nep-cna New Economics Papers
on China
Issue of 2007‒01‒02
twelve papers chosen by
Zheng Fang
Ohio State University

  1. Missing Women and the Price of Tea in China: The Effect of Sex-Specific Earnings on Sex Imbalance By Qian, Nancy
  2. The Long Run Health and Economic Consequences of Famine on Survivors: Evidence from China's Great Famine By Meng, Xin; Qian, Nancy
  3. Rural People’s Perception of Poverty in China By Bjorn Gustafsson; Ximing Yue
  4. Rural Income Volatility and Inequality in China By John Whalley; Ximing Yue
  5. Tripolar century: USA, China and India By Arvind Virmani
  6. China's Socialist Market Economy: Lessons of Success By Arvind Virmani
  7. Revealed comparative advantage: An analysis for India and China By Amita Batra; Zeba Khan
  8. Polarizações e desigualdades: desenvolvimento regional na China (1949-2000) By Ricardo Machado Ruiz
  9. Are Financial Distortions an Impediment to Economic Growth? Evidence from China By Alessandra Guariglia; Sandra Poncet
  10. FDI in Chinese Cities: Spillovers and Impact on Growth By Nicole Madariaga; Sandra Poncet
  11. Market Access Impact on Individual Wage: Evidence from China By Laura Hering; Sandra Poncet
  12. State-Owned Enterprise Behaviour Responses to Trade Reforms: Some Analytics and Numerical Simulation Results Using Chinese Data By John Whalley; Shunming Zhang

