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

Tan, Yong and An, Liwei and Hu, Cui (2015): Regional Effects of Export Tax Rebate on Exporting Firms: Evidences From China.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Export Tax Rebate, Regional Labor Market, Direct Impact, Indirect Impact
• Subjects: D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General

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