Are Duty Drawbacks on Exports Worth the Hassle?

33 Pages Posted: 20 Jul 2007

Abstract

Many countries use duty drawbacks on exports, yet there is no consensus whether countries should embrace or abandon them. The answer depends on countries' development priorities and economic conditions. An increase in the drawback has a positive impact on export competitiveness, but the welfare effect is ambiguous. A welfare increase is more likely if the economy is small with high input tariffs, low initial drawback, low administrative costs and tariff leakages. In China duty drawback removal after meeting its WTO commitments improves welfare, but hurts economic efficiency, export competitiveness, and real incomes. Further liberalization can mitigate these negative effects.

Suggested Citation

Ianchovichina, Elena, Are Duty Drawbacks on Exports Worth the Hassle?. Canadian Journal of Economics, Vol. 40, No. 3, pp. 881-913, August 2007. Available at SSRN: https://ssrn.com/abstract=1001796 or http://dx.doi.org/10.1111/j.1365-2966.2007.00435.x

Elena Ianchovichina (Contact Author)

World Bank ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-458-8910 (Phone)
202-522-1159 (Fax)

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