Taxes and Firm Investment

25 Pages Posted: 19 Jan 2021

See all articles by K. Peren Arin

K. Peren Arin

Zayed University

Kevin Devereux

affiliation not provided to SSRN

Mieszko Mazur

IESEG School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2021


We investigate the firm level investment responses to narrative shocks to average personal and corporate tax rates using a universal micro dataset of publicly traded U.S firms for the post- 1962 period. By allowing for heterogeneous effects over the business cycle and accompanying monetary policy regime, as well as over firm-level characteristics, we show that : (i) corporate tax multipliers are negative overall, but this result is driven by smaller firms who face larger borrowing constraints, especially during high-unemployment periods or when the accompanying monetary policy is contractionary; (ii) while the magnitude and the significance of personal income tax multipliers are smaller on the aggregate, there is some evidence of positive personal tax multipliers in high-unemployment state by large (dividend-paying) firms, which is consistent with the recent literature.

Keywords: Fiscal Policy, Corporate Tax, Corporate Investment, Taxation, Investment, Tax Policy, Heterogenous Effects

JEL Classification: E62, E32, E22, H25, G31, G38

Suggested Citation

Arin, Kerim Peren and Devereux, Kevin and Mazur, Mieszko, Taxes and Firm Investment (January 1, 2021). Available at SSRN: or

Kerim Peren Arin (Contact Author)

Zayed University ( email )

P.O. Box 4783
Abu Dhabi
United Arab Emirates

Kevin Devereux

affiliation not provided to SSRN

Mieszko Mazur

IESEG School of Management ( email )

Parvis de la Défense
Paris, 92800

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