Downward Revision of Investment Decisions after Corporate Tax Hikes

Sebastian Link, Manuel Menkhoff, Andreas Peichl and Paul Schüle
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Paul Schüle: Ifo Institute for Economic Research

No 16056, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper estimates the causal effect of corporate tax hikes on firm investment based on more than 1,400 local tax changes. By observing planned and realized investment volumes in a representative sample of German manufacturing firms, we can study how tax hikes induce firms to revise their investment decisions. On average, the share of firms that invest less than previously planned increases by three percentage points after a tax hike. This effect is twice as large during recessions.

Keywords: business cycle; state dependence; corporate taxation; investment (search for similar items in EconPapers)
JEL-codes: G11 H25 H32 H71 O16 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2023-04
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-eec, nep-pbe and nep-pub
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Published - published in: American Economic Journal: Economic Policy, 2024, 16 (4), 194 - 222

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Related works:
Journal Article: Downward Revision of Investment Decisions after Corporate Tax Hikes (2024)
Working Paper: Downward Revision of Investment Decisions after Corporate Tax Hikes (2022)
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