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Duty drawbacks, competitiveness, and growth - are duty drawbacks worth the hassle?

Elena Ianchovichina

No 3498, Policy Research Working Paper Series from The World Bank

Abstract: Many countries use duty drawbacks on exports, yet they have been given little attention in the literature and there is no consensus whether countries should embrace or abandon them. The author asserts that the answer depends on a country’s development priorities and economic conditions. An increase in the drawback has a positive impact on export competitiveness and employment, but could lead to exports with low domestic value added. The welfare effects of duty drawback reform are ambiguous. An increase in the drawback is more likely to be welfare improving if the economy is small with high input tariffs, low initial drawback, low administrative costs, and leakages in the tariff collection system. In China duty drawback removal after meeting WTO commitments will deepen domestic supply chains and improve welfare, but will hurt China’s economic efficiency, export competitiveness, and real factor incomes. Further liberalization could mitigate these negative effects.

Keywords: Environmental Economics&Policies; Markets and Market Access; Labor Policies; Economic Theory&Research; Trade Policy; Economic Theory&Research; Environmental Economics&Policies; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Airports and Air Services; Trade and Regional Integration (search for similar items in EconPapers)
Date: 2005-02-01
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Journal Article: Are duty drawbacks on exports worth the hassle? (2007) Downloads
Working Paper: Duty Drawbacks, Competitiveness and Growth: Should China Reform its Duty Drawback System? Downloads
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