Tax Policy and Lumpy Investment Behaviour: Evidence from China's VAT Reform

• 成果类型: Article
• 署名作者: Chen, Zhao; Jiang, Xian; Liu, Zhikuo; Serrato, Juan Carlos Suarez; Xu, Daniel Yi
• 署名单位: Fudan University; University of California System; University of California Davis; Duke University; National Bureau of Economic Research
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdac027
• 发表日期: 2023
• 页码: 634-674
• 关键词: incentives evidence; DYNAMICS; MARKET; taxation; IMPACT; plant

摘要

We incorporate the lumpy nature of firm-level investment into the study of how tax policy affects investment behaviour. We show that tax policies can directly impact the lumpiness of investment. Extensive-margin responses to tax policy are key to understanding the effects of different tax reforms and to designing effective stimulus policies. We illustrate these results by studying China's 2009 VAT reform, which lowered the tax cost of investment and reduced partial irreversibility-the price gap between new and used capital. Using comprehensive tax survey data and a difference-in-differences design, we estimate a 36% relative investment increase that is driven by investment spikes. Using a dynamic investment model that fits the reduced-form effects of the reform, we show that policies that directly reduce the likelihood of firm inaction are more effective at stimulating investment.