Technological and Economic Development of Economy

Tax reform, tax shifting and enterprise innovation

Rang-Kun Qi — 2025-03-17

Fiscal and tax policies, as important forms of government regulation and control of the economy, have a profound impact on both macroeconomics and microeconomics and have been widely studied by scholars. To deeply explore the relationship between tax reform and enterprise innovation, based on classic financial theories such as financing constraints and tax shifting, annual data on Chinese A-share listed companies from 2009 to 2022 and the time-varying difference-in-differences method, we investigated the impact mechanism and economic effects of the “replace the business tax with a value-added tax” policy (VAT reform)on enterprise innovation and examined the moderating effect of the tax shifting ability during this process. The research results indicate the following: VAT reform can lower the tax base of enterprises, reduce cash outflows, and alleviate financing constraints, which helps enterprises stimulate innovation vitality and enhance R&D investments. The negotiation leverage that a company possesses in dealings with its providers and purchasers influences its capacity to transfer fiscal burdens. The enhancement of corporate innovation resulting from the VAT reform is notably pronounced. In contrast to state-owned enterprises, non-state-owned enterprises face fierce market competition and greater survival pressure and do not undertake policy-related activities. They are more sensitive to the tax reduction effect of the VAT reform and are more willing to carry out innovative activities when pursuing long-term development. At the same time, they are also more willing to enhance their tax shifting ability to fully obtain policy dividends for enterprise innovation. This conclusion can help the government correctly judge and comprehensively evaluate the effect of the VAT reform, providing management insights into how the government can better improve tax arrangements and promote enterprise innovation to achieve balanced development and how enterprises can better obtain policy dividends to promote technological innovation.

Earnings management among industries: between the old and new economies

Adam Sadowski — 2025-03-17

This paper investigates sectoral prevalence and patterns of accrual-based earnings management in public companies listed on the Warsaw Stock Exchange. This research introduces a novel perspective by analysing differences in discretionary accruals proxies among industries, with particular emphasis on statistical variation of the earnings management through accruals in the old and new economies companies. Moreover, this paper fills a research gap in the literature regarding a shortfall of broader analyses on the industry-specific attributes explaining earnings management behaviours.
Our findings confirmed that the extent of accrual-based earnings management in public companies varies significantly depending on the industry in which they operate. We demonstrated that companies from the new economy industries and those operating in less concentrated markets engaged in accrual-based earnings management practices more than others. On the other hand, we did not find a statistically significant relationship between the accounting-type earnings management and company-specific product market power from the perspective of the pooled sample and subsamples characterized by the specific directions of earnings games.

Inflation and global supply chain pressure in Eurozone: a time-varying causal analysis

Sebastian-Emanuel Stan — 2025-03-17

The aim of this paper is to analyze the causal relationship between inflation and global supply chain pressure in the Eurozone. In contrast to the full-sample causality method, this paper utilizes the bootstrap subsample rolling window causality method to account for structural changes. Initially, the computed vector autoregressive models demonstrate that the short-term relationship between inflation and global supply chain pressure is unstable. The dynamic causal relationship is reexamined in the subsample rolling window causality test using a time-varying method (RB bootstrap-based modified-LR causality test). The results indicate that inflation is influenced by the expansion of global supply chain pressure in a variety of sub-periods, with both positive and negative effects. Conversely, inflation fluctuations increase the uncertainty of the Global Supply Chain Pressure Index. The novelty of the findings is that they illustrate bidirectional causal relationships between the two variables, which is in contrast to the existing body of empirical research that does not support the direction of causality. The implications of these findings emphasize the need to implement appropriate monetary policy measures in order to mitigate the inflationary consequences of disruptions in the global supply chain and to ensure a more stable supply chain network.

Digital economy’s role in shaping China’s outward investment in Belt and Road countries

Wan Tang — 2025-03-17

Previous international investment-related literature is less likely to include host country digital economy as an influential factor in the analysis framework. Meanwhile digital economy-related literature mainly focuses on the concept and characteristics of digital economy, and few scholars explore the impact and mechanism of China’s OFDI in the context of digital economy. Based on the theory and mechanism analysis, this article first constructs a comprehensive digital economy indicator system using data from 46 B&R countries from 2004 to 2020 and then constructs extended investment gravity model, technological innovation intermediary impact and trade cost moderating effect to thoroughly investigate the effect and fundamental mechanism of digital economy on China’s OFDI. The conclusions are as follows: First, digital economy indicators’ computation reveals significant disparities among B&R countries. Second, baseline regression finds that B&R countries’ digital economy considerably boosts China’s OFDI. Third, regional heterogeneity reveals that digital economy in ASEAN countries plays a more visible role in boosting China’s OFDI. Fourth, mechanism analysis reveals that B&R countries’ digital economy can encourage China’s OFDI by improving technological innovation and reducing trade costs.

