China's export tax rebate and the duration of firm export spells

Abstract

Using a survival analysis technique, this paper investigates the impact of the export tax rebate (ETR) on duration of the firm, country/destination, and product (F–C–P)-level export spells in China. Empirical analysis of a large dataset that covers the 2001 to 2013 period shows that the effect of ETR on duration of export spells of Chinese firms is large and statistically significant. A 1 percentage point increase in ETR rate increases the duration rate of F–C–P relationships by 23.2%. Furthermore, compared with the high-tech firms, low-tech and middle-tech firms experience a larger increase in the duration of export spells in response to increase in China's ETR. Firm ownership-based analysis shows that an increase in ETR leads to a larger increase in export spells of privately owned firms than the export spells of state- and foreign-owned firms. These findings have important policy implications for the design and implementation of China's ETR policy.