Ianchovichina, Elena2012-06-222012-06-222005-02https://hdl.handle.net/10986/8890Many countries use duty drawbacks on exports, yet they have been given little attention in the literature and there is no consensus whether countries should embrace or abandon them. The author asserts that the answer depends on a country s development priorities and economic conditions. An increase in the drawback has a positive impact on export competitiveness and employment, but could lead to exports with low domestic value added. The welfare effects of duty drawback reform are ambiguous. An increase in the drawback is more likely to be welfare improving if the economy is small with high input tariffs, low initial drawback, low administrative costs, and leakages in the tariff collection system. In China duty drawback removal after meeting WTO commitments will deepen domestic supply chains and improve welfare, but will hurt China s economic efficiency, export competitiveness, and real factor incomes. Further liberalization could mitigate these negative effects.CC BY 3.0 IGOALLOCATIVE EFFICIENCYBILATERAL TRADECAPITAL GOODSCOMPETITIVE MARKETSCOMPETITIVENESSCONSUMERSCUSTOMSDEVELOPED COUNTRIESDOMESTIC MARKETDOMESTIC MARKETSECONOMIC CONDITIONSECONOMIC EFFECTSECONOMIC EFFICIENCYECONOMIC GEOGRAPHYECONOMIC THEORYECONOMICSECONOMISTSELASTICITIESELASTICITYEQUILIBRIUMEXPORT MARKETSEXPORT PROMOTIONEXPORTSFACTOR PRICESFREE TRADEFULL EMPLOYMENTFUNCTIONAL FORMSGDPGENERAL EQUILIBRIUMGENERAL EQUILIBRIUM MODELGOVERNMENT EXPENDITURESIMPERFECT SUBSTITUTESIMPORTSINCOMEINPUT USEINTERMEDIATE INPUTSINTERMEDIATE PRODUCTSMARKET STRUCTUREPOLICY MAKERSPOLITICAL ECONOMYPRODUCERSPRODUCT DIFFERENTIATIONPRODUCTION FUNCTIONPRODUCTION FUNCTIONSPRODUCTION INCREASESPRODUCTION PROCESSPROTECTIONISMREBATESRESOURCE ALLOCATIONSAVINGSSUBSTITUTIONSUPPLY CHAINSSUPPLY CURVETARIFF REFORMTAX RATESTAX REVENUETERMS OF TRADETRADE BALANCETRADE BARRIERSTRADE BLOCSTRADE LIBERALIZATIONTRADE POLICIESTRADE REFORMTRADE REGIMEUTILITY FUNCTIONVALUE ADDEDVOLUNTARY EXPORT RESTRAINTSWELFARE EFFECTSWELFARE FUNCTIONWTOWorld Bank10.1596/1813-9450-3498