nep-cna New Economics Papers
on China
Issue of 2015‒03‒27
six papers chosen by
Zheng Fang
Ohio State University

  1. Migration Externalities in Chinese Cities By Pierre-Philippe Combes; Sylvie Démurger; Shi Li
  2. International Effects of China’s Rise and Transition: Neoclassical and Keynesian Perspectives By Rod Tyers
  3. The Impacts of Structural Transformation and Industrial Upgrading on Regional Inequality in China By Tsun Se Cheong; Yanrui Wu
  4. Convergence and Transitional Dynamics of China's Industrial Output: A County-Level Study Using a New Framework of Distribution Dynamics Analysis By Tsun Se Cheong; Yanrui Wu
  5. Short Run Effects of The Economic Reform Agenda By Rod Tyers; Ying Zhang
  6. Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving By Vipin Arora; Rod Tyers; Ying Zhang

  1. By: Pierre-Philippe Combes (Groupement de Recherche en Économie Quantitative d'Aix-Marseille); Sylvie Démurger (CNRS); Shi Li
    Abstract: We analyse the impact of internal migration in China on natives’ labour market outcomes. We find evidence of a large positive correlation of the city share of migrants with natives’ wages. Using different sets of control variables and instruments suggests that the effect is causal. The large total migrant impact (+10% when one moves from the first to the third quartile of the migrant variable distribution) arises from gains due to complementarity with natives in the production function (+6.4%), and from gains due to agglomeration economies (+3.3%). Finally, we find some evidence of a stronger effect for skilled natives than for unskilled, as expected from theory. Overall, our findings support large nominal wage gains that can be expected from further migration and urbanisation in China.
    Keywords: migration; urban development; agglomeration economies; wage disparities; China.
    Date: 2015–03
  2. By: Rod Tyers (Business School, University of Western Australia)
    Abstract: Opinion over the global implications of China’s rise is divided between critics, who see it as having developed at the expense of both investment and employment in the US, Europe and Japan and proponents who emphasise improvements in the terms of trade and reductions to the cost of financing that stem from China’s supply of light manufactures, its demand for Western capital and luxury goods and its high saving. The criticism implies Keynesian assumptions while proponents take a neoclassical perspective. In this paper, both are embodied in a global macro model that emphasises bilateral linkages via both trade and investment, with monetary spill-overs represented by globally integrated bond markets. Net gains are suggested for the US and Europe from China’s successful export-oriented growth, though there are partially offsetting Keynesian effects. China’s recent slower, more consumption focussed, growth appears also to be beneficial in those regions and in Japan notwithstanding terms of trade losses.
    Date: 2014
  3. By: Tsun Se Cheong (University of Western Australia); Yanrui Wu (University of Western Australia)
    Abstract: China has achieved unprecedented success in economic growth since the initiation of economic reforms. The high growth could partly be attributed to the success in structural transformation of the economy. Another contributing factor may be the industrial upgrading of the manufacturing sector towards high value-added products. However, regional inequality in China has increased considerably behind the scenes. In order to have sustainable economic growth, it is thus crucial to investigate both the impacts of structural transformation and industrial upgrading on regional inequality. This paper contributes to the literature in the analysis of the structural transformation by employing a database at the county-level. Decompositions are performed for different spatial groupings so as to provide a clear view of evolution of regional inequality. In addition, the contributions of the major industries to inequality in industrialization are examined by using a database of value-added at the provincial level. The results may have important policy implications for the formulation of a comprehensive and coherent strategy in managing inequality while promoting structural transformation and industrial upgrading.
    Date: 2014
  4. By: Tsun Se Cheong (Business School, University of Western Australia); Yanrui Wu (Business School, University of Western Australia)
    Abstract: Many scholars have argued that the huge increase in regional inequality in China can be attributed greatly to the disparity in industrialization. This paper contributes to the literature by providing empirical evidence on the transitional dynamics of industrial output by employing a new framework of distribution dynamics analysis, namely the Mobility Probability Plot (MPP), and a database compiled at the county-level. The new framework can address several inadequacies of the traditional display tools in the distribution dynamics literature, while the database is made up of counties and county-level cities in 22 provinces in China. Stochastic kernel analyses are performed for the nation, the economic zones and the provinces individually so as to provide an in-depth understanding of the evolution and convergence of industrial output. This study fills the gap in the literature and provides information on mobility of the county-level units, which can greatly aid the policy making process.
    Date: 2014
  5. By: Rod Tyers (Business School, University of Western Australia); Ying Zhang (Business School, University of Western Australia)
    Abstract: China’s size limits its capacity to source further growth from exports and so the inevitable turn inward is in progress. Thus far, key home policy drivers have been fiscal expansion and public investment, though provincial indebtedness will constrain these in future and growth will be driven by the reform agenda, including further industrial reform and “internationalisation”. The short run effects of these domestic policy and external shocks are examined using a model of the Chinese economy that takes explicit account of oligopoly behaviour. The results confirm that industrial reform in heavy manufacturing and services would reduce costs and foster growth in output, private consumption and modern sector employment. At the same time, while China’s private investment will be sensitive to the uncertain effects of internationalisation, increased nominal exchange rate flexibility would offer a reliable cushion.
    Date: 2014
  6. By: Vipin Arora (United States Energy Information Administration, Washington DC); Rod Tyers (Business School, University of Western Australia); Ying Zhang (Business School, University of Western Australia)
    Abstract: East Asian, and primarily Chinese and Japanese, excess saving has been comparatively large and controversial since the 1980s. That it has contributed to the decline in the global “natural” rate of interest is consistent with Bernanke’s much debated “savings glut” hypothesis for the decade after 1998, empirical explorations of which have proved unconvincing. In this paper it is argued that the comparatively integrated global market for long bonds is suggestive of trends in the “world” natural rate and that the longer term evidence supports a leading role for Asia’s contribution to the expansion of ex ante global saving in explaining the declining trend in real long yields. Evidence is presented that trends in US 10 year bond yields are indeed representative of those in the “world” natural rate. The relationship between these yields and excess saving in China and Japan is then explored using a VECM that accounts for US monetary policy. The results support a negative long term relationship between 10-year yields and the current account surpluses of China and Japan. Projections using the same model then suggest that a feasible range of future pathways for those current accounts could cause the path of long rates to deviate by 330 basis points over the next decade.
    Date: 2014

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