IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

China's Pure Exporter Subsidies

  • Fabrice Defever
  • Alejandro Riaño

One third of Chinese exporters sell more than ninety percent of their production abroad. We argue that this distinctive pattern is attributable to a wide range of subsidies that provide incentives to these “pure exporters.” We propose a heterogeneous-firm model in which firms exporting all their output receive an ad-valorem sales subsidy. Using microdata on manufacturing firms matched with custom transactions for the years 2000-2006, we measure sizable differences in productivity and paid taxes between pure exporters and domestic firms and between pure and regular exporters, in line with the predictions of our model. Embedding a pure-exporter subsidy in a two-country general equilibrium environment, we show that this instrument is worse from a welfare standpoint than a standard export subsidy, partly because it increases protection of the domestic market. A counterfactual analysis suggests that eliminating these subsidies would result in a welfare gain for China comparable to halving its trade costs.

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.

File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-12/cesifo1_wp4054.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4054.

as
in new window

Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:ces:ceswps:_4054
Contact details of provider: Postal:
Poschingerstrasse 5, 81679 Munich

Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
Email:


More information through EDIRC

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.:

as in new window
  1. Davin Chor, 2007. "Subsides for FDI : Implications from a Model with Heterogeneous Firms," Finance Working Papers 22069, East Asian Bureau of Economic Research.
  2. Julian di Giovanni & Andrei A. Levchenko & Jing Zhang, 2012. "The Global Welfare Impact of China: Trade Integration and Technological Change," Working Papers 625, Research Seminar in International Economics, University of Michigan.
  3. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  4. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  5. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
  6. Kalina Manova & Zhihong Yu, 2012. "How Firms Export: Processing vs. Ordinary Trade with Financial Frictions," NBER Working Papers 18561, National Bureau of Economic Research, Inc.
  7. Ma, Yue & Tang, Heiwai & Zhang, Yifan, 2014. "Factor Intensity, product switching, and productivity: Evidence from Chinese exporters," Journal of International Economics, Elsevier, vol. 92(2), pages 349-362.
  8. Annette SCHMINKE & Johannes VAN BIESEBROECK, 2011. "Using export market performance to evaluate regional preferential policies in China," Working Papers Department of Economics ces11.33, KU Leuven, Faculty of Economics and Business, Department of Economics.
  9. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 39-73, January.
  10. Ianchovichina, Elena, 2005. "Duty drawbacks, competitiveness, and growth - are duty drawbacks worth the hassle?," Policy Research Working Paper Series 3498, The World Bank.
  11. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 31-66.
  12. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  13. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 379-436.
  14. Panagariya, Arvind, 1992. "Input tariffs, duty drawbacks, and tariff reforms," Journal of International Economics, Elsevier, vol. 32(1-2), pages 131-147, February.
  15. Wenya Cheng & John Morrow & Kitjawat Tacharoen, 2013. "Productivity as if Space Mattered: An Application to Factor Markets Across China," CESifo Working Paper Series 4494, CESifo Group Munich.
  16. Hamada, Koichi, 1974. "An economic analysis of the duty-free zone," Journal of International Economics, Elsevier, vol. 4(3), pages 225-241, August.
  17. Svetlana Demidova, 2008. "Productivity Improvements And Falling Trade Costs: Boon Or Bane?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1437-1462, November.
  18. Claustra Bajona & Tianshu Chu, 2009. "Data Appendix to "Reforming the State-Owned Enterprises in China: Effects of WTO Accession"," Technical Appendices 06-12, Review of Economic Dynamics.
  19. Thomas Farole, 2011. "Special Economic Zones in Africa : Comparing Performance and Learning from Global Experience," World Bank Publications, The World Bank, number 2268, April.
  20. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
  21. Demidova, Svetlana & Rodríguez-Clare, Andrés, 2009. "Trade policy under firm-level heterogeneity in a small economy," Journal of International Economics, Elsevier, vol. 78(1), pages 100-112, June.
  22. Miyagiwa, Kaz F., 1986. "A reconsideration of the welfare economics of a free-trade zone," Journal of International Economics, Elsevier, vol. 21(3-4), pages 337-350, November.
  23. Gabriel J. Felbermayr & Benjamin Jung & Mario Larch, 2011. "Optimal Tariffs, Retaliation and the Welfare Loss from Tariff Wars in the Melitz Model," CESifo Working Paper Series 3474, CESifo Group Munich.
  24. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
  25. Barry Naughton, 1996. "China's Emergence and Prospects as a Trading Nation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 273-344.
  26. Jiangyong, Lu & Yi, Lu & Zhigang, Tao, 2011. "Pure Exporter: Theory and Evidence," MPRA Paper 29966, University Library of Munich, Germany.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4054. 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: (Klaus Wohlrabe)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.