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Vat Rate Dispersion And Tfp Loss In China’S Manufacturing Sector

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  • Shawn Chen

    (Business School, University of Western Australia)

Abstract

The paper studies dispersion in the effective VAT rate, a directly measurable dis-tortion, across manufacturing firms in China and assesses its impact on aggregate production efficiency through mis-allocation from 2000 to 2007. Using a structural model based on Hsieh and Klenow (2009), I find that a revenue-neutral tax reform which eliminates the dispersion in VAT rates alone produces a gain in aggregate TFP in the order of 7.9% of GDP on average in the period from 2000 to 2007.

Suggested Citation

  • Shawn Chen, 2015. "Vat Rate Dispersion And Tfp Loss In China’S Manufacturing Sector," Economics Discussion / Working Papers 15-34, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:15-34
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    2. Delalibera, Bruno R. & Cavalcanti Ferreira, Pedro & Gomes, Diego B.P. & Soares, Johann, 2024. "Tax reforms and network effects," Journal of Economic Dynamics and Control, Elsevier, vol. 163(C).
    3. Laiqun Jin & Xiuyan Liu & Sam Hak Kan Tang, 2021. "High-Technology Zones, Misallocation of Resources among Cities and Aggregate Productivity: Evidence from China," Economics Discussion / Working Papers 21-11, The University of Western Australia, Department of Economics.
    4. Kumari, Ranpati Dewage Thilini Sumudu & Chen, Shawn Xiaoguang & Li, Bei & Tang, Sam Hak Kan, 2023. "Can land misallocation be a greater barrier to development than capital? Evidence from manufacturing firms in Sri Lanka," Economic Modelling, Elsevier, vol. 126(C).
    5. Songbo Wu & Yue Lu & Xiaofeng Lv, 2021. "Does value‐added tax reform boost firms’ domestic value added in exports? Evidence from China," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1275-1299, November.
    6. Maliyamu Abudureheman & Qingzhe Jiang & Jiong Gong & Abulaiti Yiming, 2023. "Estimating and Decomposing the TFP Growth of Service-Oriented Manufacturing in China: A Translogarithmic Stochastic Frontier Approach," Sustainability, MDPI, vol. 15(7), pages 1-20, March.

    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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