Fixed Capital, Accelerated Depreciation, and Economic Growth: Mathematical and Empirical Studies Based on Political Economy
AbstractThe period of transition in China poses new problems and propositions for the efficient usage of its supply-side fixed capital input, while meeting the goal of a sustainable economic growth. In 2014, the Ministry of Finance and the State Administration of Taxation of China decided to deploy and improve accelerated depreciation of fixed capital, as one of the important tools, to promote tax reform and industrial upgrading, and to stimulate economic growth. However, there is little literature on systematic research. Based on the perspective of Marxist political economy, this paper constructs a three-Sector structural table and mathematical model containing fixed capital. This paper simulates the accelerated depreciation of fixed capital and verifies that it can drive economic growth, and the degree increases with the shortening of the accounting depreciation period. Further, this paper disassembles this effect and holds that the promotion of shortening accounting depreciation period to the renewal investment of enterprises is based on the imbalance and inadequacy of production capacity released under the adjustment of corresponding physical depreciation period. This paper also finds that there is an endogenous inflection point in the adjustment effect of negative driving economic growth. Therefore, a method for mathematical judgment of an inflection point is proposed in this paper, and the determination and specifications of the key indicators, such as the lowest depreciation period, are discussed by calculating the depreciation-profit-growth curve of China from 1987 to 2015. We find theoretical basis and practical significance for improvement of taxation policy and the optimization of industrial structure.
fixed capital, accelerated depreciation, Inflection point of physical depreciation period, taxation policy, industrial structure