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Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives

Author

Listed:
  • Estelle P. Dauchy

    (New Economic School)

  • Sophia Chen

    (Research Department, International Monetary Fund)

Abstract

We propose a tax-adjusted q model with physical and intangible assets and estimate the effect of bonus depreciation in the United States in the early 2000s. We find that investment responds moderately to tax incentives; however allowing for heterogeneity reveals that intangible-intensive firms are more responsive than physical-intensive firms and their differences increase with firm size. Accounting for intangible assets increases the estimated total investment response from 3.7 to 14.3 percent among the largest 500 firms. Our results imply that understanding the behavior of large and intangible-intensive firms has important implications for the design and evaluation of investment policy.

Suggested Citation

  • Estelle P. Dauchy & Sophia Chen, 2014. "Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives," Working Papers w0207, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0207
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    File URL: https://www.nes.ru/files/Preprints-resh/WP207.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Sebastien Bradley & Estelle Dauchy & Makoto Hasegawa, 2018. "Investor valuations of Japan’s adoption of a territorial tax regime: quantifying the direct and competitive effects of international tax reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(3), pages 581-630, June.

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    More about this item

    Keywords

    investment tax incentives; intangible assets; q model of investment; bonus depreciation;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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