nep-cna New Economics Papers
on China
Issue of 2010‒02‒05
two papers chosen by
Zheng Fang
Ohio State University

  1. Globalization, Trade & Wages: What Does History tell us about China? By Kris James Mitchener; Se Yan
  2. Welfare Effects of Regressive Taxation and Subsidies in China By Xiaobing Wang; Jenifer Piesse

  1. By: Kris James Mitchener; Se Yan
    Abstract: Chinese imports and exports grew rapidly during the first three decades of the twentieth century as China opened up to global trade. Using a new data set on the factor-intensity of traded goods at the industry level, we show that Chinese exports became more unskilled-intensive and imports became more skill-intensive during these three decades. The exogenous shock of World War I dramatically raised the price of Chinese exports, increased the demand for Chinese goods overseas, and increased the demand for unskilled workers producing these goods. These trends continued even after the war ended. We show that the timing of the rise in export prices is consistent with the observed decline in the skill premium in China. The skill-unskilled wage ratio flattened out during the 1910s and then fell by eight percent during the 1920s. We simulate the price shock of World War I using a general equilibrium factor-endowments model of trade and find evidence consistent with the observed fall in the skill premium in China during the 1920s.
    JEL: F15 F33 N25 N75
    Date: 2010–01
  2. By: Xiaobing Wang; Jenifer Piesse
    Abstract: Using three comparable national representative household surveys for China in 1988, 1995 and 2002, this paper provides micro level evidence of a policy of absolute regressive taxation and an inverted welfare system. It reviews the economic effects of taxes and subsides and shows that a dual and regressive taxation system increases the urban rural income gap and enhances overall inequality. The empirical evidence indicates that the relatively poorer rural population pay net tax while those in the richer urban areas receive net subsidies. This biased system of taxes and welfare payments is one of the major causes of the persisting urban-rural income gap and is largely responsible for overall income inequality in China.
    Date: 2009

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