First published online 6 December 2024

Adapting to uncertainty: A quantitative investment decision model with investor sentiment and attention analysis

Jie Gao — 2025-03-17

In the face of global uncertainties, including pandemics, economic fluctuations, disruptions in supply chains, major disasters, wars, and impending economic crises, the financial landscape and the impact of investor sentiment on the return of stock index futures can be significantly altered. Understanding the relationship between investor sentiment, attention, and stock index futures returns in the face of these diverse challenges has become particularly critical. However, existing research does not adequately consider the effect of these unexpected events on the market and the shifts in investor attention. Using the COVID-19 pandemic as a case study, this research proposes a dynamic quantitative investment decision-making model that considers the influence of investors’ attention and emotional characteristics, aiming to adapt to the financial market under these global changes and improve the accuracy of quantitative investment forecasting. Initially, the Bidirectional Encoder Representations from Transformers model is employed to analyze investor comment data, extract information on investor attention and emotional characteristics, and construct investor sentiment indicators. Subsequently, a stock index futures forecasting method based on Variational Mode Decomposition algorithm and Support Vector Regression (SVR) model is constructed, and the grey wolf optimization algorithm is introduced to optimize the parameters of the SVR model. Guided by investor sentiment indicators, different market states are further distinguished, and appropriate investment strategies are implemented to effectively enhance the returns of quantitative investment. When compared with models that neglect investor attention and emotional characteristics, the results show that considering investor sentiment indicators not only improves the predictive ability of the model, but also reduces cognitive bias and market risk.

First published online 6 December 2024

The impact of liquidity constraints on the effectiveness of fiscal policy: evidence from Poland

Piotr Krajewski — 2025-03-17

The aim of the paper is to estimate the impact of the rapid worsening of households’ access to credit in Poland on the effects of fiscal policy. The novelty of our study is that it extends the analysis of liquidity constrained households’ impact on fiscal multipliers to Central and Eastern European country, where households access to credit is relatively limited and therefore the potential impact of liquidity constrained households on fiscal multipliers is stronger than the existing literature for highly developed economies indicates. The empirical analysis is based on the theoretical model with heterogenous households. We found that the increase in the percentage of liquidity constrained households led to the substantial rise in fiscal multipliers, and thus the increase of effectiveness of Polish fiscal policy. The study indicates that before the worsening of households’ access to loans, the contemporaneous government spending multiplier was relatively low, whereas after a sharp increase in interest rates, contemporaneous government multiplier exceeded one. What is more, our study shows that a sharp increase in interest rates also strengthens medium term fiscal policy impact on GDP in Central and Eastern European economy.

First published online 14 November 2024

Is digital technology innovation a panacea for carbon reduction?

Zhengning Pu — 2025-03-17

This paper analyses the impact of digital technological innovation on the carbon emission intensity of enterprises and conducts an empirical test based on the data of listed enterprises in China from 2009 to 2021. The study finds that (1) digital technological innovation can significantly reduce carbon emission intensity. (2) Enterprises’ digital attention and investment can significantly increase their operating income but not reduce carbon emissions. Digital technology patents can significantly reduce carbon emissions in the short term. In the long run, even new digital technologies will have a carbon rebound effect once they are deployed on a large scale. Therefore, digital technology innovation is still challenging in the long run to realize the synergy effect of “increasing production and reducing carbon.” (3) Mechanism tests show that digital technology innovation can reduce carbon intensity by improving operational efficiency, promoting cleaner production, and improving human capital. (4) If the government pays moderate attention to digital development, digital technological innovation by enterprises can significantly reduce carbon intensity. Meanwhile, this effect is more significant in regions with higher levels of intellectual property protection. Digital technology innovation can significantly reduce carbon intensity for mature, high-tech, and technology-intensive enterprises.

First published online 18 November 2024

How does ICT capital stock affect high-quality economic growth? Evidence from China

Pengfei Guo — 2025-03-17

As an essential driving force to promote industrial upgrading and technological innovation, ICT has gradually become the technological support for high-quality economic growth. This paper adopts the improved perpetual inventory method and entropy weight TOPSIS method to measure China’s ICT capital stock and economic high-quality growth index, respectively, and experimentally examines the effect of the former on the latter. The findings show that the south has a more extensive ICT capital stock than the north, and the coastal region has a better high-quality growth index than the inland region. Meanwhile, high-quality economic growth, which has increased since 2009 and is incredibly robust in the south, positively correlates with ICT capital stock. Further research finds that ICT capital stock can boost high-quality economic growth by raising marketization and human capital. The results provide policy recommendations for enhancing high-quality economic growth.

First published online 19 November 2024

Is the household sector over-indebted in China? – the perspective of economic growth and financial risks

Ziwei Liu — 2025-03-17

In this paper, we introduce household debt into a general equilibrium model and investigate the sources of changes in household debt through the lens of leverage constraints of the household sector, firms, and banks. Based on this, we analyze the impacts of household debt on economic growth and the financial risks embedded in debt-stimulated economic growth. After fitting our model to the data from China, we find that the increase in household debt in China is conducive to economic growth as it promotes demand growth and reduces financial frictions. In addition, the marginal financial risk induced by the growth of household debt is relatively small, implying that the increase in household debt can some- what promote economic growth without accumulating much endogenous vulnerability in the economy. This contrasts with the reduction of firms’ debt, which leads to drastic negative economic fluctuations in the short term, although it is beneficial to economic growth in the long run given that firms have already been caught in a vicious debt-deflation cycle. Therefore, to ensure the stability of the economy in China, it is plausible to squeeze out firms’ debt through increasing debt in the household sector.

