Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69585
Authors: 
Defever, Fabrice
Riaño, Alejandro
Year of Publication: 
2012
Series/Report no.: 
CESifo Working Paper: Trade Policy 4054
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.
Subjects: 
trade policy
export subsidies
heterogeneous firms
China
JEL: 
F12
F13
O47
Document Type: 
Working Paper

Files in This Item:
File
Size
838.42 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.