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Duty drawbacks, competitiveness, and growth - are duty drawbacks worth the hassle?

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  • Ianchovichina, Elena

Abstract

Many countries use duty drawbacks on exports, yet they have been given little attention in the literature and there is no consensus whether countries should embrace or abandon them. The author asserts that the answer depends on a country’s development priorities and economic conditions. An increase in the drawback has a positive impact on export competitiveness and employment, but could lead to exports with low domestic value added. The welfare effects of duty drawback reform are ambiguous. An increase in the drawback is more likely to be welfare improving if the economy is small with high input tariffs, low initial drawback, low administrative costs, and leakages in the tariff collection system. In China duty drawback removal after meeting WTO commitments will deepen domestic supply chains and improve welfare, but will hurt China’s economic efficiency, export competitiveness, and real factor incomes. Further liberalization could mitigate these negative effects.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3498.

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Date of creation: 01 Feb 2005
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Handle: RePEc:wbk:wbrwps:3498

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Keywords: Environmental Economics&Policies; Markets and Market Access; Labor Policies; Economic Theory&Research; Trade Policy; Economic Theory&Research; Environmental Economics&Policies; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Airports and Air Services; Trade and Regional Integration;

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Cited by:
  1. Deng, Ziliang & Guo, Honglin & Zhang, Weifu & Wang, Chengqi, 2014. "Innovation and survival of exporters: A contingency perspective," International Business Review, Elsevier, vol. 23(2), pages 396-406.
  2. Fabrice Defever & Alejandro Riaño, 2013. "China's Pure Exporter Subsidies," FIW Working Paper series 121, FIW.
  3. Michelle Connolly & Kei-Mu Yi, 2009. "How much of South Korea's growth miracle can be explained by trade policy?," Working Papers 09-19, Federal Reserve Bank of Philadelphia.
  4. Dennis Tao Yang, 2012. "Aggregate Savings and External Imbalances in China," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 125-46, Fall.

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