IESET.
Hypotheses·fiscal·capital_gains_tax_cut_investment_response_panel

In an OECD-country panel 2014-2024, reductions in the top statutory capital- gains tax rate predict higher subsequent gross fixed capital formation as a share of GDP and higher business-startup rates, controlling for corporate-tax rates, interest rates, and institutional quality.

The directional claim is that a 10 percentage-point reduction in the capital-gains tax rate is associated with at least a 0.5 percentage-point increase in investment/GDP and a 5% increase in new business registrations within 3 years.

SUPPORTEDengine/runs/capital_gains_tax_cut_investment_response_panel

SUPPORTED — coef=-0.1981 (sign matches claim -), p=0.00535

confidence cueThis is a clear pass for the claim as written. It still applies only to this sample, period, and method.

policy briefClear support

In ordinary language

In plain terms, this asks whether capital gains tax rate is actually linked to better or worse gross fixed capital formation share income from 2014 to 2024.

plain answer

The data clearly moved in the predicted direction. coef=-0.1981 (sign matches claim -), p=0.00535

why it matters

This matters because fiscal claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 90 country or place units from 2014 to 2024, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Capital gains tax rate
  • Capital gains tax cut indicator
What we checked
  • Gross fixed capital formation share income
  • New business density
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

9 input datasets, 0 unresolved missing series, provenance status: reproducible hash verified.

Results

engine/runs/capital_gains_tax_cut_investment_response_panel
1007550250201420192024USAGBRDEUFRAITAESPNLD
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show gross_fixed_capital_formation_share_gdp across 90 sampled countries over 2014–2024.
The shapes above are stylised — none of the lines are real data.
Placeholder for capital_gains_tax_cut_investment_response_panel. Published chart will be generated from engine/runs/capital_gains_tax_cut_investment_response_panel/chart_data.json.

Who has skin in the game — schools predicting on this

2 schools list this hypothesis as a test of their position. The chips below are school-level scoreboard outcomes, not a second hypothesis verdict.

hypothesis verdict vs scoreboard outcome

The banner verdict judges this hypothesis as written. The scoreboard asks whether each school's polarity-corrected prediction was right. Raw status is not a school win: SUPPORTED supports schools that needed SUPPORTED, but refutes schools that needed REFUTED.

Chicago School Monetarismwins if SUPPORTEDschool supportedClassical Liberalwins if SUPPORTEDschool supported

Pre-registration

registration ordering unverified
first-spec commit 4c8ce8e · 2026-07-18T22:11:21Z
run generated · 2026-06-29T17:52:19Z
Run timestamp predates this path's first git-add commit (rebase, rename, or pre-git local run). Spec hash is still the path's first-add commit — not repository HEAD — but ordering is not a clean pre-registration proof.

In an OECD-country panel 2014-2024, reductions in the top statutory capital- gains tax rate predict higher subsequent gross fixed capital formation as a share of GDP and higher business-startup rates, controlling for corporate-tax rates, interest rates, and institutional quality. The directional claim is that a 10 percentage-point reduction in the capital-gains tax rate is associated with at least a 0.5 percentage-point increase in investment/GDP and a 5% increase in new business registrations within 3 years.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

SUPPORTED if β1 (cap_gains_rate) is negative and significant at p<0.10 for both investment and new business density (i.e. lower rate → more investment/entry). PARTIAL if negative and significant for investment but not business density. REFUTED if β1 is positive and significant at p<0.10. INFORMATIVE: excluding USA should not eliminate the negative sign; if it does, the result is driven by US-specific episodes.

formal test & threshold
test:      panel_fe_capital_gains_tax_investment_response
threshold: β_cap_gains_rate (investment) < 0 at p<=0.10  AND β_cap_gains_rate (business density) < 0 at p<=0.10  AND Ex-USA robustness retains negative sign.

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
90 countries · 2014 – 2024
Evidence type
associational

Two-way FE panel with 3-year forward windows: investment(t+1 to t+3) = β0 + β1*cap_gains_rate(t) + controls + FE. Robustness: (1) exclude USA (dominant capital-gains-cut episodes); (2) use first-difference specification to capture within-country rate changes; (3) instrument rate changes with right-party government seat share; (4) separate short-run (1-yr) vs medium-run (3-yr) responses; (5) control for stock-market capitalization to separate real investment from asset-price effects.

Data

VariableSourceTransform
gross_fixed_capital_formation_share_gdp
outcome
world_bank_wdi:NE.GDI.FTOT.ZStier 2
level
new_business_density
outcome
world_bank_wdi:IC.BUS.NREGtier 2
per_1000_working_age
capital_gains_tax_rate
treatment
taxfoundation_itci:capital_gains_tax_rate_paneltier 5
level
capital_gains_tax_cut_indicator
treatment
taxfoundation_itci:capital_gains_tax_cut_indicator_paneltier 5
indicator
corporate_tax_rate
control
taxfoundation_itci:corporate_tax_rate_paneltier 5
level
real_interest_rate
control
world_bank_wdi:FR.INR.RINRtier 2
level
institutional_quality
control
wgi:RL.ESTtier 4
level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
log_gdp_per_capita
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — capital_gains_tax_cut_investment_response_panel

Verdict: SUPPORTED — coef=-0.1981 (sign matches claim -), p=0.00535

Pre-registration

  • Claim: In an OECD-country panel 2014-2024, reductions in the top statutory capital- gains tax rate predict higher subsequent gross fixed capital formation as a share of GDP and higher business-startup rates, controlling for corporate-tax rates, interest rates, and institutional quality. The directional claim is that a 10 percentage-point reduction in the capital-gains tax rate is associated with at least a 0.5 percentage-point increase in investment/GDP and a 5% increase in new business registrations within 3 years.
  • Falsification rule: SUPPORTED if β1 (cap_gains_rate) is negative and significant at p<0.10 for both investment and new business density (i.e. lower rate → more investment/entry). PARTIAL if negative and significant for investment but not business density. REFUTED if β1 is positive and significant at p<0.10. INFORMATIVE: excluding USA should not eliminate the negative sign; if it does, the result is driven by US-specific episodes.
  • Falsification test: panel_fe_capital_gains_tax_investment_response

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): -0.1981
  • Std error: 0.06941
  • p-value: 0.00535
  • Observations: 120, countries: 14
  • Within R²: 0.272
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • world_bank_wdi:NE.GDI.FTOT.ZS → gross_fixed_capital_formation_share_gdp (outcome, publisher=world_bank_wdi, n=9870)
  • world_bank_wdi:IC.BUS.NREG → new_business_density (outcome, publisher=world_bank_wdi, n=2370)
  • taxfoundation_itci:capital_gains_tax_rate_panel → capital_gains_tax_rate (treatment, publisher=taxfoundation_itci, n=456)
  • taxfoundation_itci:capital_gains_tax_cut_indicator_panel → capital_gains_tax_cut_indicator (treatment, publisher=taxfoundation_itci, n=456)
  • taxfoundation_itci:corporate_tax_rate_panel → corporate_tax_rate (controls, publisher=taxfoundation_itci, n=456)
  • world_bank_wdi:FR.INR.RINR → real_interest_rate (controls, publisher=world_bank_wdi, n=4694)
  • wgi:RL.EST → institutional_quality (controls, publisher=wgi, n=5296)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_gdp_per_capita (controls, publisher=world_bank_wdi, n=12104)

Generated by scripts/run_panel_fe.py at 2026-06-29T17:52:19+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Authored framework. Read the transparency note.