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Taxes and Firm Investment

Kerim Arin, Kevin Devereux and Mieszko Mazur

No 202102, Working Papers from School of Economics, University College Dublin

Abstract: We investigate the firm level investment responses to narrative shocks to average personal and corporate tax rates using a universal micro dataset of publicly traded U.S firms for the post- 1962 period. By allowing for heterogeneous effects over the business cycle and accompanying monetary policy regime, as well as over firm-level characteristics, we show that : (i) corporate tax multipliers are negative overall, but this result is driven by smaller firms who face larger borrowing constraints, especially during high-unemployment periods or when the accompanying monetary policy is contractionary; (ii) while the magnitude and the significance of personal income tax multipliers are smaller on the aggregate, there is some evidence of positive personal tax multipliers in high-unemployment state by large (dividend-paying) firms, which is consistent with the recent literature.

Keywords: Investment; Taxation; Fiscal policy; Fiscal multiplier (search for similar items in EconPapers)
JEL-codes: C33 C53 E62 G32 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2021-01
New Economics Papers: this item is included in nep-cfn, nep-mac and nep-pbe
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http://hdl.handle.net/10197/11868 First version, 2021 (application/pdf)

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Journal Article: Taxes and firm investment (2023) Downloads
Working Paper: Taxes and firm investment (2021) Downloads
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