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Trade policy repercussions: the role of local product space -Evidence from China

Julien Gourdon (), Laura Hering (), Stéphanie Monjon () and Sandra Poncet ()
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Laura Hering: CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Stéphanie Monjon: CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique
Sandra Poncet: CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: Our study shows that the relatively under-studied VAT export rebate system is a major industrial policy of the Chinese authorities to support exports. We use city-specific export-quantity data at the HS6-product level over the 2003-12 period to assess how changes in the VAT export tax have affected China's export performance. We are particularly interested in how the impact of this policy varies within products across cities depending on how well connected the targeted product is to the local productive structure. Our difference-indifference estimates exploit an eligibility rule disqualifying some export flows from the rebates. Our results suggest that a one percent rise in the VAT export tax leads to a 6.6% relative decrease in eligible export quantities. We then show that the effectiveness of this export tax policy is magnified when it applies to products with denser links with the local productive structure. Hence export benefits from VAT export rebates are greater for cities that have the necessary capabilities and resources to carry out the activities supported by this rebate policy.

Keywords: VAT system; policy evaluation; export tax; export performance; trade elasticity; product relatedness; China (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-int and nep-tra
Date: 2019-03-13
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02065779
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