VAT rebates and export performance in China: Firm-level evidence

Chandra, Piyush; Long, Cheryl

doi:10.1016/j.jpubeco.2013.03.005

Cited by 97 publications

(70 citation statements)

References 20 publications

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“…12 However, there are very few …rms (i.e., less than 1%) producing in both eligible and ineligible industries, which precludes the implementation of this robustness check. 13 Instead, we divide …rms into two groups, based on whether they are active in single or multiple 3-digit industries.…”

Section: Robustness Checksmentioning

confidence: 99%

Firm investment and exporting: Evidence from China's value-added tax reform

Liu

2015

Journal of International Economics

265

100

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This paper contributes to the literature by identifying the causal e¤ect of …rm investment on exporting behavior. The identi…cation hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive investment shocks. The instrumental variable estimation results show that …rm investment signi…cantly and substantially increases the likelihood of exporting, and this e¤ect is largely due to the positive e¤ect of …rm investment on …rm productivity.Finally, the paper documents some heterogeneity of the e¤ect across industries with di¤erent degrees of competition and …nancial constraints.

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Section: Robustness Checksmentioning

confidence: 99%

Firm investment and exporting: Evidence from China's value-added tax reform

Liu

2015

Journal of International Economics

265

100

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“…Another concern arises from the validity of the IV we used in the regressions . Chandra and Long () use the regional deficit rate as their instrumental variable instead. The reason is that after 2003 the regional governments need to pay up to 25 percent of the ETR requested by local exporters whose exports are in excess of their 2003 level.…”

Section: Robustness Checksmentioning

confidence: 99%

“…We re‐estimate Equation using deficitrate jt as an IV. As the quasi‐natural experiment is after 2004, following Chandra and Long (), we use samples over the 2004 to 2006 period. The results are reported in Table and .…”

Section: Robustness Checksmentioning

confidence: 99%

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Regional effects of export tax rebate on exporting firms: Evidence from China

Tan

2017

Rev International Economics

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This paper extends a model from 2003 to separate the direct and indirect impact of an export tax rebate on the intensive margin of firm‐level export sales at the subnational level. The direct impact of the rebate is associated with a reduction of an exporting firm's variable costs, while the indirect impact manifests itself through higher regional wages as a result of increased demand for local labor. First, the empirical results imply that a 1 percent rise in the export tax rebate rate increases the export sales among continuing exporters by 0.2 percent through the direct channel. Second, through the indirect channel, a 1 percent difference in the regional rebate causes a 0.02 percent difference in exporters' sales growth. Both effects are statistically significant, and are consistent with the model's predictions.

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“…But no studies seem to investigate the effectiveness of exchange rates on trade in the presence of the ETR policy. Most studies explore the positive link between the ETR policy and exports (e.g., Chao, Chou, & Yu, 2001;Chen, Mai, & Yu, 2006;Wang, 2006;and Chandra & Long, 2013). A number of studies show that the opportunity cost of implementing the ETR policy appears to be very high for the government, including tax evasion and cheating on export tax rebates (e.g., Fisman & Wei, 2004;Ferrantino, Liu, & Wang, 2012;and Liu, Shi, & Ferrantino, 2015 Cui (2003) and Chan (2008) for more detailed discussion of China's ETR.…”

Section: China's Export Tax Rebate Policymentioning

confidence: 99%

China's exports, export tax rebates and exchange rate policy

2017

World Economy

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This paper examines the relationship between China's exports, export tax rebates and exchange rate policy. It offers an explanation for why China's exports continued to rise under RMB real appreciations during the Asian financial crisis. Based on a traditional export demand model, we test our hypothesis that the counteracting effects of China's export tax rebate policy have diminished the effectiveness of real exchange rates in facilitating the resolution of trade imbalances under the current pegged exchange rate regime. We find evidence that RMB real appreciations during the crisis negatively affected China's exports, but the negative effects were mitigated by the positive effects of export tax rebates. We also find evidence of a long‐run relationship between China's exports and the other explanatory variables. The empirical evidence suggests that under the pegged exchange rate regime with limited adjustments, real exchange rate movements alone cannot resolve China's external imbalances. The policy implication of this study is that China needs to redirect its decades‐long export‐oriented development strategy to one that emphasises domestic demand‐oriented development and to replace the current pegged exchange rate regime with a market‐oriented more flexible exchange rate regime.

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VAT rebates and export performance in China: Firm-level evidence

Cited by 97 publications

References 20 publications

Firm investment and exporting: Evidence from China's value-added tax reform

Firm investment and exporting: Evidence from China's value-added tax reform

Regional effects of export tax rebate on exporting firms: Evidence from China

China's exports, export tax rebates and exchange rate policy

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