Thesis title: Tax Policy and Heterogeneous Investment Behavior (Eric Zwick and James Mahon, American Economic Review 2017, 107(1): 217-248)

Time: Friday, February 22, 2019 12:00-13:30

Location: 610, Main Building, Mingde

Speaker: Tian Muge, PhD student of Renmin University of China, 2018

We estimate the effect of temporary tax incentives on equipment investment using shifts in accelerated depreciation. Analyzing data for over 120,000 firms, we present three findings. First, bonus depreciation raised investment in eligible capital relative to ineligible capital by 10.4 percent between 2001 and 2004 and 16.9 percent between 2008 and 2010. Second, small firms respond 95 percent more than big firms. Third, firms respond strongly when the policy generates immediate cash flows, but not when cash flows only come in the future. This heterogeneity materially affects investment-weighted estimates and supports models in which financial frictions or fixed costs amplify investment responses.

Moderator: Associate Professor Liu Xiaolu

The Finance Literature Seminar is sponsored by the Department of Finance, School of Finance and Finance, Renmin University of China. The graduate students of the Department of Finance analyze the classic or frontier literature of finance, and form theoretical thoughts and systematic views on hot issues in the field of finance. The main topics of the seminar include: government behavior, fiscal system, tax system and macro economy.