IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v93y2024ipbp28-41.html
   My bibliography  Save this article

The Government's fiscal and taxation policy effect on enterprise productivity: Policy choice and optimal allocation

Author

Listed:
  • Zhang, Xiekui
  • Gong, Dayong
  • Huang, Yihan
  • Li, Yiting

Abstract

Based on a thorough exploration of the mechanisms by which fiscal subsidies and tax incentives influence enterprise productivity, this research conducts an empirical analysis, leveraging a detailed micro-database of Chinese industrial enterprises spanning from 1998 to 2012, and applies a fixed-effect methodology to rigorously evaluate the effects of these fiscal and tax policies. The findings of this research indicate that: (1) On average, both fiscal subsidies and tax incentives help to increase the productivity of Chinese enterprises. Regarding the impact of individual policies, it is discerned that the stimulative influence of tax incentives surpasses that of fiscal subsidies in terms of promoting enterprise productivity. This conclusion is still valid after the robustness test. (2) By examining the heterogeneous characteristics of the city's administrative hierarchy, industry factor intensity, and enterprise ownership, it is found that the “productivity effect” of fiscal subsidies in municipalities is the largest, and the “productivity effect” of tax incentives in prefecture-level cities is the largest. The productivity of capital and labor-intensive enterprises benefits most from fiscal subsidies. There is little difference in the impact of tax incentives on the productivity of enterprises across various industries. Considering the aspect of enterprise ownership, it is observed that private enterprises leverage fiscal subsidies and tax incentives more effectively than state-owned enterprises to enhance their productivity. (3) There are synergy effects between fiscal subsidies and tax incentives in promoting enterprise productivity. The government can maximize corporate productivity by allocating tax incentives and fiscal subsidies at a ratio of 3.12:1.

Suggested Citation

  • Zhang, Xiekui & Gong, Dayong & Huang, Yihan & Li, Yiting, 2024. "The Government's fiscal and taxation policy effect on enterprise productivity: Policy choice and optimal allocation," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 28-41.
  • Handle: RePEc:eee:reveco:v:93:y:2024:i:pb:p:28-41
    DOI: 10.1016/j.iref.2024.03.049
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056024002132
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.iref.2024.03.049?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Fiscal subsidies; Tax incentives; Enterprise productivity; Optimal allocation;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:93:y:2024:i:pb:p:28-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.