(Correspondent: Li Yue)Recently, Professor Sheng Dan has had a paper published in the top economics journal—The Journal of World Economy, coauthored by Zhang Huiling and Wang Yongjin. The paper is entitled “Can Tax Incentives Improve Corporate Pricing Power?”.

While tax incentives can reduce the tax burden on enterprises and help to improve corporate pricing power in the market, there is limited literature reflecting this by discussing and identifying it. This paper takes as an example the 2004 value-added tax reform in northwest China to identify the effect of tax incentives on corporate pricing power measured using the costplus ratio of enterprises. The results of the study reveal that tax incentives have a significant positive effect on corporate pricing power in the market, which is greater than the competition effect, that it is robust for a series of validity tests and that this effect is due to R&D and innovation, mainly caused by increased investment in corporate fixed assets, improved product quality and productivity, and enhanced competitiveness in the business market. Finally, the positive effect of tax incentives on corporate pricing power shows heterogeneity in all industries with different levels of competitiveness and enterprises with different types of ownership.

Founded in 1978, The Journal of World Economy is a national comprehensive economic theory journal. It is sponsored by China Society of World Economics and Institute of World Economics and Politics Chinese Academy of Social Sciences. It is recognized as a top journal of economics by universities and research institutions in China.