TY  - RPRT
        AU  - Lerche, Adrian
        TI  - Investment Tax Credits and the Response of Firms
        PY  - 2022/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 15668
        UR  - https://www.iza.org/index.php/publications/dp15668
        AB  - This paper estimates the direct effects of investment tax credits on firms' production behavior and the additional indirect effects arising from agglomeration economies. Exploiting a change in tax credit rates by firm size in Germany, I find that manufacturing firms increase capital and employment, with labor demand in information and communication technology-intensive industries shifting towards college-educated workers. Using geolocation data, I show that agglomeration benefits lead to a sizable further firm production expansion with these benefits materializing within distances of 5 kilometers. Worker flows from the service sector and from non-employment, rather than between manufacturing firms, explain the employment effects. 
        KW  - investment tax incentives
KW  - capital
KW  - labor demand
KW  - agglomeration
        ER  -