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Regional Effects of Export Tax Rebate on Exporting Firms: Evidences From China

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  • Tan, Yong
  • An, Liwei
  • Hu, Cui

Abstract

In this paper, we extend the model of Melitz (2003) to separate the direct and indirect impact of an export tax rebate on the intensive margin of firm-level export sales at the sub-national level. The direct impact of the rebate is associated with a reduction of an exporting firm’s variable costs, while the indirect impact manifests itself through higher regional wages as a result of increased demand for local labor. First, the empirical results imply that a 1% rise in the export tax rebate rate increases the export sales among continuing exporters by 0.4% through the direct channel. Second, the same rebate increase reduces export sales among continuing exporters by 0.02% through indirect channel. Both effects are statistically significant, and are consistent with the model's predictions.

Suggested Citation

  • Tan, Yong & An, Liwei & Hu, Cui, 2015. "Regional Effects of Export Tax Rebate on Exporting Firms: Evidences From China," MPRA Paper 65188, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65188
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    References listed on IDEAS

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    Cited by:

    1. Wonkyung Lee & Hong Ma & Yuan Xu, 2021. "Export tax rebate and the margins of exports: product-level evidence from a quasi-natural experiment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(2), pages 386-404, April.
    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. Alexis Catanzaro & Christine Teyssier, 2020. "Export promotion programs, export capabilities, and risk management practices of internationalized SMEs," Post-Print hal-03034452, HAL.
    4. 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.
    5. Bond, Eric W. & Duan, Yuwan & Ji, Ting & Lu, Yi, 2023. "Trade and welfare effects of export tax: Theory and evidence from China's incomplete export VAT rebate," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 542-560.

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    More about this item

    Keywords

    Export Tax Rebate; Regional Labor Market; Direct Impact; Indirect Impact;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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