Firm investment and exporting: Evidence from China's value-added tax reform

This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive investment shocks. The instrumental variable estimation res...

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Published inJournal of international economics Vol. 97; no. 2; pp. 392 - 403
Main Authors Liu, Qing, Lu, Yi
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.11.2015
Elsevier Sequoia S.A
Subjects
Online AccessGet full text
ISSN0022-1996
1873-0353
DOI10.1016/j.jinteco.2015.07.003

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Abstract This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive investment shocks. The instrumental variable estimation results show that firm investment significantly and substantially increases the likelihood of exporting, and this effect is largely due to the positive effect of firm investment on firm productivity. Finally, the paper documents some heterogeneity of the effect across industries with different degrees of competition and financial constraints. •We identify the causal effect of firms' fixed investment on their exporting behavior with the Difference-in-Differences method.•Our results show that fixed investment significantly and substantially increases the likelihood of exporting.•We document some heterogeneity of the effect across industries with different degrees of competition and financial constraints.
AbstractList This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive investment shocks. The instrumental variable estimation results show that firm investment significantly and substantially increases the likelihood of exporting, and this effect is largely due to the positive effect of firm investment on firm productivity. Finally, the paper documents some heterogeneity of the effect across industries with different degrees of competition and financial constraints. [web URL: http://www.sciencedirect.com/science/article/pii/S002219961500118X]
This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive investment shocks. The instrumental variable estimation results show that firm investment significantly and substantially increases the likelihood of exporting, and this effect is largely due to the positive effect of firm investment on firm productivity. Finally, the paper documents some heterogeneity of the effect across industries with different degrees of competition and financial constraints. All rights reserved, Elsevier
This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive investment shocks. The instrumental variable estimation results show that firm investment significantly and substantially increases the likelihood of exporting, and this effect is largely due to the positive effect of firm investment on firm productivity. Finally, the paper documents some heterogeneity of the effect across industries with different degrees of competition and financial constraints. •We identify the causal effect of firms' fixed investment on their exporting behavior with the Difference-in-Differences method.•Our results show that fixed investment significantly and substantially increases the likelihood of exporting.•We document some heterogeneity of the effect across industries with different degrees of competition and financial constraints.
Author Lu, Yi
Liu, Qing
Author_xml – sequence: 1
  givenname: Qing
  surname: Liu
  fullname: Liu, Qing
  email: qliu1997@gmail.com
  organization: School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China
– sequence: 2
  givenname: Yi
  surname: Lu
  fullname: Lu, Yi
  email: justinly6@gmail.com
  organization: Department of Economics, National University of Singapore, 1 Arts Link, 117570, Singapore
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Issue 2
Keywords Fixed investment
Value-added tax reform
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Exporting behavior
Difference-in-differences
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Snippet This paper contributes to the literature by identifying the causal effect of firm investment on exporting behavior. The identification hinges on regional...
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SubjectTerms Causality
China
Difference-in-differences
Exporting behavior
Exports
Fixed investment
Foreign direct investment
Foreign investment
Investments
Organizational behavior
Organizational behaviour
Regional differences
Studies
Tax reform
Taxation
Value
Value-added tax reform
Value-added taxes
VAT
Title Firm investment and exporting: Evidence from China's value-added tax reform
URI https://dx.doi.org/10.1016/j.jinteco.2015.07.003
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https://www.proquest.com/docview/1758941390
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