Firm investment and exporting: Evidence from China's value-added tax reform

Qing Liu and Yi Lu

Journal of International Economics, 2015, vol. 97, issue 2, 392-403

Abstract: This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive investment shocks. The instrumental variable estimation results show that firm investment significantly and substantially increases the likelihood of exporting, and this effect is largely due to the positive effect of firm investment on firm productivity. Finally, the paper documents some heterogeneity of the effect across industries with different degrees of competition and financial constraints.

Keywords: Value-added tax reform; Fixed investment; Exporting behavior; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: C23 F10 G31 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (73)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:97:y:2015:i:2:p:392-403

DOI: 10.1016/j.jinteco.2015.07.003

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