How Do VAT Reforms in the Service Sectors Impact TFP in the Manufacturing Sector: Firm-Level Evidence from China

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dc.cclicenceCC-BY-NCen
dc.contributor.authorPeng, F.
dc.contributor.authorPeng, L.
dc.contributor.authorWang, Zheng
dc.date.acceptance2021-03-02
dc.date.accessioned2021-03-02T15:47:05Z
dc.date.available2021-03-02T15:47:05Z
dc.date.issued2021-03-06
dc.descriptionThe file attached to this record is the author's final peer reviewed version.en
dc.description.abstractThis paper estimates the impact of a pilot policy reform in China that replaced the business tax (BT) with a value-added tax (VAT) for the service sectors on the total factor productivity (TFP) of manufacturing firms. Employing a difference-in-differences (DD) estimation approach, our results show that through forward and backward linkages (FLs and BLs, respectively) along the value chain, this pilot program has a positive effect on manufacturing firms’ TFP. A 1% increase in FLs (BLs) leads to an approximately 7% (16%) increase in firm productivity. This effect is larger for non-state-owned enterprises and labor-intensive firms than for other firms. Manufacturing firms with high intensities of exporting activities are affected only through BLs. Further exploration shows that this increase in productivity is realized mainly through increased specialization of firms. Our findings imply that simplification and unification of the tax system across sectors can help boost firm productivityen
dc.funderOther external funder (please detail below)en
dc.funder.otherNational Natural Science Foundation of Chinaen
dc.identifier.citationPeng, F, Peng, L., Wang, Z. (2021) How Do VAT Reforms in the Service Sectors Impact TFP in the Manufacturing Sector: Firm-Level Evidence from China. Economic Modelling, 99, 105483en
dc.identifier.doihttps://doi.org/10.1016/j.econmod.2021.03.002
dc.identifier.issn0264-9993
dc.identifier.urihttps://dora.dmu.ac.uk/handle/2086/20666
dc.language.isoenen
dc.peerreviewedYesen
dc.projectid71973121en
dc.publisherElsevieren
dc.researchinstituteInstitute for Applied Economics and Social Value (IAESV)en
dc.subjectVAT pilot programen
dc.subjectTFPen
dc.subjectChinaen
dc.subjectForward and backward linkagesen
dc.titleHow Do VAT Reforms in the Service Sectors Impact TFP in the Manufacturing Sector: Firm-Level Evidence from Chinaen
dc.typeArticleen

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