Firm Investment and Exporting: Evidence from Chinas Value-Added Tax Reform

This paper contributes to the literature by identifying the causal e¤ect of \u85rm investment on exporting behavior. The identi\u85cation hinges on regional variations in the 2004 value-added tax pilot reform in China, which generated positive invest-ment shocks. The instrumental variable estimation results show that \u85rm invest-ment signi\u85cantly and substantially increases the likelihood of exporting, and this e¤ect is largely due to the positive e¤ect of \u85rm investment on \u85rm productivity. Finally, the paper documents some heterogeneity of the e¤ect across industries with di¤erent degrees of competition and \u85nancial constraints