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Can production subsidies explain China's export performance? Evidence from firm level data

Author

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  • Girma, Sourafel
  • Gong, Yundan
  • Görg, Holger
  • Yu, Zhihong

Abstract

It is widely accepted that China has been experiencing an export-led growth approach. However, the question whether government can reshape industry structure through production subsidies to enhance export performance has not been answered. This paper analyses the impact of production subsidies on firms' export performance using a very comprehensive and recent firm level database and controlling for the endogeneity of subsidies. It documents robust evidence that production subsidies stimulate export activity, although this effect is conditional on firm characteristics. In particular, the beneficial impact of subsidies is found to be more pronounced amongst profit-making firms, firms in capital intensive industries and those located in non-coastal regions. Compared to firm characteristics, the extent of heterogeneity across ownership structure (SOEs, collectives and privately-owned firms) proves to be relatively less important.

Suggested Citation

  • Girma, Sourafel & Gong, Yundan & Görg, Holger & Yu, Zhihong, 2008. "Can production subsidies explain China's export performance? Evidence from firm level data," Kiel Working Papers 1442, Kiel Institute for the World Economy.
    • Handle: RePEc:zbw:ifwkwp:1442
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    References listed on IDEAS

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    JEL classification:

    • F1 - International Economics - - Trade
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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