"Tax Thresholds and Firm Responses "
Abstract: Size-dependent tax policies are a double-edged sword: they aim to support small firms but risk distorting growth incentives. We study China's size-dependent corporate income tax reduction for small enterprises during 2011-2015, which dramatically expanded the eligibility threshold while holding the notch magnitude constant. Using a national tax survey database, we find a threshold-dependent reversal: the policy boosts asset growth by 4.4% at the lower threshold but reduces it by 6.0% at the higher threshold. Within treated firms, those far below the threshold grow substantially faster than those near it. Holding notch magnitude constant, higher thresholds intensify both bunching and downward adjustment. We develop a theoretical framework with threshold-scaled enforcement costs to explain these patterns. The simple formulas we derive imply that when absolute tax savings exceed adjustment costs, firms just above the threshold contract to regain eligibility. Once the threshold becomes too generous, a growth catalyst transforms into a growth trap, suggesting size-dependent policies require careful calibration of threshold levels.
"Value-added Tax Reform and Input Distortions "
"Size-Dependent Corporate Income Tax, Manipulation vs. Splitting "
This study explores dynamic contracting in venture capital investment, where entrepreneurial compensation integrates absolute and relative performance. We identify a paradox in investment strategies based on startup efficiency: fixed capital suits efficient startups, while dynamic investment benefits inefficient ones. If the Venture Capitalist (VC) can switch strategies, starting with dynamic early-stage investment and transitioning to fixed allocation would enhance returns. We also examine the trade-off between equity and competition incentives, showing that competition incentives strengthen under high correlation and uncertainty, diverging from standard agency theory. These insights help balance effort, incentives and optimize VC financing
In this study, we incorporate an adaptive hybrid incentive strategy (AHIS) into an eco-evolutionary game model, if the density of cooperators surpasses the threshold, cooperators are rewarded; conversely, defectors are punished. We analyze the resulting piecewise-smooth continuous system and determine the optimal strategy switching threshold. Then, we identify a non-smooth Hopf bifurcation induced by policy switching and establish the stability and uniqueness of the resulting limit cycle. Through numerical simulations, we compare the effects of several incentive controls. The results demonstrate that AHIS, compared to pure incentive strategies, enables the establishment and maintenance of full cooperation under a broader set of conditions. Furthermore, implementing incentive policies with a higher switching threshold and avoiding frequent changes can improve outcomes. Our results provide a novel theoretical framework for addressing the tragedy of the commons and offer insights into designing effective incentive mechanisms in social and ecological systems.