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Research Article

Did government R&D subsidies increase Chinese firms’ trade margins? Evidence from Innofund program

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Pages 397-401 | Published online: 30 Apr 2020
 

ABSTRACT

This study investigates the effects of government R&D subsidies on firms’ trade margins using a panel dataset for Chinese manufacturing firms during the period between 2001 ndto 2014. This study finds that an R&D subsidy increases Chinese firms’ propensity to begin exporting and increases existing exporters’ sales from export (across-firm trade margins). After disentangling firms’ export value at the product-country transaction level, this study further finds that government R&D subsidy increases firms’ both intensive margin and extensive margin (within-firm trade margins).

JEL CLASSIFICATION:

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Calculated based on data from INNOFUND website: http://www.innofund.gov.cn/.

2 Bernard, Redding, and Schott (Citation2011) used the terms of ‘across-firm’ and ‘within-firm’ to distinguish between different categories of trade margins. According to them, prior research examined variations in export across firms within an industry, while they highlighted the variations at within-firm levels. Take extensive margin, for example, prior research only focused on new exporters’ entry, but they examined within-firm ‘extensive’ margins of the existing exporter, including exporting new products and entering new countries.

3 Following Girma et al. (Citation2009), we add one to each export sales in order to avoid the problem of taking a log of zero.

4 The study defines a new product at the HS 6-digit level when a firm never exports it before time t during the sample period; a new destination is a country to which a firm has never exported products before time t during the sample period.

Additional information

Funding

This work was supported by the Maritime Silk Road fund of Huaqiao University [[HSZD201402]].

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