The Employment Effects of State Hiring Credits During and After the Great Recession
State and federal policymakers grappling with the aftermath of the Great Recession have sought ways to spur job creation, in many cases adopting hiring credits to encourage employers to create new jobs. However, there is virtually no evidence on the effects of these kinds of counter-recessionary hiring credits – the only evidence coming from much earlier studies of the federal New Jobs Tax Credit in the 1970s. This paper provides evidence on the effect on job growth of hiring credits adopted by states during the Great Recession. For many of the types of hiring credits we examine we do not find positive effects on job growth. However, some specific types of hiring credits – including those targeting the unemployed and those that allow states to recapture credits when job creation goals are not met – appear to have succeeded in boosting job growth. At the same time, some credits appear to generate hiring without increasing employment or to generate much more hiring than net employment growth, consistent with these credits leading to churning of employees that raises the costs of producing jobs via hiring credits.
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This paper was revised on October 11, 2013