%0 Report
        %A Lerche, Adrian
        %T Investment Tax Credits and the Response of Firms
        %D 2022
        %8 2022 Oct
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 15668
        %U https://www.iza.org/publications/dp15668
        %X 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. 
        %K investment tax incentives
%K capital
%K labor demand
%K agglomeration