Essays in labor economics

This dissertation, "Essays in Labor Economics, " includes three chapters investigating the role of innovation and technological change in shaping labor markets. The first chapter, "Do R\& D Tax Credits Create Jobs?", studies the employment effects of state tax credits for research and development (R& D), a large and widely-used policy tool. Using confidential micro data from the U.S. Census Bureau, I show that state R& D tax credits increase state employment growth. The increased in-state employment growth is not due to R& D-performing firms shifting employment across states in response to differential tax incentives. Rather, total employment growth at these firms increases. Additionally, greater in-state employment growth does not come at the expense of neighboring states. This is surprising in light of previous research which found that the credits increase in-state R& D spending but that all of the increase is offset by decreased R& D spending in neighboring states. I find no similar effect with respect to employment growth. A plausible explanation for my results is that state R& D tax credits cause increased innovation in the states which offer them, as the tax credits are associated with higher R& D investment and patenting, and lead to increased productivity growth. The second chapter, "Do Innovative Firms Offshore Less?", provides causal evidence of a link between innovation and offshoring. Linking confidential U.S. Census micro data on foreign trade transactions, production, and R& D expenditures, and using R& D state tax credits to instrument for firm R& D investment, I find that over the past 20 years more R& D-intensive firms engage in less offshoring. I provide evidence that the operative mechanism is quality-upgrading -- innovative firms produce higher quality products using more expensive and higher quality intermediate inputs which are complementary to domestic production. The third chapter, co-authored with Nicholas Bloom of Stanford University and John Van Reenen of the Massachusetts Institute of Technology, is titled "Have R\& D Spillovers Changed?". Slow growth over the last decade has prompted policy attention towards increasing R& D spending, often via the tax system. In this essay, we examine the impact of R& D on firm performance, both by the firm's own investments and through spillovers from other firms. Analysing panel data on US firms over the last three decades, and allowing for interactions in both technology space and product market space. We show that the magnitude of R& D spillovers remains as large in the second decade of the 21st Century as it was in the mid-1980s. The marginal social return and marginal private return to R& D have been largely stable during this time period. Consequently, the ratio between marginal social returns to R& D and marginal private returns has changed little since the 1980's, with the marginal social return exceeding the marginal private return by a factor of 4. This implies that there remains a strong case for public support of R& D. Positive spillovers appeared to increase in the 1995-2004 digital technology boom.

Keywords: Economics.
Advisor: Bloom Nick
Bernstein Shai
Sorkin Isaac