Export Tax Rebates and Resource Misallocation: Evidence from a Large Developing Country

Ariel Weinberger (), Xuefeng Qian () and Mahmut Yasar

No 302, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: The export tax rebate (ETR) policy is one of the most frequently used policy instruments by Chinese policy makers. This paper therefore provides a vital analysis of its allocation effects. To motivate our empirical analysis for the allocation effects of the ETR policy, we first add a tax rebate to the Melitz and Ottaviano (2008) model and examine the impact of this policy on firms' markup size and resource allocation between eligible and non-eligible firms for the rebates. We use customs transactions, tax administration, and firm-level data to measure the effect of variation in export tax rebates, taking advantage of the large policy change in 2004. A difference-indifference approach allows us to compare the production and pricing decisions of eligible versus non-eligible firms and the distributional implications. We find that an increase in tax rebates shifts production to eligible firms and that tax rebates increase allocative efficiency.

JEL-codes: F12 F13 F14 F6 O19 O24 O38 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2017-01-01
New Economics Papers: this item is included in nep-acc and nep-int
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Journal Article: Export tax rebates and resource misallocation: Evidence from a large developing country (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:302

DOI: 10.24149/gwp302

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