Lynn Snarr Hal Snarr Dan Friesner Introduction Why New York State access to world financial markets international ports the St Lawrence and Hudson rivers Why not New York State ID: 659442
Download Presentation The PPT/PDF document "Evaluating the employment effects of STA..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Evaluating the employment effects of START-UP NY using county-level unemployment rates
Lynn
Snarr
Hal Snarr
Dan
Friesner
Slide2
Introduction
Why New
York
State?
access
to world financial
markets
international ports
the
St. Lawrence and Hudson
rivers
Why not New York State?
onerous tax: tax
revenue as a percent of
GSP
was 62.1
%
regulatory
environment: Bottom 10 in State
Business Tax Climate
IndexSlide3
STARTUP-NY is the State’s plan to become the next Silicon Valley or Austin
Enacted in 2014 to grow
GSP via firm
expansion,
enhance employment, tax revenue growthSupply-side economics or crony capitalism?Only high-tech firms choosing the tax free zones are eligible for it (Bruns 2013)firms with 100% of their operations in these zones get tax credits (STARTUP-NY)firms are exempted from paying any state or local taxes for ten years (STARTUP-NY)Tax credits are prorated for firms with under 100% of operations in tax free zones (STARTUP-NY)Employees can be exempted from paying income tax (STARTUP-NY)3-member board determines who’s in and where they play (Bruns 2013)ESD Corp (ties the Gov?) has rights to convert min-security jails & psychiatric hospitals (Bruns 2013)Members of the 10 regional councils are campaignpolitical donors? (Gormley 2016)Program has yet to be evaluated independently (Gormley 2016)To us, the supply-side tax cuts are more like tax subsidies passed out to friends.
IntroductionSlide4
Supply-side economics or crony capitalism
?
(continued)
Firms selling online
or over phones may find that the tax exemptions are of little valueParticipation further limited: certification expenses, licensing and maintenance fees, public transportation taxes, and sales and use taxesSTART-UP NY gives tax-free status approval to a participant’s employees (Chumley 2014)START-UP NY imposes limits on number of “tax-free” employees at a participant (Spector 2015)the majority of business involved in the program is “an eclectic mix… more mom-and-pop companies than… Fortune 500” (Craig and McKinley 2015):Simply Natural ClothingSonic BlocksAmericord Registry Almost $100 million spent on promoting the program since (Spector 2015)IntroductionSlide5
Government R&D evaluations use firm level data:
Daniel
J. Wilson (2009) “Beggar Thy Neighbor? …”
Review of Economics & Statistics.
Czarnitzki, Hanel & Rosa (2011) “Evaluating the impact of R&D tax credits on innovation” Reasearch & Policy Rubin, Marilyn and Donald J. Boyd (2013)60 years of data to analyze the impact of business tax incentives GSP growthNo evidence suggesting that tax incentives contribute to economic growthNo empirical literature on STARTUP-NY’s effect on county unemployment Use the Card and Krueger (1994, AER) difference-and-differences in PA-NJ employment methodologyIntroductionSlide6
STARTUP-NY program goals: increase
number
of
firms
employment opportunitiescommerceEconomic Schools of Thought EvaluationsThe Supply-sideZero-taxes on firmsZero-taxes on workersFactories are built after investments are madeNeoclassicalAustrianPost-KeynesianHypotheses: Ho: STARTUP-NY has no effect on county unemployment Ha: STARTUP-NY reduces county unemploymentIntroduction
AD
SRAS
Y
0
LRAS
P
0
Y
1Slide7
The DataSlide8
The DataSlide9
The DataSlide10
The DataSlide11
The DataSlide12
The DataSlide13
The DataSlide14
The DataSlide15
The DataSlide16
The DataSlide17
The Difference-in-Differences (2014-2016
)
NY
PA
DuNY = -1.3DuPA = -0.2
D
u
NY
-
D
u
PA
= -1.11Slide18
The Difference-in-Differences
2 control groups = non-STARTUP NY counties, PA and non-STARTUP NY counties
TREATMENT = the presence of a START-UP NY campus in a county (STARTUP) YEAR = is post treatment dummy (next year)X is set of county and state level controlsui
are the county effects
d
3
is the
difference in differences
estimator
Immediate-effect and delayed-effect modelsSlide19
The Difference-in-Differences
(2015-16) (2016-17)Slide20
The Difference-in-Differences
2015-16
OLS
FE RE
FE RESlide21
The Difference-in-Differences
2015-16
OLS
FE RE
FE RE2016-17
OLS
FE RE
FE RESlide22
The critics of START-UP NY are numerous.
Jeffrey
Mikkelson
(2014
): The supply-side economics that underlie the program are kickbacks for political donorsIan Murray (via Chumley 2014): STARTUP zones are like Reagan’s enterprise zones, which don't go far enough to foster a real free-market revivalOur results seemingly support: STARTUP is enhancing employment (delayed-effect)It is associated with a 0.5 percentage point reduction in unemployment (2016-17)Or 50,000 fewer unemployed workers in New York State (LF = 10m)Caution! … more research neededIs unemployment falling in NY (relative to PA) due to new firms being incubatedIs unemployment rising in PA (relative to NY) due to its firms being raidedWilson (2009)If program is shifting firm birth places, it is not adding to national output, but shifting where that output is producedThe Difference-in-Differences