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on China |
| By: | Djankov, Simeon; Qian, Yingyi; Roland, Gérard; Zhuravskaya, Ekaterina |
| Abstract: | We compare results from a pilot study on entrepreneurship in China and Russia. Compared to non-entrepreneurs, Russian and Chinese entrepreneurs have more entrepreneurs in their family and among childhood friends, value work more relative to leisure and have higher wealth ambitions. Russian entrepreneurs have a better educational background and their parents were more likely to have been members of the communist party but Chinese entrepreneurs are more risk-taking and greedy and have more entrepreneurs among their childhood friends. |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5705&r=cna |
| By: | Lane, Philip R.; Schmukler, Sergio |
| Abstract: | Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China’s FDI liabilities), these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are “short equity, long debt.” Third, China and India have improved their net external positions over the last decade although, based on their income level, neoclassical models would predict them to be net borrowers. Domestic financial developments and policies seem essential in understanding these patterns of integration. These include financial liberalization and exchange rate policies; domestic financial sector policies; and the impact of financial reform on savings and investment rates. Changes in these factors will affect the international financial integration of China and India (through shifts in capital flows and asset/liability holdings) and, consequently, the international financial system. |
| Keywords: | capital flows; China; financial integration; India; world economy |
| JEL: | F02 F30 F31 F32 F33 F36 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5852&r=cna |
| By: | Hasan, Iftekhar (BOFIT); Wachtel , Paul (BOFIT); Zhou, Mingming (BOFIT) |
| Abstract: | There have been profound changes in both political and economic institutions in China over the last twenty years. Moreover, the pace of transition has led to variation across the country in the level of development. In this paper, we use panel data for the Chinese provinces to study the role of legal institutions, financial deepening and political pluralism on growth rates. The most important institutional developments for a transition economy are the emergence and legalization of the market economy, the establishment of secure property rights, the growth of a private sector, the development of financial sector institutions and markets, and the liberalization of political institutions. We develop measures of these phenomena, which are used as explanatory variables in regression models to explain provincial GDP growth rates. Our evidence suggests that the development of financial markets, legal environment, awareness of property rights and political pluralism are associated with stronger growth. |
| Keywords: | economic growth; institutions; financial markets; China |
| JEL: | O16 O53 P14 P16 |
| Date: | 2006–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2006_012&r=cna |
| By: | Dwayne Benjamin (University of Toronto); Loren Brandt (University of Toronto); John Giles (Michigan State University and IZA Bonn) |
| Abstract: | We explore the relationship between the level of village inequality in 1986, and the subsequent growth of household incomes from 1986 to 1999. Using a detailed householdlevel data set from rural China, we find robust evidence that initial inequality is negatively related to subsequent household income growth. We are able to address a number of econometric issues that affect the use of aggregate data for this exercise, especially measurement error and aggregation: Our results strongly suggest that village inequality has an external adverse impact on household-level income trajectories. However, once we account for possibly fixed village-level unobserved heterogeneity, we find no evidence that changes in inequality are correlated with household income growth: Whatever factor drives the inequality-growth relationship only operates in the “long run.” We explore several possible avenues by which initial inequality – or an unobserved variable correlated with it – affects household income growth. While we do not find the precise mechanism, our findings point toward a class of explanations based on collective choice (like the provision of public goods or determination of local taxes), and away from credit-market based explanations. |
| Keywords: | inequality, growth, rural China, panel data |
| JEL: | O12 O15 P20 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2344&r=cna |
| By: | Piketty, Thomas; Qian, Nancy |
| Abstract: | This paper evaluates the prospects for income tax reform in China during the coming decade (with a comparison to India), and argues that such reforms should rank high on the policy agenda in these two countries. Due to high average income growth and sharply rising top income shares during the 1990s and early 2000s, progressive income taxation is about to raise non-trivial tax revenues in China and India and to become an important political object. According to our projections, the income tax should raise at least 4% of Chinese GDP in 2010 (versus less than 1% in 2000 and 0,1% in 1990), in spite of the 20% nominal rise in the exemption threshold that took effect in 2004. The fact that progressive income taxation is becoming an important policy tool has important consequences for China’s ability to finance social spending and to keep under control the rise in income inequality associated to globalization and growth. Due to faster income growth and to a higher fraction of wage earners in the labor force, the prospects for income tax development look better in China than in India. This potential is however limited by the fact that Chinese top wage-earners are under-taxed relatively to top non-wage income earners. |
