nep-cna New Economics Papers
on China
Issue of 2014‒11‒07
five papers chosen by
Zheng Fang
Ohio State University

  1. The cleansing effect of minimum wages - Minimum wages, firm dynamics and aggregate productivity in China By Sandra PONCET; Florian MAYNERIS; Tao ZHANG
  2. Rural-Urban Migration, Structural Transformation, and Housing Markets in China By Garriga, Carlos; Tang, Yang; Wang, Ping
  3. Chinese Shadow Banking: Bank-Centric Misperceptions By Tri Vi Dang; Honglin Wang; Aidan Yao
  4. The Effects of China’s Sloping Land Conversion Program on Agricultural Households By Zhen Liu; Arne Henningsen
  5. Water quality, brawn, and education: the rural drinking water program in China By Xu, Lixin Colin; Zhang, Jing

  1. By: Sandra PONCET (Université de Paris I); Florian MAYNERIS (FERDI); Tao ZHANG (FERDI)
    Abstract: We here consider how Chinese firms adjust to higher minimum wages and how these affect aggregate productivity, exploiting the 2004 minimum-wage reform in China. We find that higher city-level minimum wages reduced the survival probability of firms which were the most exposed to the reform. For the surviving firms, thanks to signicant productivity gains, wage costs rose without any negative employment effect. At the city-level, our results show that higher minimum wages affected aggregate productivity growth via both productivity growth in incumbent firms and the net entry of more productive firms. Hence, in a fast-growing economy like China, there is a cleansing effect of labor-market standards.
    JEL: F10 F14 O14
    Date: 2014–10
  2. By: Garriga, Carlos (Federal Reserve Bank of St. Louis); Tang, Yang (Nanyang Technological University); Wang, Ping (Washington University)
    Abstract: This paper explores the role played by structural transformation and the resulting relocation of workers from rural to urban areas in the recent housing boom in China. This development process has fostered an ongoing increase in urban housing demand, which, combined with a relatively inelastic supply due to land and entry restrictions, has raised housing and land prices. We examine the issue using a multi-sector dynamic general-equilibrium model with endogenous rural-urban migration and endogenous housing demand and supply. Our quantitative results suggest that the development process accounts for two-thirds of housing and land price movements across all urban areas. This mechanism is amplified in an extension calibrated to the two largest cities indicating that market fundamentals remain a key driver of housing and land prices.
    Keywords: Migration; structural transformation; housing boom
    JEL: D90 E20 O41 R23 R31
    Date: 2014–10–01
  3. By: Tri Vi Dang (Columbia University and Hong Kong Institute for Monetary Research); Honglin Wang (Hong Kong Institute for Monetary Research); Aidan Yao (AXA Investment Managers)
    Abstract: In this paper, we provide a qualitative and theoretical framework to analyze the rapid growth of shadow banking in China. An important characteristic of the system is its close connection with traditional banks, making it very bank-centric. Our theoretical model employs the concept of "information sensitivity" - a measure of tail risks - by Dang, Gorton and Holmstrom (2013) and suggests that Chinese shadow banking is built on the asymmetric perception of information sensitivity among shadow banking entities, banks and investors. Compared to the US, we show that shadow banking in China is built on different mechanisms (implicit guarantees in China versus financial engineering in the US) and operates on different platforms (banks versus capital markets).
    Keywords: Number: 222014
    Date: 2014–09
  4. By: Zhen Liu (Department of Food and Resource Economics, University of Copenhagen); Arne Henningsen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: In the late 1990s, China aimed to mitigate environmental degradation from agricultural production activities by introducing the world’s largest ’Payments for Environmental Services’ (PES) program ― the Sloping Land Conversion Program (SLCP). In order to analyze its effects on agricultural households, we develop a microeconomic Agricultural Household Model (AHM), which can model the production, consumption, and non-farm labor supply decisions of agricultural households in rural China in a theoretically consistent fashion. Based on this theoretical model, we derive an empirical specification that we use to econometrically estimate the effects of the SLCP and other exogenous factors. Using a large longitudinal farm household survey data set, we estimate the empirical model with the Hausman-Taylor estimation method. The empirical results are generally consistent with the results of our theoretical comparative static analysis, e.g. that the SLCP significantly decreases agricultural production. While the SLCP increases non-farm labor supply and total consumption in the Yellow River basin, these effects could not be observed in the Yangtze River basin. The recent reduction of the SLCP compensation payment rates has had some notable, but generally small effects.
    Keywords: Sloping Land Conversion Program; Agricultural household model; Household behavior; Hausman-Taylor Estimator; China
    JEL: H31 Q12 R38
    Date: 2014–10
  5. By: Xu, Lixin Colin; Zhang, Jing
    Abstract: Although previous research has demonstrated the health benefits of water treatment programs, relatively little is known about the effect of water treatment on education. This paper examines the educational benefits to rural youth in China of a major drinking water treatment program started in the 1980s, perhaps the largest of such programs in the world. By employing a cross-sectional data set (constructed from a longitudinal data set covering two decades) with more than 4,700 individuals between 18 and 25 years old, the analysis finds that this health program has improved the individuals'education substantially, increasing the grades of education completed by 1.08 years. The qualitative results hold when the analysis controls for local educational policies and resources, village dummies, and distance of villages to schools, and by instrumenting the water treatment dummy with villages'topographic features, among others. Moreover, three findings render support to the brawn theory of gender division of labor: girls benefit much more from water treatment than boys in schooling attainment; youth with an older brother benefit more than youth with an older sister; and boys gain more body mass than girls do from having access to treated water. The program can account for the gender gap in educational attainment in rural China in the sample period. Young people that had access to treated plant water in early childhood (0-2 years of age) experienced significantly higher gains in education than those who were exposed to treated water after early childhood. The estimates suggest that this program is highly cost-effective.
    Keywords: Health Monitoring&Evaluation,Town Water Supply and Sanitation,Water and Industry,Water Supply and Sanitation Governance and Institutions,Water Conservation
    Date: 2014–10–01

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