Assist. Prof. Jing Xing, D.Phil

The Impact of Investment Incentives

How do tax incentives affect firms’ investment? Using confidential UK corporation tax returns, Jing Xing, together with Giorgia Maffini and Michael P Devereux, provide new evidence on the effects of incentives in the form of depreciation allowances. They exploit a 2004 exogenous change in the qualifying thresholds for the first-year depreciation allowances (FYAs) and conduct a difference-in-difference analysis. Results suggest that the investment rate increased between 2.1 and 2.6 percentage points when firms became qualified for FYAs, relative to firms that never qualified. This implies an increase in investment rate of 11 per cent at the mean. The researchers exploit exogenous variation in the timing of tax payments to show that this large effect is not due to an increase in available cash and hence this is primarily a cost of capital effect. Firms respond rather quickly to FYAs, within 12 to 18 months. Firms also bunch just below notches in the cost of capital created by the qualifying thresholds, suggesting salience of the FYAs. Such behaviour does not drive the main results.

Jing Xing’s research interests include public economics, taxation and corporate finance. While visiting Munich, she will hold three CES lectures on “Corporate Taxation: Recent Evidence on Selected Issues”.

Jing Xing is an Assistant Professor of Finance at the Antai College of Economics and Management at the Shanghai Jiao Tong University. Prior to joining Antai, she was a Research Fellow at the Oxford University Centre for Business Taxation and an Associate Member of Nuffield College, University of Oxford. Jing Xing is now an International Research Fellow at the Oxford University Centre for Business Taxation and was previously a Research Associate at the Centre for European Economic Research (ZEW). She currently serves on the Associate Editorial Board for International Tax and Public Finance. Jing Xing is a member of the Board of Management for the International Institute of Public Finance (IIPF). She holds an M.Phil and a D.Phil in Economics from the University of Oxford. She also has an MSc in Applied Economics from the Department of Economics and Finance of the City University of Hong Kong.