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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: arqus Discussion Paper ; No. 231

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Business Taxes and Subsidies including sales and value-added (VAT) ; Fiscal Policies and Behavior of Economic Agents: Firm ; Accounting
• Subject: bonus depreciation ; tax incentive ; business taxation ; heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eichfelder, Sebastian ; Schneider, Kerstin
• Event: Veröffentlichung
• (who): Arbeitskreis Quantitative Steuerlehre (arqus)
• (where): Berlin
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/190980
• Last update: 10.03.2025, 11:43 AM CET