Regional Effects of Export Tax Rebate on Exporting Firms: Evidences From China

Yong Tan, Liwei An and Cui Hu

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we extend the model of Melitz (2003) to separate the direct and indirect impact of an export tax rebate on the intensive margin of firm-level export sales at the sub-national level. The direct impact of the rebate is associated with a reduction of an exporting firm’s variable costs, while the indirect impact manifests itself through higher regional wages as a result of increased demand for local labor. First, the empirical results imply that a 1% rise in the export tax rebate rate increases the export sales among continuing exporters by 0.4% through the direct channel. Second, the same rebate increase reduces export sales among continuing exporters by 0.02% through indirect channel. Both effects are statistically significant, and are consistent with the model's predictions.

Keywords: Export Tax Rebate; Regional Labor Market; Direct Impact; Indirect Impact (search for similar items in EconPapers)
JEL-codes: D22 F10 F14 L10 (search for similar items in EconPapers)
Date: 2015-06-21
New Economics Papers: this item is included in nep-cna, nep-int, nep-pbe and nep-tra
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Journal Article: Regional effects of export tax rebate on exporting firms: Evidence from China (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:65188

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