Are export tax rebates patronage for Chinese firms? An analysis of productivity

Teng Zhang, Shu Xu and Shuoxun Zhang

China Economic Review, 2022, vol. 75, issue C

Abstract: This paper examines the nexus between export tax rebates and productivity using Chinese firm-level data from 2000 to 2007. The empirical findings indicate that a one percentage point decrease in export tax rebate rates increases the total factor productivity (TFP) of a firm by about 0.1 percentage points. We explore the possible mechanisms that explain this nexus and attribute it to the allocation effect of export tax rebate policy; that is, export tax rebates prevent low-productivity firms from exiting the market and further reallocate resources and economic activities to them. In addition, a decrease in rebate rates significantly encourages the TFP growth of surviving firms and leads to an increase in aggregate TFP. Specifically, throughout 2000–07, the declining rebate rates accounted for 5.23% of the rise in the aggregate TFP, and the between-firm effect was 3.85%, which is much larger than the within effect.

Keywords: Export tax rebates; Productivity; Allocation effect; TFP decomposition (search for similar items in EconPapers)
JEL-codes: D24 F14 H20 O31 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:75:y:2022:i:c:s1043951x2200102x

DOI: 10.1016/j.chieco.2022.101844

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