VAT rebates as trade policy: Evidence from China

Nils Braakmann, Bo Gao and Sara Maioli

China Economic Review, 2020, vol. 63, issue C

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%.

Keywords: VAT rebates; Intensive margins; Extensive margins; Pass through; Trade policy (search for similar items in EconPapers)
JEL-codes: F13 F14 H20 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:63:y:2020:i:c:s1043951x20301334

DOI: 10.1016/j.chieco.2020.101536

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