Kiel Working Papers, Kiel Institute for World Economics
No 1442:
Can production subsidies explain China's export performance? Evidence from firm level data
Zhihong Yu, Yundan Gong, Sourafel Girma and Holger Görg
Abstract: It is widely accepted that China has been experiencing an
export-led growth approach. However, the question whether government can
reshape industry structure through production subsidies to enhance export
performance has not been answered. This paper analyses the impact of
production subsidies on firms’ export performance using a very
comprehensive and recent firm level database and controlling for the
endogeneity of subsidies. It documents robust evidence that production
subsidies stimulate export activity, although this effect is conditional on
firm characteristics. In particular, the beneficial impact of subsidies is
found to be more pronounced amongst profit-making firms, firms in capital
intensive industries and those located in non-coastal regions. Compared to
firm characteristics, the extent of heterogeneity across ownership
structure (SOEs, collectives and privately-owned firms) proves to be
relatively less important
Keywords: Exporting, subsidies, China, endogenous Tobit; (follow links to similar papers)
JEL-Codes: F1,; O2,; P3; (follow links to similar papers)
36 pages, August 2008
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