VAT rate dispersion and TFP loss in China's manufacturing sector

Shawn Xiaoguang Chen

doi:10.1016/j.econlet.2017.03.008

VAT rate dispersion and TFP loss in China's manufacturing sector

Shawn Xiaoguang Chen

Research output: Contribution to journal › Article › peer-review

11 Citations (Web of Science)

Abstract

The paper studies dispersion in the effective VAT rate, a directly measurable distortion, across manufacturing firms in China and assesses its impact on aggregate production efficiency through misallocation from 2000 to 2007. Using a model based on Hsieh and Klenow (2009), I find that a revenue-neutral tax reform which eliminates the dispersion in VAT rates alone produces a gain in aggregate TFP in the order of 7.9% of GDP on average in the period 2000 to 2007.

Original language	English
Pages (from-to)	49-54
Number of pages	6
Journal	Economics Letters
Volume	155
DOIs	https://doi.org/10.1016/j.econlet.2017.03.008
Publication status	Published - 1 Jun 2017

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title = "VAT rate dispersion and TFP loss in China's manufacturing sector",

abstract = "The paper studies dispersion in the effective VAT rate, a directly measurable distortion, across manufacturing firms in China and assesses its impact on aggregate production efficiency through misallocation from 2000 to 2007. Using a model based on Hsieh and Klenow (2009), I find that a revenue-neutral tax reform which eliminates the dispersion in VAT rates alone produces a gain in aggregate TFP in the order of 7.9% of GDP on average in the period 2000 to 2007.",

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AB - The paper studies dispersion in the effective VAT rate, a directly measurable distortion, across manufacturing firms in China and assesses its impact on aggregate production efficiency through misallocation from 2000 to 2007. Using a model based on Hsieh and Klenow (2009), I find that a revenue-neutral tax reform which eliminates the dispersion in VAT rates alone produces a gain in aggregate TFP in the order of 7.9% of GDP on average in the period 2000 to 2007.

KW - China

KW - Misallocation

KW - Revenue-neutral reform

KW - TFP

KW - VAT

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JO - Economics Letters

JF - Economics Letters

ER -

VAT rate dispersion and TFP loss in China's manufacturing sector

Abstract

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