Do investment tax incentives promote firm pollution abatement investment? Evidence from China’s value-added tax reform

Fei Peng, Shibiao Zhou and Ya Chen

Journal of the Asia Pacific Economy, 2025, vol. 30, issue 2, 451-482

Abstract: Using the 2009 consumption-based value-added tax (VAT) reform in China as a quasi-natural experiment for investment tax incentives, we investigate the impact of investment tax incentives on firm pollution abatement investment via a difference-in-differences (DID) approach. We find that the investment tax incentives have significantly raised firm pollution abatement investment of the eligible firms over the ineligible firms by 21.7%. Moreover, the effect is more pronounced for firms with political connection and firms located in regions with stricter environment regulation and lower pollution abatement costs. Our mechanism shows that the motivations for tax deduction play an important role in increasing pollution abatement investment. We also find that VAT reform has a negative indirect impact on firm environmental fine and firm employments and has a positive impact on firm’s capital-labor ratio and labor productivity.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13547860.2023.2297576 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:rjapxx:v:30:y:2025:i:2:p:451-482

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjap20

DOI: 10.1080/13547860.2023.2297576

Access Statistics for this article

Journal of the Asia Pacific Economy is currently edited by Leong Liew

More articles in Journal of the Asia Pacific Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().