IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v102y2013icp13-22.html
   My bibliography  Save this article

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

Author

Listed:
  • Chandra, Piyush
  • Long, Cheryl

Abstract

A destination-based VAT system without a complete export tax rebate is detrimental to a country's exports, while an increase in the VAT rebate rate helps reduce the negative effects. In this paper, we study the role of VAT rebates in affecting Chinese exports using firm-level panel data for 2000–2006. To address potential endogeneity, we rely on a quasi-natural policy experiment in 2004, when the fiscal conditions of local governments became important in determining the actual VAT rebate rates for exports. The empirical findings demonstrate significant and large effects of VAT rebates on export volume. On average, for each percentage point increase in the VAT rebate rate, the amount of exports increased by 13%, which translates into an additional $4.70 of exports for each $1 of export tax rebates paid.

Suggested Citation

  • Chandra, Piyush & Long, Cheryl, 2013. "VAT rebates and export performance in China: Firm-level evidence," Journal of Public Economics, Elsevier, vol. 102(C), pages 13-22.
  • Handle: RePEc:eee:pubeco:v:102:y:2013:i:c:p:13-22
    DOI: 10.1016/j.jpubeco.2013.03.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272713000534
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Bird,Richard & Gendron,Pierre-Pascal, 2011. "The VAT in Developing and Transitional Countries," Cambridge Books, Cambridge University Press, number 9781107401440, April.
    3. Bela Balassa, 1978. "Export incentives and export performance in developing countries: A comparative analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(1), pages 24-61, March.
    4. Chi-Chur Chao & Eden S. H. Yu, 2014. "Export Duty Rebates and Export Performance: Theory and China's Experience," World Scientific Book Chapters,in: TRADE-RELATED INVESTMENT MEASURES Theory and Applications, chapter 18, pages 259-272 World Scientific Publishing Co. Pte. Ltd..
    5. Holger Görg & Michael Henry & Eric Strobl, 2008. "Grant Support and Exporting Activity," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 168-174, February.
    6. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    7. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    8. Martin S. Feldstein & Paul R. Krugman, 1990. "International Trade Effects of Value-Added Taxation," NBER Chapters,in: Taxation in the Global Economy, pages 263-282 National Bureau of Economic Research, Inc.
    9. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
    10. Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR;CES;MSH, vol. 23, pages 5-49, January.
    11. Zhi Wang & Shang-Jin Wei, 2010. "What Accounts for the Rising Sophistication of China's Exports?," NBER Chapters,in: China's Growing Role in World Trade, pages 63-104 National Bureau of Economic Research, Inc.
    12. Elena Ianchovichina & Will Martin, 2004. "Impacts of China's Accession to the World Trade Organization," World Bank Economic Review, World Bank Group, vol. 18(1), pages 3-27.
    13. James H. Stock & Mark W. Watson, 2008. "Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data Regression," Econometrica, Econometric Society, vol. 76(1), pages 155-174, January.
    14. Jeffrey M. Wooldridge, 2003. "Cluster-Sample Methods in Applied Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 133-138, May.
    15. Branstetter, Lee G. & Feenstra, Robert C., 2002. "Trade and foreign direct investment in China: a political economy approach," Journal of International Economics, Elsevier, vol. 58(2), pages 335-358, December.
    16. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    17. Sourafel Girma & Yundan Gong & Holger Gˆrg & Zhihong Yu, 2009. "Can Production Subsidies Explain China's Export Performance? Evidence from Firm-level Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 863-891, December.
    18. Michael Keen & Murtaza H Syed, 2006. "Domestic Taxes and International Trade; Some Evidence," IMF Working Papers 06/47, International Monetary Fund.
    19. Tokarick, Stephen, 2007. "How large is the bias against exports from import tariffs?," World Trade Review, Cambridge University Press, vol. 6(02), pages 193-212, July.
    20. Chao, Chi-Chur & Yu, Eden S.H. & Yu, Wusheng, 2006. "China's import duty drawback and VAT rebate policies: A general equilibrium analysis," China Economic Review, Elsevier, vol. 17(4), pages 432-448.
    21. Chen, Chien-Hsun & Mai, Chao-Cheng & Yu, Hui-Chuan, 2006. "The effect of export tax rebates on export performance: Theory and evidence from China," China Economic Review, Elsevier, vol. 17(2), pages 226-235.
    22. ECKAUS, Richard S., 2006. "China's exports, subsidies to state-owned enterprises and the WTO," China Economic Review, Elsevier, vol. 17(1), pages 1-13.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gourdon, Julien & Monjon, Stéphanie & Poncet, Sandra, 2016. "Trade policy and industrial policy in China: What motivates public authorities to apply restrictions on exports?," China Economic Review, Elsevier, vol. 40(C), pages 105-120.
    2. Tan, Yong & An, Liwei & Hu, Cui, 2015. "Regional Effect of Trade Liberalization on the Firm-level Exports," MPRA Paper 81811, University Library of Munich, Germany.
    3. Tan, Yong & An, Liwei, 2015. "Regional Effect of Trade Liberalization on the Firm-level Exports," MPRA Paper 66893, University Library of Munich, Germany.
    4. repec:bla:reviec:v:25:y:2017:i:4:p:774-798 is not listed on IDEAS
    5. repec:dau:papers:123456789/13784 is not listed on IDEAS
    6. Sandra PONCET & Laura HERING & José DE SOUSA, 2015. "Has trade openness reduced pollution in China?," Working Papers P132, FERDI.
    7. Julien Gourdon & Stéphanie Monjon & Sandra Poncet, 2014. "Incomplete VAT rebates to exporters : how do they affect China's export performance?," Working Papers 2014-05, CEPII research center.
    8. L. An & C. Hu & Yong Tan, 2017. "Regional effects of export tax rebate on exporting firms: Evidence from China," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 774-798, September.
    9. Eisenbarth, Sabrina, 2017. "Is Chinese trade policy motivated by environmental concerns?," Journal of Environmental Economics and Management, Elsevier, vol. 82(C), pages 74-103.
    10. Liu, Xuepeng & Shi, Huimin & Ferrantino, Michael, 2016. "Tax evasion through trade intermediation: Evidence from Chinese exporters," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 518-535.
    11. repec:bla:pacecr:v:22:y:2017:i:1:p:101-122 is not listed on IDEAS
    12. Sandra PONCET & Julien GOURDON & Laura HERING & Stéphanie MONJON, 2014. "Export management and incomplete VAT rebates to exporters: the case of China," Working Papers P117, FERDI.
    13. repec:dau:papers:123456789/14545 is not listed on IDEAS
    14. Weinberger, Ariel & Xuefeng, Qian & Yasar, Mahmut, 2017. "Export Tax Rebates and Resource Misallocation: Evidence from a Large Developing Countr," Globalization and Monetary Policy Institute Working Paper 302, Federal Reserve Bank of Dallas.
    15. repec:bla:apacel:v:31:y:2017:i:1:p:66-78 is not listed on IDEAS

    More about this item

    Keywords

    VAT rebate; Export growth; Trade policy; China;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:102:y:2013:i:c:p:13-22. 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). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.