  1. By: Qian, Nancy
    Abstract: Economists long have argued that the severe sex imbalance that exists in many developing countries is caused by underlying economic conditions. This paper uses plausibly exogenous increases in sex-specific agricultural income caused by post-Mao reforms in China to estimate the effects of total income and sex-specific income on sex ratios of surviving children. The results show that increasing income alone has no effect on sex ratios. In contrast, increasing female income, holding male income constant, increases survival rates for girls; increasing male income, holding female income constant, decreases survival rates for girls. Moreover, increasing the mother's income increases educational attainment for all children, while increasing the father's income decreases educational attainment for girls and has no effect on boys' educational attainment.
    Keywords: development; gender; household bargaining
    JEL: I12 J13 J16 J24 O13 O15
    Date: 2006–12
  2. By: Meng, Xin; Qian, Nancy
    Abstract: In the past century, more people have perished from famine than from the two World Wars combined. Many more were exposed to famine and survived. Yet we know almost nothing about the long run impact of famine on these survivors. This paper addresses this question by estimating the effect of childhood exposure to China's Great Famine on adult health and labor market outcomes of survivors. It resolves two major empirical difficulties: 1) data limitation in measures of famine intensity; and 2) the potential joint determination of famine occurrences and survivors' outcomes. As a measure of famine intensity, we use regional cohort size of the surviving population in a place and time when there is little migration. We then exploit a novel source of plausibly exogenous variation in famine intensity to estimate the causal effect of childhood exposure to famine on adult health, educational attainment and labor supply. The results show that exposure to famine had significant adverse effects on adult health and work capacity. The magnitude of the effect is negatively correlated with age at the onset of the famine. For example, for those who were one year old at the onset of the famine, exposure on average reduced height by 2.08% (3.34cm), weight by 6.03% (3.38kg), weight-for-height by 4% (0.01 kg/cm), upper arm circumference by 3.95% (0.99cm) and labor supply by 6.93% (3.28 hrs/week). The results also suggest that famine exposure decreased educational attainment by 3% (0.19 years); and that selection for survival decreased within-region inequality in famine stricken regions.
    Keywords: children; demographic; famine; institutions
    JEL: J1 J24 O15
    Date: 2006–12
  3. By: Bjorn Gustafsson (University of Göteborg and IZA Bonn); Ximing Yue (Renmin University of China)
    Abstract: Subjective Poverty Line methodology is applied to rural China 2002 using a sample from 22 provinces. Respondents were asked two questions: one on amount of food necessary and another on amount of cash necessary for their households. The respondent’s perception of how much cash is needed varies profoundly and positively by income in the county where the respondent lives. The findings provide an argument for increasing the official poverty line for China as average household income increases. Poverty in rural China is disproportionally concentrated to the western regions and to poor counties. Most of rural China’s poverty can be attributed to households living outside classified poor areas. People living in a household with many members, those with a household head with a short education, and children face higher poverty risks than other persons.
    Keywords: China, poverty, poverty line
    JEL: I32 O15 P36
    Date: 2006–12
  4. By: John Whalley; Ximing Yue
    Abstract: Available data indicates a growing urban-rural income gap (the ratio of mean urban to rural incomes) with a significant increase from around 1.8 in the late 1980's to over 3 today. These estimates do not take into account the higher volatility of rural incomes in China. Current literature based on analyses of rural income volatility in China decomposes poverty into chronic and transient components using longitudinal survey data and assesses the fraction of the Foster, Greer and Thorbecke poverty gap attributable to mean income over time being below the poverty line. Resulting estimates of 40-50 % transient poverty point to the policy conclusion that poverty may be a less serious social problem than it appears in annual data due to rural income volatility. Here we use a direct method instead to adjust rural income for volatility using a certainty equivalent income measure and recompute summary statistics for the distribution of volatility corrected incomes, including the urban-rural income gap on which much of current poverty debate in China focuses. Since an uncertain income stream is worth less in utility terms than a certain income stream we argue that heightened rural volatility increases the effective urban-rural income gap and intensifies not weakens poverty concerns. Using Chinese longitudinal rural survey data for which current decompositions can be replicated, we make adjustments for certainty equivalence of rural household income streams which not only widen the urban-rural income gap in China but also increases other distributional summary statistics. Depending upon values used for the coefficient of relative risk aversion, the measured urban-rural income gap increases by 20-30% using a certainty equivalent measure to adjust rural incomes for volatility. We also conduct similar analyses using consumption data, for which slightly larger increases occur.
    JEL: O15 O20 O53
    Date: 2006–12
  5. By: Arvind Virmani (Indian Council for Research on International Economic Relations)
    Date: 2005–03
  6. By: Arvind Virmani (Indian Council for Research on International Economic Relations)
    Date: 2005–12
  7. By: Amita Batra (Indian Council for Research on International Economic Relations); Zeba Khan (Indian Council for Research on International Economic Relations)
    Date: 2005–08
  8. By: Ricardo Machado Ruiz (Cedeplar-UFMG)
    Abstract: The regional development in China in the period 1949-2000 has two stages. In the first one (1949-1978), the aim was to control the territory. During three decades the government encouraged the convergences of per capita income among regions, rural, and urban areas, the industry was decentralized, the growth of central regions was induced, and the growth of coastal regions was constrained. In the second period (1979-2000), the so called "coastal and uneven strategy of development" determined the regional development of China. During this period the regional disparity decreased only at the beginning, then the differences between rural and urban areas, regions, and provinces were amplified and political conflicts increased.
    Keywords: China; regional economics; economic development; regional policy
    JEL: R58 R11 O14 O18
    Date: 2006–12
  9. By: Alessandra Guariglia; Sandra Poncet
    Abstract: Using data for 30 Chinese provinces over the period 1989-2003, this study examines the relationship between the level of financial intermediary development, and real GDP growth, physical capital accumulation, and total factor productivity (TFP) growth. We find that traditionally used indicators of financial development and China-specific indicators measuring the level of state interventionism in finance are generally negatively associated with growth and its sources, while indicators measuring the degree of market driven financing in the economy are positively associated with GDP and TFP growth, and capital accumulation. These effects have gradually declined over time and are weaker for high FDI recipients.
    Keywords: Financial intermediation; economic growth; capital accumulation; productivity growth; China
    JEL: E44 G21 N15 O16 O40
    Date: 2006–12
  10. By: Nicole Madariaga; Sandra Poncet
    Abstract: We study the impact of FDI on growth performance. We rely on a data set of Chinese cities between 1990 and 2002 to investigate the effects of FDI in the traditional growth regression framework using the GMM estimator for dynamic panels. Our growth model incorporates an explicit consideration of spatial dependence effects in the form of spatially lagged income and FDI. Our results reveal that Chinese cities take advantage not only of FDI flows received locally but also of FDI flows received by their neighbors.
    Keywords: Growth; regional convergence; economic geography; foreign direct investment China
    JEL: E1 O1 O5 R1
    Date: 2006–12
  11. By: Laura Hering; Sandra Poncet
    Abstract: We study the effect of geography and in particular of market access on wages by working with individual data from 56 Chinese cities in 11 different provinces. By applying the theory of the New Economic Geography on individual survey data, we contribute to the explanation of growing disparities within the country, and even within provinces. We examine to what extent proximity to markets can explain inter-individual wage heterogeneity and growing wage disparities within Chinese provinces. Using a New Economic Geography style model, we derive an econometric specification relating wages to market access. The latter is calculated as a transport cost weighted sum of the surrounding locations’ market capacities. Based on data from 1995 on around 10,000 Chinese workers, and after controlling for individual skills and factor endowments, we find that a significant fraction of inter-individual differences in terms of return to labor can be explained by the geography of access to markets. Moreover, our study investigates whether the relationship between market access and wages holds for all types of workers equally and shows that the magnitude of the impact depends on the firm type and the level of qualification.
    Keywords: Economic geography; international trade; regional integration; wage China; inequality
    JEL: F12 F15 R11 R12
    Date: 2006–12
  12. By: John Whalley; Shunming Zhang
    Abstract: We note the absence of prior literature on analytical structures to be used for China and other economies with extensive SOEs when evaluating behavioural responses of SOEs to trade policy and other changes. This is despite both the large empirical literature discussing the productivity effects of Chinese SOE enterprise reform, and wider policy discussion of the potential impacts of various reform initiatives. We present two simple analytical formulations of SOE behaviour in response to trade policy change with the aim of investigating how traditional competitive models of enterprise behaviour can mislead when used in policy debate. One formulation centres on SOE managerial control. In this enterprise managers are politically appointed, expect any non performing loans to be recapitalized by state banks andhence capital is centrally allocated by credit rationing. The managers are assured to maximize the size of the enterprise rather than profits since this yields maximal networking benefits to managers. This implies labour is priced at its average rather than its marginal product, and with a competitive non-manufacturing (agricultural) industry free trade is not optimal policy. The other assumes worker control of SOEs and that workers satisfice in their supply of effort to the enterprise given both fixed wage rates and enterprise employment and otherwise shirk or pursue second jobs. In this formulation the enterprise meets their budget constraint and covers costs. With leisure in the preferences of enterprise members, their leisure consumption will be implied by the satisfying behaviour of the enterprise and will be non optimal. In both model variants, implications for trade policy are different from those of a standard competitive model, and computations using models calibrated to 2003 Chinese data suggest the differences can be large.
    JEL: F00 F13 P2
    Date: 2006–12

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