VAT rate dispersion and TFP loss in China’s manufacturing sector

Shawn Chen

Economics Letters, 2017, vol. 155, issue C, 49-54

Abstract: The paper studies dispersion in the effective VAT rate, a directly measurable distortion, across manufacturing firms in China and assesses its impact on aggregate production efficiency through misallocation from 2000 to 2007. Using a model based on Hsieh and Klenow (2009), I find that a revenue-neutral tax reform which eliminates the dispersion in VAT rates alone produces a gain in aggregate TFP in the order of 7.9% of GDP on average in the period 2000 to 2007.

Keywords: VAT; Misallocation; TFP; Revenue-neutral reform; China (search for similar items in EconPapers)
JEL-codes: H21 H25 O11 O47 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:155:y:2017:i:c:p:49-54

DOI: 10.1016/j.econlet.2017.03.008

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