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

Author

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  • Liu, Qing
  • Lu, Yi

Abstract

This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification 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 firm investment significantly and substantially increases the likelihood of exporting, and this effect is largely due to the positive effect of firm investment on firm productivity. Finally, the paper documents some heterogeneity of the effect across industries with different degrees of competition and financial constraints.

Suggested Citation

  • Liu, Qing & Lu, Yi, 2015. "Firm investment and exporting: Evidence from China's value-added tax reform," Journal of International Economics, Elsevier, vol. 97(2), pages 392-403.
    • Handle: RePEc:eee:inecon:v:97:y:2015:i:2:p:392-403
    DOI: 10.1016/j.jinteco.2015.07.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Value-added tax reform; Fixed investment; Exporting behavior; Difference-in-differences;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F10 - International Economics - - Trade - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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