (4623.86) (7193.16) R2 0.002 0.008 0.004 N 333 362 359 Table 9. Employment Growth Across Border Counties (standard errors in parentheses) Border Counties Variables [1] Tiers 1 & 2 [2] Tiers 2 & 3 [3] Tiers 3 & 4 DiffCredit -154.82 -46.40 -5136.42*** (109.92) (452.08) (1887.00) Constant 807.67 666.81 12543.43*** (568.76) (2901.02) (4878.57) R2 0.003 0.000 0.020 N 649 452 359 Future Work –  1. Incorporate establishment level data 2. Account for interaction between less developed census tracts and tier effects 3. Control for spatial effects 4. Firm Duration Comments and Suggestions appreciated.    Thank you. 

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Measuring the Effect of Job Creation Tax Credits

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