Managing Policy Anticipation

15:40-17:00, Thursday, November 28, 2024

I-206, Boxue Building

Dr. Jiasheng Li is an Assistant Researcher at the School of Economics and Management, Tsinghua University, and a recipient of the National Postdoctoral Research Fellowship. His research focuses on public finance and industrial economics. He currently has a working paper under revision at International Economic Review and serves as a reviewer for journals such as Journal of Economic Behavior & Organization, China Economic Review, and China & World Economy.

This paper examines the impact of anticipated tax increases on household purchasing behavior and social welfare. Using a bunching design, we analyze two consecutive tax increases for small displacement vehicles in China. Our findings reveal that the length of anticipation significantly influences the timing of household purchases. We develop a dynamic discrete choice model incorporating limited memory to explain these results. Theoretical analysis indicates that individuals' responses to anticipated policy shocks are shaped by limited memory and option value effects. We estimate the parameters of our structural model and conduct a series of counterfactual experiments, finding that the optimal anticipation period is two months before the tax increase. This further enhances the policy's effect by over 8.85% in terms of sales compared to the real policy roll-out time. These findings have important implications for policymakers, suggesting that a better understanding of household responses to anticipated tax increases can inform the design of policies that effectively promote social welfare.

For more information of the seminar, scan the following QR code(s) to join Tencent QQ group (904 544 292) or WeChat group named "IAER Seminar (5)", please.

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(QR code is valid until December 2, 2024)