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Are export tax rebates patronage for Chinese firms? An analysis of productivity

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  • Zhang, Teng
  • Xu, Shu
  • Zhang, Shuoxun

Abstract

This paper examines the nexus between export tax rebates and productivity using Chinese firm-level data from 2000 to 2007. The empirical findings indicate that a one percentage point decrease in export tax rebate rates increases the total factor productivity (TFP) of a firm by about 0.1 percentage points. We explore the possible mechanisms that explain this nexus and attribute it to the allocation effect of export tax rebate policy; that is, export tax rebates prevent low-productivity firms from exiting the market and further reallocate resources and economic activities to them. In addition, a decrease in rebate rates significantly encourages the TFP growth of surviving firms and leads to an increase in aggregate TFP. Specifically, throughout 2000–07, the declining rebate rates accounted for 5.23% of the rise in the aggregate TFP, and the between-firm effect was 3.85%, which is much larger than the within effect.

Suggested Citation

  • Zhang, Teng & Xu, Shu & Zhang, Shuoxun, 2022. "Are export tax rebates patronage for Chinese firms? An analysis of productivity," China Economic Review, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:chieco:v:75:y:2022:i:c:s1043951x2200102x
    DOI: 10.1016/j.chieco.2022.101844
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    2. Shugeng Dai & Dong Tan, 2022. "China and the United States Hierarchical International Competitiveness Analysis," Sustainability, MDPI, vol. 14(16), pages 1-12, August.

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    More about this item

    Keywords

    Export tax rebates; Productivity; Allocation effect; TFP decomposition;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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