The Impact Of Accelerated Depreciation Policy Of Fixed Assets On Corporate Labor Hiring

Stability of employment is not only an important guarantee of the high-quality and stable development of China’s economy but also a major contribution to the deepening of capital accumulation,industrial transformation,and modernization.The report of the 20 th CPC National Congress reiterated that employment is people’s most fundamental livelihood,emphasizing strategies for strengthening and improving employment.At present,the unemployment rate in China is historically high due to trade protectionism,geopolitical conflicts,and so on.Tax policy has always been regarded as an important tool to regulate the macroeconomy and promote the stable development of society and the economy.As the main tax payer,corporates are obviously influenced by tax policy,which affects their employment demand.Therefore,it is crucial to study tax policies that affect the employment demand of corporates.The accelerated depreciation policy of fixed assets implemented by the Chinese government in 2014 and 2015 is an extremely important and representative tax incentive policy,which provides a good opportunity to identify the impact of tax incentives on corporate labor hiring.Accordingly,this thesis investigates the incentive effects of the accelerated depreciation policy of fixed assets enacted in 2014 and 2015 on corporates’ labor hiring demand using data on Chinese A-share listed corporates within the period from 2011 to 2018.Firstly,based on existing studies,this thesis theoretically analyzes the possible effects of the accelerated depreciation policy of fixed assets on corporates’ labor hiring demand.It discusses the possible heterogeneous effects of the policy and proposes research hypotheses in terms of depreciation supplementation theory,income effect,substitution effect,and capital skill complementarity effect.Secondly,this thesis introduces the data sources and sample selection for empirical analysis.It defines various indicators and sets up an individual time two-way fixed effects model.Finally,this thesis uses an empirical model for regression analysis and performs many robustness tests on the regression results.Based on research hypotheses,this thesis examines the mechanism of the policy’s impact on corporates’ hiring demand in many ways and tests the heterogeneous impact of the policy in terms of both corporate ownership nature and corporate size.This thesis finds that firstly,the accelerated depreciation policy of fixed assets implemented in 2014 and 2015 significantly boosts corporates’ labor hiring demand.The empirical results still hold after numerous robustness tests.Secondly,the mechanism study shows that the accelerated depreciation policy of fixed assets mainly boosts corporates’ hiring demand for high-skilled labor under the combination of the financial flow effect and capital skill complementarity effect.It does not exhibit a significant substitution effect.Specifically,the policy alleviates corporates’ financing constraints through the capital flow effect,significantly boosts corporates’ hiring size,stimulates corporates’ investment in fixed assets,and boosts corporates’ hiring demand for high-skilled labor mainly due to the capital-skill complementarity effect.Thirdly,the accelerated depreciation policy of fixed assets has heterogeneous effects on different types of corporates.Large-scale and non-state corporates are stimulated to increase labor hiring while small-scale and state-owned corporates are not significantly affected by the policy.Large non-state corporates are most stimulated by the policy.In order to further exert the incentive effect of accelerated depreciation policy of fixed assets,based on theoretical analysis and empirical results,this thesis proposes the following countermeasures.Firstly,insist on the implementation of tax reduction policy and further expand the scope of application of accelerated depreciation policy of fixed assets.Secondly,design the policy of accelerated depreciation of fixed assets in a differentiated way to improve the relevance of its implementation.Specifically,give large corporates more flexible depreciation options and allow SMEs to depreciate a certain percentage of the original value of fixed assets.Thirdly,sound skills training system to help improve the employability of workers.Fourthly,strengthen interaction between banks and taxes to provide SMEs with more financing channels to directly alleviate their financing constraints.The findings of this thesis enrich the research related to the impact of tax policy on labor force employment and also have implications for government implementation of employmentfirst strategies.