The influence of tax incentives on market segmentation in the context of a unified national market

Jun Liu, Bihui Huang and Yaoyu Hu

Finance Research Letters, 2024, vol. 65, issue C

Abstract: The new development pattern prioritises the construction of a unified national market, eliminating market segmentation and promoting resource flows. This paper investigates the impact of tax incentives on market segmentation using China's provincial panel data from 2003 to 2019 through a two-way fixed effects model. The results indicate that tax incentives reduce market segmentation. The analysis of heterogeneity reveals a non-linear relationship between the effects of tax incentives on market segmentation. Tax incentives reduce market segmentation in regions with low tax incentives, but have a limited effect or even exacerbate segmentation in regions with high incentives.

Keywords: Tax incentives; Market segmentation; Unified national market (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:65:y:2024:i:c:s1544612324006214

DOI: 10.1016/j.frl.2024.105591

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