Defever, Fabrice and Riaño, Alejandro (2012) China's pure exporter subsidies. CEP Discussion Papers (CEPDP1182). London School of Economics and Political Science. Centre for Economic Performance, London, UK.
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Abstract
One third of Chinese exporters sell more than ninety percent of their production abroad. We argue that this distinctive pattern is attributable to a wide range of subsidies that provide incentives to these “pure exporters”. We propose a heterogeneous firm model in which firms exporting all their output receive an ad-valorem sales subsidy. Using microdata on manufacturing firms matched with custom transactions for the years 2000-2006, we measure sizable differences in productivity and paid taxes between pure exporters and domestic firms and between pure and regular exporters, in line with the predictions of our model. Embedding a pure-exporter subsidy in a two-country general equilibrium environment, we show that this instrument is worse from a welfare standpoint than a standard export subsidy, partly because it increases protection of the domestic market. A counterfactual analysis suggests that eliminating these subsidies would result in a welfare gain for China comparable to halving its trade costs.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://cep.lse.ac.uk/_new/publications/series.asp?... |
| Additional Information: | © 2012 The Authors |
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HF Commerce |
| JEL classification: | F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence |
| Date Deposited: | 01 Mar 2013 14:05 |
| Last Modified: | 13 Sep 2024 20:22 |
| URI: | http://eprints.lse.ac.uk/id/eprint/48929 |
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