Madani, Dorsati H.Mas-Guix, Natalia2012-03-192012-03-192011-03-01https://hdl.handle.net/10986/3352The original goal of the Motor Industry Development Program was to help the automotive industry in South Africa adjust to trade liberalization and become internationally competitive. In simple terms, it consists of an import/export complementation arrangement, whereby the local value-added of components or built-up vehicles exported earns credits that can be used to rebate import duties on components and vehicles. This study provides a first attempt at a quantitative analysis of the Motor Industry Development Program using the difference-in-difference methodology, in order to assess to what extent the program was effective in improving South Africa's automotive export performance during 1996-2006. The authors take a two-tier approach. First, they perform a comparative study using different manufacturing sectors within South Africa; second, they apply this methodology to analyze South Africa and a number of comparator countries that are automotive producers and exporters. The analysis finds that the impact of the program on automotive exports in South Africa is positive and significant. In particular, (i) the largest response to the program in terms of improved manufacturing exports occurs with a delay after the adoption of the law, suggesting that exports need time to fully react to the incentives; and (ii) in turn, the effectiveness of the tax incentives fades in time, reaffirming the common belief that tax incentives may affect some business decisions particularly in the short run, but they are not a primary consideration for investors in the long run.CC BY 3.0 IGOAGRICULTURAL PRODUCTSAGRICULTUREAUTO INDUSTRYAUTOMOBILEAUTOMOBILE INDUSTRIESAUTOMOBILE INDUSTRYAUTOMOTIVE INDUSTRYAUTOMOTIVE SECTORAVERAGE PRODUCTIVITYBANK POLICYBUSINESS CYCLEBUSINESS ENVIRONMENTCAPITAL GOODSCAPITAL INVESTMENTSCARCAR PRICESCARSCENTRAL BANKCHECKSCOMPARATIVE ADVANTAGECOMPARATIVE ANALYSISCOMPETITIVENESSCOMPETITIVENESS OF FIRMSCOMPLIANCE COSTSCONSUMER SURPLUSCONSUMERSCORPORATE INCOME TAXCOST-BENEFIT ANALYSISCOUNTERVAILING MEASURESCURRENCYCURRENCY UNIONDEFLATORSDEREGULATIONDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDISCOURAGED WORKERSDOMESTIC INDUSTRIESDOMESTIC MARKETDRIVINGDUMMY VARIABLEDUMMY VARIABLESECONOMIC DEVELOPMENTECONOMIC LOSSECONOMIC PERFORMANCEECONOMIC RELATIONSECONOMIC STRUCTUREECONOMIC THEORYECONOMIES OF SCALEEMERGING ECONOMIESEQUIPMENTSEXCHANGE RATEEXCHANGE RATESEXOGENOUS SHOCKSEXPENDITUREEXPORTEXPORT GROWTHEXPORT INCENTIVESEXPORT INTENSITYEXPORT MARKETEXPORT MARKETSEXPORT PERFORMANCEEXPORT PRICEEXPORT PROCESSINGEXPORT PROCESSING ZONESEXPORT SUBSIDIESEXPORT SUPPLYEXPORT VALUEEXPORT VOLUMESEXPORTEREXPORTERSEXPORTSFINANCIAL CRISISFOREIGN COMPANIESFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN TRADEFREE ACCESSGDPGDP PER CAPITAGENERALIZED SYSTEM OF PREFERENCESGLOBAL BUSINESSGLOBAL CAPITALGLOBAL COMPETITIONGLOBAL INTEGRATIONGLOBAL MARKETSGLOBAL TRADEGOVERNMENT SUPPORTGROSS DOMESTIC PRODUCTHOST GOVERNMENTHOST GOVERNMENTSHUMAN CAPITALIMPACT OF TRADEIMPACT OF TRADE LIBERALIZATIONIMPORT DUTIESIMPORT DUTYIMPORT PENETRATIONIMPORT TARIFFSINCENTIVE REGIMESINCOMEINCOME LEVELINCOME TAXINDUSTRIAL POLICIESINDUSTRIAL POLICYINDUSTRIALIZATIONINFLATIONINFRASTRUCTURE INVESTMENTINJURYINTERMEDIATE INPUTSINTERNATIONAL BANKINTERNATIONAL COMPETITIVENESSINTERNATIONAL DEVELOPMENTINTERNATIONAL ECONOMICSINVENTORYINVESTINGINVESTMENT CLIMATEINVESTMENT DECISIONSINVESTMENT INCENTIVESKNOWLEDGE SPILLOVERSLOSS OF REVENUESMACROECONOMIC DYNAMICSMACROECONOMIC FACTORSMACROECONOMIC POLICYMARKET STRUCTUREMIDDLE INCOME COUNTRIESMIDDLE INCOME COUNTRYMOBILITYMOTOR VEHICLEMOTOR VEHICLESMULTINATIONAL CORPORATIONSNATIONAL TREASURYNATURAL RESOURCESNET EXPORTSNET INFLOWSOPEN MARKETOPENNESSPATTERN OF TRADEPATTERNS OF TRADEPOLITICAL STABILITYPOSITIVE EXTERNALITIESPOTENTIAL INVESTORSPRICE FLUCTUATIONSPRODUCTION COSTSPRODUCTIVITY GROWTHRAILRAILWAYSREAL EXCHANGE RATESREAL GDPREAL INTERESTREAL INTEREST RATEREAL INTEREST RATESREGRESSION ANALYSISREGULATORY FRAMEWORKSRENTSRETURNSROADSSTRUCTURAL CHANGETARIFF PROTECTIONTARIFF RATESTARIFF REDUCTIONTARIFF REDUCTIONSTAXTAX BENEFITSTAX INCENTIVESTAX RATETAX REGIMESTAXPAYERSTERMS OF TRADETRADE BALANCETRADE BARRIERSTRADE FLOWSTRADE LIBERALIZATIONTRADE PERFORMANCETRADE POLICIESTRADE POLICYTRADE PREFERENCESTRADE REGIMETRANSACTIONTRANSACTION COSTSTRANSPORTTRANSPORT EQUIPMENTTRANSPORT INFRASTRUCTURETRANSPORTATIONTRANSPORTATION EQUIPMENTTREASURYTRUETURNOVERUNEMPLOYMENTUNEMPLOYMENT RATEUNEMPLOYMENT RATESUNSKILLED LABORVALUE ADDEDVEHICLEVEHICLESWAGESWHOLESALE PRICE INDEXWORLD MARKETSWORLD PRICESWORLD TRADEWTOWorld Bank10.1596/1813-9450-5585