## The Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives

_IMF Working Papers, June 12, 2014_

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## Bibliographic details
- Authors: Sophia Chen, Estelle Dauchy
- Published: June 12, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498335478.001

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### Summary
- Authors: Sophia Chen, Estelle Dauchy
- Date: June 12, 2014
- Core proposition: A tax-adjusted q model that incorporates both physical and intangible assets, estimated using a self-collected comprehensive database of intangible assets.
- Central insight: The presence of intangibles alters accounting and economic measures of q; with temporary tax changes the q model can be consistently estimated by adjusting for a firm’s intangible stock and intangible intensity.
- Empirical setting: Temporary investment tax incentive policies in the United States in the early 2000s.

### Key findings and estimates
- When the q-model accounts for intangible assets, the estimated investment elasticity to tax incentives is generally larger than otherwise.
- The investment elasticity to tax incentives is:
  - larger for intangible-intensive firms,
  - increasing with firm size.
- Subject areas covered include: Asset and liability management, Asset valuation, Depreciation, Financial institutions, Investment incentives, National accounts, Stocks, Tax incentives, Taxes.

### Methodological notes
- Model: Tax-adjusted q model extended to include both physical and intangible assets.
- Data: A self-collected comprehensive database of intangible assets used for estimation.
- Identification: Leveraging temporary tax changes (temporary investment tax incentives) to estimate the q model after adjusting for intangible stock and intangible intensity.

### Policy implications and interpretation
- Ignoring intangible assets in q-based investment analysis leads to underestimation of the responsiveness of investment to temporary tax incentives.
- Policy evaluations of temporary investment tax incentives should account for intangible intensity across firms and consider heterogeneous effects by firm size.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-tax-adjusted-q-model-with-intangible-assets-theory-and-evidence-from-temporary-41646_