Incentive Effects of Bonus Depreciation

Posted: 18 Jan 2011

See all articles by David S. Hulse

David S. Hulse

University of Kentucky - Gatton College of Business and Economics

Jane R. Livingstone

Western Carolina University

Date Written: December 1, 2010


This study examines the effect on capital expenditures of "bonus depreciation," which was intended to stimulate such spending by allowing businesses to immediately expense a portion of the cost of qualified capital expenditures from late 2001 through 2004. After controlling for many previously documented determinants of capital expenditures, some of our results indicate that capital expenditures during bonus depreciation’s availability were greater than those during the time it was not available, consistent with the expected effect. However, other results indicate that bonus depreciation had an insignificant effect on capital expenditures. These mixed findings generally persist through several sensitivity analyses. We interpret these results as weakly supportive evidence that Congress attained its goal of stimulating capital spending.

Keywords: Taxation

JEL Classification: H25

Suggested Citation

Hulse, David S. and Livingstone, Jane R., Incentive Effects of Bonus Depreciation (December 1, 2010). Journal of Accounting and Public Policy, Vol. 29, No. 6, 2010, Available at SSRN:

David S. Hulse

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-3276 (Phone)
859-257-3654 (Fax)

Jane R. Livingstone (Contact Author)

Western Carolina University ( email )

United States

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