Investment responses to Japanese tax reforms: A cross-industry comparison

Junya Hamaaki

Japan and the World Economy, 2008, vol. 20, issue 4, pages 542-562

Abstract: This paper examines the investment responses to past Japanese tax reforms for individual industries. To identify the tax effect, this paper estimates investment functions by using a covariate of the change in tax-adjusted q caused by tax reform. This method alleviates the measurement error problem and enables the derivation of estimates indicating the valid adjustment cost of investment. Moreover, the findings suggest that firms' investment responded significantly to tax reforms in the 1980s in general. Also, investments of only a few industries responded to those in the late 1990s, implying that the manner of investment response slightly differs among industries.

Keywords: Tax; reform; Investment; Tax-adjusted; q (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:eee:japwor:v:20:y:2008:i:4:p:542-562

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