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

Author

Listed:
  • Murillo Campello

    (Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Janet Gao

    (McDonough School of Business, Georgetown University, Washington, DC 20006)

  • Qiping Xu

    (Gies College of Business, University of Illinois, Champaign, Illinois 61820)

Abstract

Using big data on U.S. job postings, we show that firms increase skill requirements when hiring workers in states that cut personal income taxes. We trace a significant driver of this effect to companies’ reallocation of skilled job postings across states based on tax differentials. The tax-induced upskilling is observed within occupations and is more pronounced for high-skill positions within firms. It is accompanied and amplified by concurrent increases in information technology expenditures at local-level establishments. In characterizing the mechanism at play, we show that job upskilling is triggered by tax changes affecting middle- and upper middle-class workers. It is pronounced for high-growth firms, for firms in tradable industries, and in urban areas, but it is mitigated among profitable firms. A narrative-based analysis helps us establish causal inferences.

Suggested Citation

  • Murillo Campello & Janet Gao & Qiping Xu, 2024. "Personal Taxes and Firm Skill Hiring: Evidence from 27 Million Job Postings," Management Science, INFORMS, vol. 70(10), pages 7215-7241, October.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:10:p:7215-7241
    DOI: 10.1287/mnsc.2022.01211
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