 The impact of VAT input tax refund policy on firms’ labor income share: Evidence from ChinaGuang-Zhao Yang and Deng-Kui Si Economic Analysis and Policy, 2025, vol. 86, issue C, 2233-2246 Abstract: This study examines the impact of China’s 2018 VAT input tax credit refund policy on the labor income share within enterprises. Using panel data from Chinese listed companies between 2014 and 2022, we find that the policy increased the labor income share by approximately 0.8 percentage points. The reform reduced industry concentration and improved firms’ access to external financing. The effects were more pronounced among private firms, financially constrained firms, high-productivity enterprises, and labor-intensive sectors. In addition, the policy stimulated greater R&D investment and output, accompanied by increased hiring of technical personnel. While average employee compensation rose, executive pay grew at an even faster rate, indicating a potential widening of intra-firm wage inequality. The policy also contributed to overall employment expansion. These findings suggest that the VAT refund policy positively affected labor income distribution, with broader implications for corporate investment behavior and internal wage structures. Keywords: Vat input tax refund policy; Labor income share; Financing constraints; Innovation Investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:86:y:2025:i:c:p:2233-2246 DOI: 10.1016/j.eap.2025.05.054 Access Statistics for this article Economic Analysis and Policy is currently edited by Clevo Wilson More articles in Economic Analysis and Policy from Elsevier |
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