Tax Policy and Heterogeneous Investment Behavior
Eric Zwick and
American Economic Review, 2017, vol. 107, issue 1, 217-48
We estimate the effect of temporary tax incentives on equipment investment using shifts in accelerated depreciation. Analyzing data for over 120,000 firms, we present three findings. First, bonus depreciation raised investment in eligible capital relative to ineligible capital by 10.4 percent between 2001 and 2004 and 16.9 percent between 2008 and 2010. Second, small firms respond 95 percent more than big firms. Third, firms respond strongly when the policy generates immediate cash flows, but not when cash flows only come in the future. This heterogeneity materially affects investment-weighted estimates and supports models in which financial frictions or fixed costs amplify investment responses.
JEL-codes: D21 D22 D92 G31 H25 H32 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20140855
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56) Track citations by RSS feed
Downloads: (external link)
https://www.aeaweb.org/articles/attachments?retrie ... 1IQC77ajfzMpLm4ETDo3 (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... yT3MFmbRsKHs-7EeASil (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... oanY6_aLDHqSenwLAWcz (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.
Working Paper: Tax Policy and Heterogeneous Investment Behavior (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:107:y:2017:i:1:p:217-48
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().