The Value-Added Tax Reform Puzzle

This explores the impact of a tax reform in some provinces of China which eliminated the value-added tax on some investment goods. While the goal of the experiment was to encourage upgrading of technology, the results suggest that there was no evident increase overall in fixed investment, and employment fell significantly in the treated provinces and sectors. The reform reduced the total number of employees for all types of firms. For domestic firms, it reduced employment by almost 8 percent. The results are robust to a variety of approaches, and suggest that the primary impact of the policy has been to induce labor-saving growth. This experiment has since been extended to the rest of China.

Bibliographic Details

Main Authors:	Cai, Jing, Harrison, Ann
Language:	English
Published:	2011-09-01
Subjects:	ACCOUNTING, ADDED TAX, ADDED TAXES, ADVERSE EFFECTS, AFFILIATED ORGANIZATIONS, ANNUAL SALES, BUSINESS ECONOMICS, BUSINESS INVESTMENT, CAPITAL ACCUMULATION, CAPITAL ASSETS, CAPITAL INTENSITY, CAPITAL INVESTMENT, CHECKS, CONSUMER SPENDING, CONSUMERS, CORPORATE BEHAVIOR, CORPORATE TAXES, CREDIBILITY, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIVIDEND, DIVIDEND TAX, DIVIDEND TAXES, DOUBLE TAXATION, DUMMY VARIABLE, EQUIPMENT, EXPENDITURE, EXPORT SHARE, EXPORTS, FINANCIAL CRISIS, FISCAL POLICY, FIXED ASSET, FIXED ASSETS, FIXED INVESTMENT, FOREIGN FIRMS, FOREIGN INVESTMENT, FOREIGN OWNERSHIP, FOREIGN SHARE, FOREIGN SHARES, FUTURE RESEARCH, GDP, INCOME, INCOME TAXES, INSTRUMENT, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INVESTMENT BEHAVIOR, LIQUID ASSETS, MANUFACTURING INDUSTRIES, MARKET ENVIRONMENT, NEW PRODUCTS, OUTPUT, PRODUCTIVE ASSETS, PRODUCTIVE INVESTMENT, PRODUCTIVE INVESTMENTS, PRODUCTIVITY, PUBLIC FINANCE, PURCHASE PRICE, SALES TAX, SMALL BUSINESS, STATE ENTERPRISE, STATE OWNED ENTERPRISES, TAX BASE, TAX BASES, TAX CHANGES, TAX DEDUCTION, TAX DEDUCTIONS, TAX EXEMPTION, TAX INCENTIVES, TAX PAYMENTS, TAX POLICIES, TAX POLICY, TAX RATE, TAX RATES, TAX REDUCTION, TAX REFORM, TAX REFORMS, TAX REFUNDS, TAX REVENUE, TAX SYSTEM, TAXATION, TOTAL FACTOR PRODUCTIVITY, USE TAX, VALUE ADDED, VALUE ADDED TAX, VALUE OF OUTPUT, WAGES,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110906095243 https://hdl.handle.net/10986/3551
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