VAT RATE DISPERSION AND TFP LOSS IN CHINA’S MANUFACTURING SECTOR

Shawn Chen

No 15-34, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: The paper studies dispersion in the effective VAT rate, a directly measurable dis-tortion, across manufacturing firms in China and assesses its impact on aggregate production efficiency through mis-allocation from 2000 to 2007. Using a structural 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 from 2000 to 2007.

Pages: 53 pages
Date: 2015
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Related works:
Journal Article: VAT rate dispersion and TFP loss in China’s manufacturing sector (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:uwa:wpaper:15-34

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