Panel Paper: R&D Tax Credits and Interstate Mobility of Ph.Ds.

Saturday, November 10, 2018
Marriott Balcony A - Mezz Level (Marriott Wardman Park)

*Names in bold indicate Presenter

J. David Selby, Arizona State University

Since the great recession, a number of state’s have cut their contribution to higher education. Additionally, as the United States economy evolves, states require more highly skilled labor to fill science, technology, engineering, and math (STEM) jobs. Over the next decade, the US is projected to need an additional one million STEM workers above the current rate of training. One subset of STEM workers, individuals with Ph.Ds., are particularly desirable for states to train because of their contribution to a state’s economy in terms of knowledge, innovation, and human capital. Since only 37% of PhDs live in the state they received their degree, there is little guarantee a state will be able to retain the economic benefit of training these highly skilled workers. As an alternative to training, a state can encourage Ph.Ds. to migrate by improving its economy. One mechanism a state can use to accomplish this is by incentivizing industry Research and Development (R&D) spending through tax credits. This paper demonstrates how R&D tax credits affect the movement of Ph.Ds. between states using panel data from the Survey of Doctoral Recipients. I use a fixed effects model to explain the relationship between the amount of R&D tax credits claimed by companies and the movement of Ph.Ds. The findings from this paper suggest that policymakers should continue to incentivize industry R&D spending and increase their support of state universities in order to attract Ph.Ds. to their states.