The effect of export tax rebates on product quality: evidence from China's agricultural product processing industry

Abstract

PurposeThis study aims to establish the linkage among export tax rebate (ETR), firm innovation and product quality of Chinese agricultural product processing industry (APPI), so that more targeted policy implications can be discussed.Design/methodology/approachUsing highly disaggregated firm-product-destination-level data through 2001 to 2013 of Chinese APPI, this study employs a two-way fixed effects specification to establish the linkage between ETR and product quality, while the mediational model is adopted to examine potential mechanisms.FindingsBaseline estimates show that a 1% increase in ETR rate leads to a significant increase in the product quality of APPI by 0.12% on the whole. However, there is a nonlinear, inverse-U shaped relationship between ETR and product quality, and the optimal inflection point occurs when ERT rate equals 0.15. Mechanism analyses show that firm innovation is an important impact channel, which explains 9.8% of quality improvement induced by raising ETR. Further heterogeneous analyses reveal both the total effects of ETR on product quality and the mediation effects of innovation are dominated by young SMEs (small and medium-size enterprises).Practical implicationsAuthorities can promote the innovation and then product quality improvement of young SMEs by moderately increasing ETR rate. To ensure ETR more effective in improving quality, it is necessary for the government to encourage innovation. Authorities can reduce the risk of innovation failure for low-tech firms by increasing R&D subsidies, while ensuring innovation returns for high-tech firms in combination with stronger intellectual property protection.Originality/valueFirst, this is one of the earlier studies to explore the relationship between ETR and product quality specifically for Chinese APPI. Second, we show firm innovation as an important mediator so that policies aim at raising ETR rates are eventually beneficial to product quality. Third, using the highly disaggregated data, we allow ETR rate to vary across different products, which is an improvement in the accuracy of previous literature. Finally, our research provides additional empirical evidence for revealing the micro-mechanism of ETR affecting firm behaviors.

Short‐term impact of food safety standards on agri‐product exports: Evidence from Japan's positive list system on Chinese vegetable exports

“…We take firms' R&D investment intensity as a proxy to reflect their prevention efforts to ensure food safety. A higher R&D investment intensity leads to a higher quality of agricultural products produced (Liang et al, 2021). In addition, it could lower the possibility of a firm's products being rejected for food safety reasons.…”

“…Specifically, we use unique monthly export data for vegetables from China from December 2005 to December 2006. Using monthly data allows us to investigate the short‐term impact of standards that might be masked with annual data (Liang et al, 2021), while using data at the firm‐product level instead of product level allows us to identify heterogeneous firm‐level responses. Previous studies either used monthly data at an aggregate level (such as the product level) or firm‐product data at a lower frequency (such as annual data), but not both (Curzi et al, 2020; Dal Bianco et al, 2016; El‐Enbaby et al, 2016).…”

Pengaruh Environmental Knowledge, Brand Image, Product Quality, Price Fairness Terhadap Purchase Intention

“…Ini mencakup ketahanan, keandalan, presisi, kemudahan penggunaan, dan aspek utama lainnya. Product quality terkait dengan sejauh mana produk dapat memenuhi kebutuhan dan harapan pelanggan (Liang et al, 2022). Maintaining kualitas produk yang baik penting untuk tetap menjadi pilihan pelanggan dan menciptakan kepercayaan terhadap merek .…”

Empirical Analysis of Export Tax Rebate on Inwards Foreign Direct Investment in China

“…Zhang and Song (2022) found that export tax rebates can achieve both economic and environmental benefits for Chinese firms and have an incentive effect on technological innovation. Liang et al (2022) detected that export tax rebates would significant influence the product quality of China's agricultural product processing industry. Sun and Wu (2023) studied how the export value-added tax rebate impacted exporters' product markups by taking data of China's industrial enterprises.…”