Personal Taxes and Firm Skill Hiring: Evidence from 27 Million Job Postings

55 Pages Posted: 2 Jul 2019 Last revised: 23 Mar 2021

See all articles by Murillo Campello

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Janet Gao

Indiana University - Kelley School of Business

Qiping Xu

University of Illinois Urbana Champaign

Date Written: December 27, 2019

Abstract

Using big data on U.S. job postings, we document detrimental effects of local personal income taxes on the level of education, experience, and technological skills required by firms when hiring workers (downskilling). Tax-induced downskilling is identified at the county level and at individual firms' establishments. It is driven by taxes on middle-class earners. Multi-state corporations internally reassign their hiring of low- vs. high-skill workers according to local personal tax changes. Together with worker downskilling, firms cut IT investment in localities that hike personal taxes. Our results suggest that corporations amplify the ``brain drain'' effect induced by local personal income taxes.

Keywords: State personal income taxes, Skilled labor, Human capital, Firm organizational form

JEL Classification: E24, J23, G31, H24

Suggested Citation

Campello, Murillo and Gao, Janet and Xu, Qiping, Personal Taxes and Firm Skill Hiring: Evidence from 27 Million Job Postings (December 27, 2019). Kelley School of Business Research Paper No. 19-35, Available at SSRN: https://ssrn.com/abstract=3392080 or http://dx.doi.org/10.2139/ssrn.3392080

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

114 East Avenue
369 Sage Hall
Ithaca, NY 14853
United States

HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138

Janet Gao

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

Qiping Xu (Contact Author)

University of Illinois Urbana Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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