First published online 12 February 2025

Can government R&D expenditure promote innovation? New evidence from 37 OECD countries

Yemin Ding — 2025-03-17

This research employs a fixed effect model to empirically estimate panel data from 37 OECD countries spanning 2000 to 2021, revisiting the influence of government R&D expenditure on innovation within the theory of marginal diminishing effect. Results reveal a significant positive effect of government R&D expenditure on national innovation capacity, and this influence remains robust under robustness checks. Then, quantile regression uncovers a nuanced pattern, indicating that as a country’s innovation capacity strengthens, the stimulative effect of government R&D expenditure initially rises and subsequently declines. Additionally, incorporating lags of the independent variable at different periods affirms the time lag effect of government R&D expenditure on national innovation capacity. Deeper scrutiny using two fixed effect models including interaction terms reveals a multifaceted mechanism, where government R&D expenditure fosters innovation by promoting bank credit, yet simultaneously suppresses innovation by hindering non-governmental R&D intensity. Lastly, heterogeneity analysis affirms that government efficiency, democracy, ruling party ideology, political stability, and economic freedom moderate the link between government R&D expenditure and national innovation capacity. These insights offer new references for governments to promote innovation.

First published online 23 October 2024

The drivers of export product diversification in China: does natural resource endowments matter?

Jabbar Ul-Haq — 2025-03-17

Export product diversification (EPD) mitigates a country’s vulnerability to global trade shocks, contributes to its high-quality economic progress, and increases its resilience. Natural resource endowment (NRE) is considered as one of the important determinants of EPD that is less explored by scholars. The contribution of NRE to EPD will remain a matter of debate in China. The paper aims to identify the drivers of the diversification of export products in China using the province level data from 2011 to 2019. It considers key determinants including foreign direct investment (FDI), human capital (HC), technological innovation (TI), and trade openness (TO). The results of the Fixed Effect-Driscoll-Kraay standard errors (FE-DKSE) indicate a positive and significant relationship between NRE and EPD. This suggests that a rise in NRE within a country promotes EPD. Furthermore, FDI, TO, TI, and HC have statistically significant positive links with EPD. Moreover, the findings of our research are consistent across all regions. The robustness analysis provides evidence that our findings are both significant and robust. The empirical findings indicate that the included variables are fundamental determinants of EPD, which provides policymakers with crucial policy implications. To encourage EPD, the government should implement policies that stimulate these determinants.

First published online 05 February 2025

Agility sustainable supply chain in automobile industry

Ahmad Bathaei — 2025-03-17

Automobile industries are facing rapid and unanticipated changes in their business envi¬ronment. New strategies are needed to remain competitive in the market for those companies. The supply chain plays a crucial role in automobile companies, and improving the supply chain helps them to be successful in the competition. The agile paradigm allows companies to be flexible in the compe¬tition, and also sustainable paradigm helps them to popularity among the organizational system. The primary purpose of this study is to combine agile supply chain and sustainable supply chain as one strategy. For this purpose, 73 factors obtained from previous studies and the Fuzzy Delphi Method and Fuzzy Best Worst Method were used to find the best factors and rank them. The results show that 26 elements accepted and after ranking Quality, Supply chain configuration, Customer satisfaction, Suppliers ’green initiatives and Top management vision were the best five factors. In addition, the results confirmed the finding and the new model for an agile sustainable supply chain.

Adaptive strategies and sustainable investments: navigating organizations through a VUCA environment in and after COVID-19

Mihaela Minciu — 2025-03-17

This study delves into the resilience and adaptability of employees within the volatile, uncertain, complex, and ambiguous (VUCA) business environment, examining their readiness to manage effectively and the organizational agility in navigating change, alongside the impact of sustainable investment practices. Employing quantitative methods, a survey was conducted among employees at two pivotal moments: during and after the COVID-19 pandemic restrictions. Factorial analysis revealed a strong preference for participatory work styles and highlighted the critical need for employee involvement in significant decision-making processes. Although the value of sustainable investments was recognized, a noticeable gap was found in employees’ understanding and adaptability towards these investments. The use of the Wilcoxon test illuminated the significant impact of external disruptions, such as the pandemic, on organizational operations and preparedness. The findings underscore the imperative for organizations to champion continuous learning and training, enabling strategic and innovative responses to the challenges unique to the VUCA world. By aligning adaptive interventions with the demands of the VUCA environment, organizations can define a clear trajectory towards sustainable growth and enhance their proactive stance against sudden shifts in the business landscape.

First published online 10 September 2024