American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Downward Revision of Investment Decisions after Corporate Tax Hikes
American Economic Journal: Economic Policy
vol. 16,
no. 4, November 2024
(pp. 194–222)
Abstract
This paper estimates the causal effect of corporate tax hikes on firm investment based on more than 1,400 local tax changes. By observing planned and realized investment volumes in a representative sample of German manufacturing firms, we can study how tax hikes induce firms to revise their investment decisions. On average, the share of firms that invest less than previously planned increases by 3 percentage points after a tax hike. This effect is twice as large during recessions.Citation
Link, Sebastian, Manuel Menkhoff, Andreas Peichl, and Paul Schüle. 2024. "Downward Revision of Investment Decisions after Corporate Tax Hikes." American Economic Journal: Economic Policy, 16 (4): 194–222. DOI: 10.1257/pol.20220530Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- E32 Business Fluctuations; Cycles
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H32 Fiscal Policies and Behavior of Economic Agents: Firm
- H71 State and Local Taxation, Subsidies, and Revenue
- L60 Industry Studies: Manufacturing: General
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