Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms [JOB MARKET PAPER]
(with Juan Carlos Suárez Serrato)
Manuscript, December 2013. Slides, January 2014.
Abstract: This paper estimates the incidence of state
corporate taxes on workers, landowners, and firm owners in a spatial
equilibrium model in which corporate taxes affect the location choices of both
firms and workers. Heterogeneous, location-specific productivities and
preferences determine the mobility of firms and workers, respectively. Owners
of monopolistically competitive firms receive economic profits and may bear the
incidence of corporate taxes as heterogeneous productivity can make them
inframarginal in their location choices. We derive a simple expression for
equilibrium incidence as a function of a few estimable parameters. Using
variation in state corporate tax rates and apportionment rules, we estimate the
reduced form effects of tax changes on firm and worker location decisions, wages, and rental costs. We then use minimum distance methods to
recover the parameters that determine equilibrium incidence as a function
of these reduced form effects. In contrast to previous assumptions of
infinitely mobile firms and perfectly immobile workers, we find that firms are
only approximately twice as mobile as workers over a ten-year period. This
fact, along with equilibrium impacts on the housing market, implies that firm
owners bear roughly 40% of the incidence, while workers and landowners bear 35%
and 25%, respectively. Finally, we derive revenue-maximizing state
corporate tax rates and discuss interactions with other local taxes
and apportionment formulas.
In Media: Washington Post, VoxEU for their job market paper series, Washington Post Wonkblog, Chicago Sun-Times
Tax Cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment
Slides and Manuscript from NBER Summer Institute - Public Economics. July 2013.
In Progress (My research statement describes these projects in more detail and is available upon request).
Abstract: This paper investigates how tax changes for different income groups affect macroeconomic activity. Using historical tax return data from NBER’s TAXSIM, I construct a measure of who received (or who paid for) postwar tax changes for each income and payroll tax change that Romer & Romer (2010) classify as exogenous. At the national level, I aggregate tax changes for all taxpayers in the bottom 90% and the top 10% of AGI and relate these aggregates to output, employment, and consumption growth. At the state level, I construct Bartik instruments for state tax shocks using national tax changes and each state’s share of high income taxpayers. If tax cuts for high income earners generate substantial economic activity, then states with a large share of high income taxpayers should grow faster following a tax cut for high income earners. I find that the negative relationship between tax changes and real GDP growth over a two year period is almost entirely driven by tax changes for the bottom 90%. The empirical relationship between tax cuts for the top 10% percent and job creation is negligible in magnitude, statistically insignificant, and much weaker than that of equivalently sized tax cuts for the bottom 90%.
In Media: Reuters, New York Times, Huffington Post, International Business Times, Jared Bernstein, Mother Jones, Project Syndicate
Biased Productivity Growth and Rising Health Expenditures
(with Dominick Bartelme)
State Taxes and Spatial Misallocation
(with Pablo Fajgelbaum, Eduardo Morales, and Juan Carlos Suárez Serrato)
State Corporate Taxes, Firm Mobility, and Innovation Productivity: Evidence from Patent Data
(with Zoe Cullen and Juan Carlos Suárez Serrato)
Declining Labor Shares and the Relative Price of Investment: Evidence from State Investment Tax Credits
(with Dan Wilson)
Tax Cuts for Job Creators The New York Times Economix with Laura Tyson, October 19, 2012.
Research from Before Graduate School
Abstract: The policy of the American Economic Review (AER) to publish unrefereed papers in the same volume as refereed ones gives economists the opportunity to pad their resumes by trying to pass Papers & Proceedings off as refereed AER articles. Using unique data on curricula vitae of economists at the top 25 U.S. economics departments, we provide preliminary evidence in support of deliberate obfuscation. Economists with more Papers & Proceedings are more likely to list them in a way that is difficult to distinguish from refereed ones. We then go on to provide support for a more benign explanation, that the convention guiding how one should document Papers & Proceedings is in transition and varies across communities of scholars. We provide a series of difference-in-differences analyses of citation behavior, both at the level of demographic groups and individuals, showing that economists who cite Papers & Proceedings more tend to be the ones who “pad” more, suggesting both are correlated with an additional latent factor — a judgment about the journal’s prestige.
Campaigning in Poetry: Candidates' Choice of Words in the 2008 Election
(with Bruce Sacerdote)
Manuscript. January 2008.
Abstract: We construct and analyze a database consisting of the words used in speeches made by the candidates in the 2008 Democratic and Republican Presidential Primary. We present findings in two key areas. First, we estimate which candidates are more negative by counting the number of times they mention their opponents by name. Both Obama and Clinton are among the least negative. John Edwards is 3.7 times more negative than Barack Obama and Mitt Romney is 4.7 times more negative than Obama. We also compare the speeches of the candidates to speeches delivered by famous political figures and orators such as Martin Luther King, Ronald Reagan, and John F. Kennedy. For example, we can ask whether a candidate's words are more like those of MLK versus Ronald Reagan. Using our metric, John McCain and Mitt Romney are the most like Ronald Reagan whereas (within the set of primary candidates) the words of Mike Huckabee and Barack Obama are the closest to those of Martin Luther King. Hillary Clinton is by far the candidate closest in oratory to Bill Clinton.
In Media: Freakonomics, Greg Mankiw's Blog