This paper assesses the effects of a tax policy designed to induce manufacturing investment on employee earnings. Following the accelerated depreciation policy in Canada, which lowers the costs of acquiring machinery or equipment, treated frms increase manufacturing investment and employment. However, earnings of incumbent workers at treated firms decrease on average, primarily driven by displaced or low-skill workers. Furthermore, both the skil ratio and skill premium increase within the frm, providing evidence of skill-biased technological change. Our fndings suggest that a tax policy promoting manufacturing investment may contribute to increases in wage inequality both within and across firms.

Yige Duan is an Assistant Professor at the Antai College of Economics and Management, Shanghai Jiao Tong University. He received his PhD in Economics from the University of British Columbia in 2024. Dr. Duan studies labor and urban economics. His work has been published in Management Science and received the 2024 best paper award of the journal.