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NATIONAL BUREAU OF ECONOMIC RESEARCH
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Zhao Chen

Fudan University
China

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Institutional Affiliation: Fudan University

NBER Working Papers and Publications

June 2018Notching R&D Investment with Corporate Income Tax Cuts in China
with Zhikuo Liu, Juan Carlos Suárez Serrato, Daniel Yi Xu: w24749
We analyze the effects of a Chinese policy that awards substantial corporate tax cuts to firms that increase R&D investment over a given threshold, or notch. We exploit this quasi-experimental variation with administrative tax data in order to shed light on longstanding questions on the effects of fiscal incentives for R&D. We find large responses of reported R&D using a cross-sectional “bunching” estimator that is new to the R&D literature. We also find significant increases in firm-level productivity, even though about 30% of the increase in R&D is due to relabeling of administrative expenses. Anchored by these reduced-form effects, we estimate a structural model of R&D investment and relabeling that recovers a 9.8% return to R&D. We simulate alternative policies and show that firm selec...
August 2016The Consequences of Spatially Differentiated Water Pollution Regulation in China
with Matthew E. Kahn, Yu Liu, Zhi Wang: w22507
China’s environmental regulators have sought to reduce the Yangtze River’s water pollution. We document that this regulatory effort has had two unintended consequences. First, the regulation’s spatial differential stringency has displaced economic activity upstream. As polluting activity agglomerates upstream, more Pigouvian damage is caused downstream. Second, the regulation has focused on reducing one dimension of water pollution called chemical oxygen demand (COD). Thus, local officials face weak incentives to engage in costly effort to reduce other non-targeted but more harmful water pollutants such as petroleum, lead, mercury, and phenol.

Published: Zhao Chen & Matthew E. Kahn & Yu Liu & Zhi Wang, 2018. "The consequences of spatially differentiated water pollution regulation in China," Journal of Environmental Economics and Management, . citation courtesy of

 
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