| Keywords: | income distribution; income taxation |
| JEL: | E25 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5703&r=cna |
| By: | Djankov, Simeon; Qian, Yingyi; Roland, Gérard; Zhuravskaya, Ekaterina |
| Abstract: | Social scientists studying the determinants of entrepreneurship have emphasized three distinct perspectives: the role of institutions, the role of social networks and the role of personal characteristics. We conduct a survey from five large developing and transition economies to better understand entrepreneurship in view of these three perspectives. Using data from a pilot study with over 2,000 interviews in 7 cities across China, we find that controlling for institutional environment entrepreneurs in China are much more likely to have family members who are entrepreneurs as well as childhood friends who became entrepreneurs, suggesting that social environment plays an important role in entrepreneurship. Entrepreneurs also differ strongly from non-entrepreneurs in their attitudes toward risks and their work-leisure preferences, echoing Schumpeter. Finally, failed entrepreneurs score the worst on aptitude tests, but have the best self-reported performance in school and perceive the business environment as least favourable. |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5706&r=cna |
| By: | John Giles (Michigan State University and IZA Bonn); Ren Mu (World Bank) |
| Abstract: | Recent research has shown that participation in migrant labor markets has led to substantial increases in income for families in rural China. This paper asks how participation is affected by elder parent health. We find that younger adults are less likely to work as migrants when a parent is ill. Poor elder parent health has less impact on the probability of employment as a migrant when an adult child has siblings who may be available to provide care. We also highlight the potential importance of including information on non-resident family members when studying how parent illness and elder care requirements influence the labor supply decisions of adult children. |
| Keywords: | migration, health, aging, rural China |
| JEL: | O12 O15 I12 J14 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2333&r=cna |
| By: | Girma, Sourafel; Gong, Yundan; Görg, Holger |
| Abstract: | We investigate whether inward FDI, either at the firm or industry level, has any impact on product innovation by Chinese State owned enterprises (SOEs). We use a comprehensive firm level panel data set of Chinese SOEs covering the period 1999 to 2003. Our results show that foreign capital participation is associated with higher innovative activity. Inward FDI in the sector has a negative effect on innovative activity in SOEs. However, there is a positive effect of FDI on SOEs that export, invest in human capital or R&D, or have prior innovation experience. We also find that SOEs with internal R&D activity and human capital development are successful innovators. Hence, our results suggest that rather than relying on sector level inward FDI to improve domestic innovative activity, it is important to get the firm-level fundamentals right. |
| Keywords: | China; competition; FDI; innovation; spillovers; state-owned enterprises |
| JEL: | F23 O31 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5838&r=cna |
| By: | Obstfeld, Maurice |
| Abstract: | In the face of huge balance of payments surpluses and internal inflationary pressures, China has been in a classic conflict between internal and external balance under its dollar currency peg. Over the longer term, China’s large, modernizing, and diverse economy will need exchange rate flexibility and, eventually, convertibility with open capital markets. A feasible and attractive exit strategy from the essentially fixed RMB exchange rate would be a two-stage approach, consistent with the steps already taken since July 2005, but going beyond them. First, establish a limited trading band for the RMB relative to a basket of major trading partner currencies. Set the band so that it allows some initial revaluation of the RMB against the dollar, manage the basket rate within the band if necessary, and widen the band over time as domestic foreign exchange markets develop. Second, put on hold ad hoc measures of financial account liberalization. They will be less helpful for relieving exchange rate pressures once the RMB/basket rate is allowed to move flexibly within a band, and they are best postponed until domestic foreign exchange markets develop further, the exchange rate is fully flexible, and the domestic financial system has been strengthened and placed on a market-oriented basis. |
| Keywords: | China balance of payments; China currency; fixed exchange rate exit strategy; renminbi |
| JEL: | F32 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5771&r=cna |
| By: | Shibao Guo (University of Calgary); Don J. DeVoretz (RIIM, Simon Fraser University and IZA Bonn) |
| Abstract: | This paper reports findings from a Vancouver study which examines the settlement and adaptation experience of Chinese immigrants in Vancouver. The study reveals that noneconomic reasons, such as the environment, education and citizenship, constituted the primary motivations for Chinese immigrants to move to Canada. Employment and language facilities were the most frequently cited barriers inhibiting their integration into the Vancouver social and economic spheres. Their poor economic performances coupled with the devaluation of both their acquired Chinese education qualifications and labour market experience have hindered integration and increased dissatisfaction with their lives in Canada. Given the logic of our posited triangular migration model we argue that this dissatisfaction will encourage Chinese emigration from Vancouver. |
| Keywords: | Chinese immigrants, emigration, integration, triangle theory |
| JEL: | J15 J61 J60 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2340&r=cna |