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This research aims to evaluate how tax incentives influence investment and productivity at the firm level in China.

How Do Tax Incentives Affect Investment and Productivity? Firm-Level Evidence from China

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This research aims to evaluate how tax incentives influence investment and productivity at the firm level in China.
Utilized a unique firm-level dataset from 2005 to 2012
Employed a quasi-experimental design to compare treated and control firms
Analyzed impacts of permanent tax incentives introduced during capital taxation reform
The reform increased investment by 38.4% in treated firms compared to controls
Firms’ productivity improved by 8.9% relative to control firms
Effects were more pronounced for firms facing financial constraints.

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Randomized trial investigates tax reform effects on investment and productivity in firms, indicating significant improvements.

Liu et al. (2019) studied this question.

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