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Working Paper
Fiscal Policies for Job Creation and Innovation: The Experiences of US States
This paper reviews selected fiscal policy initiatives undertaken by US states to encourage job creation and innovation. We begin with a discussion of some general considerations about the design of tax policies summarized in a tax policy design table. Four policies are reviewed: job creation tax credits, research and development tax credits, a set of tax policies targeted to the biotechnology industry, and a broad set of tax policies that attract star scientists. The experiences at the state level are used to evaluate the effectiveness of these employment and knowledge-capital tax incentives ...
Working Paper
Financial innovations, money demand, and disaggregation: some time series evidence
This paper explores the instability in estimated money demand functions. Using a new data series on credit card usage, we evaluate the role of financial innovations in stabilizing the M1 demand function over three troubling episodes. We find that our measure of financial innovations improves the short-term predictive ability of the M1 demand function, but does not generate stable long-run elasticities. Structural instability remains even after accounting for seasonal adjustment, the turbulence in the second and third quarters of 1980, and an alternative transactions measure. ; Financial ...
Working Paper
State investment tax incentives: a zero-sum game?
Though the U.S. federal investment tax credit (ITC) was permanently repealed in 1986, state-level ITCs have proliferated over the last few decades. The proliferation of state ITCs and other investment tax incentives raises two important questions: (1) Are these tax incentives effective in achieving their stated objective, to increase investment within the state?; and (2) To the extent these incentives raise investment within the state, how much of this increase is due to investment drawn away from other states? To begin to answer these questions, we construct a detailed panel data set for 50 ...
Working Paper
State investment tax incentives: what are the facts?
There is an ongoing debate in the U.S. among policymakers and the courts concerning the practical effects of state investment tax incentives. However, this debate often suffers from a lack of clear information on the extent of such incentives among states and how these incentives have evolved over time. This paper takes a first step toward addressing this shortcoming. Compiling information from all 50 states and the District of Columbia over the past 40 years, we are able to paint a picture of the variation in state investment tax incentives across states and over time. In particular, we ...
Journal Article
State business taxes and investment: state-by-state simulations
This article develops a framework for simulating the effects of state business taxes on state investment and output. Our simulations provide the predicted increase in investmentboth in equipment and structures (E&S) and in research and development (R&D)and the predicted increase in output for a given state resulting from a specified change in one of its three tax policiesthe E&S investment tax credit, the R&D tax credit, or the corporate income tax. The simulations depend on a set of formulas linking economic parameters and state data to investment and output, all of which are reported in ...
Working Paper
A state level database for the manufacturing sector: construction and sources
This document describes the construction of and data sources for a state-level panel data set measuring output and factor use for the manufacturing sector. These data are a subset of a larger, comprehensive data set that we currently are constructing and hope to post on the FRBSF website in the near future. The comprehensive data set will cover the U.S. manufacturing sector and may be thought of as a state-level analog to other widely used productivity data sets such as the industry-level NBER Productivity Database or Dale Jorgenson?s ?KLEM? database or the country-level Penn World Tables, ...
Journal Article
Fiscal policies aimed at spurring capital formation: a framework for analysis
In recent years, policymakers have proposed various fiscal policies to spur long-run economic growth through increased capital formation. The Bush Administration, for example, proposed lowering the capital gains tax rate. The Clinton Administration, among other measures in its economic package, proposed reinstituting the investment tax credit. These proposals stem from heightened concerns that the U.S. economy has been growing by less than its long-run potential, and from the judgment that this subpar growth is due in part to deficient capital formation.> Chirinko and Morris present a ...