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VAT rebates as trade policy: Evidence from China

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  • Braakmann, Nils
  • Gao, Bo
  • Maioli, Sara

Abstract

Value-added tax (VAT) rebates are a commonly used export-promoting policy. This paper exploits China's frequent adjustments of VAT rebates and large-scale data on export transactions to estimate the effects of VAT rebates on exports. Our difference-in-differences estimations show that the negative adjustments of VAT rebates in our sample period significantly reduce export value and quantity by 15.30% and 19.75%, respectively. This shows that the trade policy of VAT rebates is very effective. We also find that the effect of VAT rebates on exports operating through extensive margins is larger than the effect through intensive margins. Moreover, we find that the pass-through of VAT rebates to importers is around 47%.

Suggested Citation

  • Braakmann, Nils & Gao, Bo & Maioli, Sara, 2020. "VAT rebates as trade policy: Evidence from China," China Economic Review, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:chieco:v:63:y:2020:i:c:s1043951x20301334
    DOI: 10.1016/j.chieco.2020.101536
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    Cited by:

    1. Lu, Angdi & Zhang, Jiang & Li, Jie, 2023. "The impact of export VAT rebate reduction on firms' pollution emissions: Evidence from Chinese enterprises," Energy Economics, Elsevier, vol. 120(C).
    2. Liu, Lihua & Cao, Lele & Cao, Yuqiang & Lu, Meiting & Shan, Yaowen, 2024. "VAT credit refunds and firm productivity: Evidence from China's VAT reform," International Review of Financial Analysis, Elsevier, vol. 93(C).
    3. Bingqiang Li & Xi Li & Jinzhi Li & Hongchun Lin & Baojuan Rui, 2023. "Empirical Analysis of Export Tax Rebate on Inwards Foreign Direct Investment in China," SAGE Open, , vol. 13(4), pages 21582440231, December.
    4. Baoqing Tang & Bo Gao & Jing Ma, 2021. "The impact of export VAT rebates on firm productivity: Evidence from China," The World Economy, Wiley Blackwell, vol. 44(10), pages 2798-2820, October.
    5. Bo Gao & Jing Ma & Zheng Wang, 2021. "The employment and wage effects of export VAT rebates: evidence from China," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(2), pages 347-373, May.
    6. Sergey G. Sinelnikov-Murylev & Nikolay S. Milogolov & Sergey G. Belev, 2022. "Налоговая Политика В Условиях Санкций," Russian Economic Development (in Russian), Gaidar Institute for Economic Policy, issue 9, pages 42-51, September.
    7. Zhang, Teng & Xu, Shu & Zhang, Shuoxun, 2022. "Are export tax rebates patronage for Chinese firms? An analysis of productivity," China Economic Review, Elsevier, vol. 75(C).
    8. Xu, Zhiwei & Wen, Qiang & Zhang, Teng, 2023. "Trade policy and air pollution: Evidence from the adjustment of the export tax rebate in China," Economic Modelling, Elsevier, vol. 128(C).
    9. Sergey G. Sinelnikov-Murylev & Nikolay S. Milogolov & Sergey G. Belev, 2022. "Tax Policy under Sanctions [Налоговая Политика В Условиях Санкций]," Russian Economic Development, Gaidar Institute for Economic Policy, issue 9, pages 42-51, September.
    10. Sun, Churen & Wu, Han, 2023. "The impact of export VAT rebate on firm-product markups: Evidence from Chinese industrial enterprises," Economic Modelling, Elsevier, vol. 119(C).

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    More about this item

    Keywords

    VAT rebates; Intensive margins; Extensive margins; Pass through; Trade policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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