Accelerated Depreciation and Investment-driven Growth: A Marx-Okishio Approach

25 Pages Posted: 14 Oct 2020 Last revised: 13 Jan 2025

See all articles by Chong Liu

Chong Liu

University of Cambridge - Department of Land Economy; Tsinghua University - School of Social Sciences

Bangxi Li

Tsinghua University

Jim Huangnan Shen

School of Management, Fudan University ; The Growth Lab, Center for International Development, Harvard Kennedy School, Harvard University; Core China Research Center, School of Economics and Business, University of Navarra

Date Written: July 1, 2020

Abstract

Accelerated depreciation of fixed assets is a prominent tax reduction policy. While existing empirical studies have primarily focused on the micro perspective, there is a lack of literature systematically quantifying its macro-level economic impact. Based on Marxist political economy and drawing on Okishio’s theory of accumulation, we propose an analysis framework integrating the reproduction of fixed capital into the overall reproduction of aggregate social capital. This study aims to examine whether, and to what extent, accelerated depreciation can promote economic growth, using China’s input-output data from 1981 to 2020. The findings reveal that accelerated depreciation positively impacts economic growth, primarily driven by new investments. This impact becomes more significant as the depreciation period shortens. However, it is essential to note that shortening the depreciation period also leads to a negative adjustment effect due to increased costs. Theoretical implications for policymaking need a systematic perspective on the role of accelerated depreciation and investment-driven growth.

Keywords: Accelerated Depreciation, Fixed Capital, Investment-Driven Growth, Marx-Okishio Approach

JEL Classification: B51, E62, L60

Suggested Citation

Liu, Chong and Li, Bangxi and Shen, Jim Huangnan,

Accelerated Depreciation and Investment-driven Growth: A Marx-Okishio Approach

(July 1, 2020). Available at SSRN: https://ssrn.com/abstract=3679853 or http://dx.doi.org/10.2139/ssrn.3679853

Chong Liu

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Tsinghua University - School of Social Sciences ( email )

Beijing, 100084
China

Bangxi Li (Contact Author)

Tsinghua University ( email )

Beijing, 100084
China

Jim Huangnan Shen

School of Management, Fudan University ( email )

Shanghai
China

The Growth Lab, Center for International Development, Harvard Kennedy School, Harvard University ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Core China Research Center, School of Economics and Business, University of Navarra ( email )

Campus Universitario
Pamplona, Navarra 31009
Spain

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