Rebalancing and the Chinese VAT: Some numerical simulation results
This paper presents numerical simulation results that suggest that China can both reduce its trade imbalance and receive welfare benefits by switching the value added tax (VAT) regime from the current destination principle to an origin principle. We modify the traditional general equilibrium tax model to capture endogenous trade imbalances along with endogenous factor supply, a fixed exchange rate and a non-accommodative monetary policy structure which supports the Chinese trade imbalance. We calibrate model parameters to 2008 data and simulate counterfactual equilibrium for VAT tax basis switches in which the trade imbalance changes. Our results suggest that given China's trade surplus VAT regime switching to an origin basis can decrease China's trade surplus by over 40%, and additionally increase Chinese and world welfare. This has implications for present G20 discussions on finding ways to adjust global trade imbalances.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grossman, Gene M., 1980. "Border tax adjustments: Do they distort trade?," Journal of International Economics, Elsevier, vol. 10(1), pages 117-128, February.
- Genser, Bernd, 1996.
" A Generalized Equivalence Property of Mixed International VAT Regimes,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 98(2), pages 253-262, June.
- Genser, Bernd, 1994. "A generalized equivalence property of mixed international VAT regimes," Discussion Papers, Series II 241, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- Dong Yan & Whalley John, 2011. "Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies," Global Economy Journal, De Gruyter, vol. 10(4), pages 1-21, January.
- Yan Dong & John Whalley, 2009. "Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies," NBER Working Papers 15363, National Bureau of Economic Research, Inc.
- Martin Feldstein, 1974. "Incidence of a Capital Income Tax in a Growing Economy with Variable Savings Rates," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 505-513.
- Berglas, Eitan, 1981. "Harmonization of commodity taxes : Destination, origin and restricted origin principles," Journal of Public Economics, Elsevier, vol. 16(3), pages 377-387, December.
- Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(1), pages 5-24, February.
- Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550.
- Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867.
- Whalley, John, 1979. "Uniform domestic tax rates, trade distortions and economic integration," Journal of Public Economics, Elsevier, vol. 11(2), pages 213-221, March.
- Alfredo M. Pereira, 1995. "Equal Yield Tax Alternatives and Government Deficits," Public Finance Review, , vol. 23(1), pages 40-71, January.
- Shoven, John B. & Whalley, John, 1977. "Equal yield tax alternatives : General equillibrium computational techniques," Journal of Public Economics, Elsevier, vol. 8(2), pages 211-224, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:23:y:2012:i:2:p:316-324. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.