The Impact of Export Tax Incentives on Export Performance : Evidence from the Automotive Sector in South Africa

The 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.

Bibliographic Details

Main Authors:	Madani, Dorsati H., Mas-Guix, Natalia
Language:	English
Published:	2011-03-01
Subjects:	AGRICULTURAL PRODUCTS, AGRICULTURE, AUTO INDUSTRY, AUTOMOBILE, AUTOMOBILE INDUSTRIES, AUTOMOBILE INDUSTRY, AUTOMOTIVE INDUSTRY, AUTOMOTIVE SECTOR, AVERAGE PRODUCTIVITY, BANK POLICY, BUSINESS CYCLE, BUSINESS ENVIRONMENT, CAPITAL GOODS, CAPITAL INVESTMENTS, CAR, CAR PRICES, CARS, CENTRAL BANK, CHECKS, COMPARATIVE ADVANTAGE, COMPARATIVE ANALYSIS, COMPETITIVENESS, COMPETITIVENESS OF FIRMS, COMPLIANCE COSTS, CONSUMER SURPLUS, CONSUMERS, CORPORATE INCOME TAX, COST-BENEFIT ANALYSIS, COUNTERVAILING MEASURES, CURRENCY, CURRENCY UNION, DEFLATORS, DEREGULATION, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISCOURAGED WORKERS, DOMESTIC INDUSTRIES, DOMESTIC MARKET, DRIVING, DUMMY VARIABLE, DUMMY VARIABLES, ECONOMIC DEVELOPMENT, ECONOMIC LOSS, ECONOMIC PERFORMANCE, ECONOMIC RELATIONS, ECONOMIC STRUCTURE, ECONOMIC THEORY, ECONOMIES OF SCALE, EMERGING ECONOMIES, EQUIPMENTS, EXCHANGE RATE, EXCHANGE RATES, EXOGENOUS SHOCKS, EXPENDITURE, EXPORT, EXPORT GROWTH, EXPORT INCENTIVES, EXPORT INTENSITY, EXPORT MARKET, EXPORT MARKETS, EXPORT PERFORMANCE, EXPORT PRICE, EXPORT PROCESSING, EXPORT PROCESSING ZONES, EXPORT SUBSIDIES, EXPORT SUPPLY, EXPORT VALUE, EXPORT VOLUMES, EXPORTER, EXPORTERS, EXPORTS, FINANCIAL CRISIS, FOREIGN COMPANIES, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FOREIGN INVESTMENT, FOREIGN INVESTORS, FOREIGN TRADE, FREE ACCESS, GDP, GDP PER CAPITA, GENERALIZED SYSTEM OF PREFERENCES, GLOBAL BUSINESS, GLOBAL CAPITAL, GLOBAL COMPETITION, GLOBAL INTEGRATION, GLOBAL MARKETS, GLOBAL TRADE, GOVERNMENT SUPPORT, GROSS DOMESTIC PRODUCT, HOST GOVERNMENT, HOST GOVERNMENTS, HUMAN CAPITAL, IMPACT OF TRADE, IMPACT OF TRADE LIBERALIZATION, IMPORT DUTIES, IMPORT DUTY, IMPORT PENETRATION, IMPORT TARIFFS, INCENTIVE REGIMES, INCOME, INCOME LEVEL, INCOME TAX, INDUSTRIAL POLICIES, INDUSTRIAL POLICY, INDUSTRIALIZATION, INFLATION, INFRASTRUCTURE INVESTMENT, INJURY, INTERMEDIATE INPUTS, INTERNATIONAL BANK, INTERNATIONAL COMPETITIVENESS, INTERNATIONAL DEVELOPMENT, INTERNATIONAL ECONOMICS, INVENTORY, INVESTING, INVESTMENT CLIMATE, INVESTMENT DECISIONS, INVESTMENT INCENTIVES, KNOWLEDGE SPILLOVERS, LOSS OF REVENUES, MACROECONOMIC DYNAMICS, MACROECONOMIC FACTORS, MACROECONOMIC POLICY, MARKET STRUCTURE, MIDDLE INCOME COUNTRIES, MIDDLE INCOME COUNTRY, MOBILITY, MOTOR VEHICLE, MOTOR VEHICLES, MULTINATIONAL CORPORATIONS, NATIONAL TREASURY, NATURAL RESOURCES, NET EXPORTS, NET INFLOWS, OPEN MARKET, OPENNESS, PATTERN OF TRADE, PATTERNS OF TRADE, POLITICAL STABILITY, POSITIVE EXTERNALITIES, POTENTIAL INVESTORS, PRICE FLUCTUATIONS, PRODUCTION COSTS, PRODUCTIVITY GROWTH, RAIL, RAILWAYS, REAL EXCHANGE RATES, REAL GDP, REAL INTEREST, REAL INTEREST RATE, REAL INTEREST RATES, REGRESSION ANALYSIS, REGULATORY FRAMEWORKS, RENTS, RETURNS, ROADS, STRUCTURAL CHANGE, TARIFF PROTECTION, TARIFF RATES, TARIFF REDUCTION, TARIFF REDUCTIONS, TAX, TAX BENEFITS, TAX INCENTIVES, TAX RATE, TAX REGIMES, TAXPAYERS, TERMS OF TRADE, TRADE BALANCE, TRADE BARRIERS, TRADE FLOWS, TRADE LIBERALIZATION, TRADE PERFORMANCE, TRADE POLICIES, TRADE POLICY, TRADE PREFERENCES, TRADE REGIME, TRANSACTION, TRANSACTION COSTS, TRANSPORT, TRANSPORT EQUIPMENT, TRANSPORT INFRASTRUCTURE, TRANSPORTATION, TRANSPORTATION EQUIPMENT, TREASURY, TRUE, TURNOVER, UNEMPLOYMENT, UNEMPLOYMENT RATE, UNEMPLOYMENT RATES, UNSKILLED LABOR, VALUE ADDED, VEHICLE, VEHICLES, WAGES, WHOLESALE PRICE INDEX, WORLD MARKETS, WORLD PRICES, WORLD TRADE, WTO,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110309100435 https://hdl.handle.net/10986/3352
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