How do tax incentives affect business investment? Evidence from German bonus depreciation

Sebastian Eichfelder and Kerstin Schneider ()

No 231, arqus Discussion Papers in Quantitative Tax Research from arqus - Arbeitskreis Quantitative Steuerlehre

Abstract: We analyse how tax incentives in the form of accelerated depreciations ("bonus depreciation") affect business investment. By exploiting exogenous variation in tax regulation of a regional bonus depreciation program in the former East Germany, we identify and quantify the impact from bonus depreciation on building and equipment investments at the extensive and intensive margins in the German manufacturing industry. We observe a stronger response for building investments and from large firms. There is only weak evidence of subsidy shopping but stronger evidence of investment shifting to years with more generous bonus depreciation regulations.

Keywords: bonus depreciation; tax incentive; business taxation; heterogeneity (search for similar items in EconPapers)
JEL-codes: G11 H25 H32 M41 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-bec, nep-eur, nep-pbe and nep-pub
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:arqudp:231

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