China's Pure Exporter Subsidies

Fabrice Defever and Alejandro Riaño

No 4054, CESifo Working Paper Series from CESifo

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.

Keywords: trade policy; export subsidies; heterogeneous firms; China (search for similar items in EconPapers)
JEL-codes: F12 F13 O47 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp4054.pdf (application/pdf)

Related works:
Working Paper: China's Pure Exporter Subsidies (2012)
Working Paper: China's pure exporter subsidies (2012)
Working Paper: China's Pure Exporter Subsidies (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4054

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().