nep-cna New Economics Papers
on China
Issue of 2016‒02‒17
nine papers chosen by
Zheng Fang
Ohio State University

  1. Remittances and Expenditure Patterns of the Left Behinds in Rural China By Démurger, Sylvie; Wang, Xiaoqian
  2. The Health Implications of Social Pensions: Evidence from China's New Rural Pension Scheme By Cheng, Lingguo; Liu, Hong; Zhang, Ye; Zhao, Zhong
  3. Subjective Well-being in China, 2005-2010: The Role of Relative Income, Gender and Location By Asadullah, Niaz; Xiao, Saizi; Yeoh, Emile Kok-Kheng
  4. Endogenous competition exposure: China's rise, intra-industry and intra-firm reallocations By Gampfer, Benjamin; Geishecker, Ingo
  5. Does A Child Quantity-Quality Trade-Off Exist? Evidence from the One-Child Policy in China By Huang, Yue
  6. Leader Networks and Transaction Costs: A Chinese Experiment in Interjurisdictional Contracting By Chau, Nancy; Qin, Yu; Zhang, Weiwen
  7. Trade Invoicing in the Major Currencies in the 1970s-1990s: Lessons for renminbi internationalization By ITO Hiroyuki; KAWAI Masahiro
  8. Aid on Demand: African Leaders and the Geography of China s Foreign Assistance By Fuchs, Andreas; Dreher, Axel; Hodler, Roland; Parks, Bradley C.; Raschky, Paul
  9. Higher Education Expansion and Labor Market Outcomes for Young College Graduates By Ou, Dongshu; Zhao, Zhong

  1. By: Démurger, Sylvie (CNRS, GATE); Wang, Xiaoqian (GATE, University of Lyon)
    Abstract: This paper investigates how private transfers from internal migration in China affect the expenditure behaviour of families left behind in rural areas. Using data from the Rural-Urban Migration in China (RUMiC) survey, we assess the impact of remittances sent to rural households on consumption-type and investment-type expenditures. We apply propensity score matching to account for the selection of households into receiving remittances, and estimate average treatment effects on the treated. We find that remittances supplement income in rural China and lead to increased consumption rather than increased investment. Moreover, we find evidence of a strong negative impact on education expenditures, which could be detrimental to sustaining investment in human capital in poor rural areas in China.
    Keywords: remittances, labour migration, expenditure behaviour, left-behind, China, propensity score matching
    JEL: O15 J22 R23 D13 O53
    Date: 2016–01
  2. By: Cheng, Lingguo (Shanghai University of Finance and Economics); Liu, Hong (Central University of Finance and Economics); Zhang, Ye (Nanjing University); Zhao, Zhong (Renmin University of China)
    Abstract: This paper estimates the causal effect of income on health outcomes of the elderly and investigates underlying mechanisms by exploiting an income change induced by the launch of China's New Rural Pension scheme (NRPS). Using this policy experiment, we address the endogeneity of pension income by applying a fixed-effect model with instrumental variable correction. The results reveal that pension enrollment and income from the NRPS both have had a beneficial impact on objective measures of physical health, cognitive function, and psychological well-being of the rural elderly, and also reduced mortality over a three-year horizon by 6 percentage points. Evidence further suggests that pension recipients respond to the new pension income in multiple ways: improved nutrition intake, better accessibility to health care, increased informal care, increased leisure activities, and better self-perceived relative economic situation. These in turn act as channels from pension income to health of the Chinese rural elderly.
    Keywords: pension income, health, channels, elderly, China
    JEL: H55 I12 I38 J14
    Date: 2016–01
  3. By: Asadullah, Niaz (University of Malaya); Xiao, Saizi (University of Malaya); Yeoh, Emile Kok-Kheng (University of Malaya)
    Abstract: We use data from two rounds of the Chinese General Social Survey (CGSS) to study the determinants of subjective well-being in China over the period 2005-2010 during which self-reported happiness scores show an increase across all income groups. Ordered probit regression analysis of well-being reveals large influence of gender, rural residency and household income. After controlling for demographic attributes, health, unemployment status, household size, agricultural hukou (household registration identity) and education status, household assets, the influence of past and future income and province dummies, we find that women, urban residents and people with higher income are happier in China. More schooling, better health and being employed are positively and significantly correlated with well-being. Sub-sample s reveals that the rich only care about relative income whereas the effect of absolute income dominates in case of the poorer section. The influence of absolute income is larger among women compared to men and in turn explains why women, despite being poorer, are happier in China, conditional on socio-economic differences. On the other hand, rural residents are poorer than urban residents so that conditional on having the same income, there is no rural-urban happiness gap. Our results suggest that while further decline in poverty will enhance well-being in China, policies that reduce rural-urban and gender inequalities are also likely to boost well-being.
    Keywords: gender, happiness, inequality, poverty, unemployment, well-being
    JEL: O12 I30 I31
    Date: 2016–01
  4. By: Gampfer, Benjamin; Geishecker, Ingo
    Abstract: In this paper we analyse the manufacturing sector's capacity to mitigate increasing import competition from China. In our view, competition exposure is endogenous, i.e. influenced by firms' decisions which products are sold and what markets are served. We construct a counterfactual competition measure to assess the importance of different types of adaptation to increased competition: inter- and intra-industry reallocations, firm entry and exit, and product- and destination switching, among others. Combining Danish firm register data with transactional level trade statistics we are able to track product-level competition changes on the domestic as well as on each export market. Between 1997 and 2008 aggregated manufacturing level exposure to Chinese imports increased by 177 per cent but counterfactually would have increased by remarkable 283 per cent had the manufacturing sector not successfully adapted. The mitigation of sector level competition exposure works through all adaptation channels, notably firm entry and exit, and inter-industry reallocations. However, for surviving firms, product and destination switching are very relevant mechanisms to mitigate increased competitive pressure from China.
    JEL: F14 L60
    Date: 2015
  5. By: Huang, Yue
    Abstract: Evidence on the existence of a trade-off between child quantity and child quality, as suggested by Gary S. Becker, is still inconclusive. This also holds true for empirical studies on China that exploit for identification the country s One-Child Policy (OCP) as an exogenous source of variation in the number of offspring. However, this body of literature suffers from a number of shortcomings, in particular measurement error in the key policy variable (a household s coverage by OCP) and in the outcome variable of interest (schooling choices, i.e. child quality). Using census data for China and a continuous OCP variable that can address these shortcomings, the results provide evidence for the existence of a sizeable quantity-quality trade-off within households with mothers who are Han and have agricultural Hukou.
    JEL: J13 J18 I20
    Date: 2015
  6. By: Chau, Nancy (Cornell University); Qin, Yu (National University of Singapore); Zhang, Weiwen (Zhejiang University)
    Abstract: Do leader networks promote efficient intergovernmental contracts? We examine a groundbreaking policy in China where subprovincial governments freely traded land conversion quotas, and investigate the role of leader networks on the boundary between jurisdictions that embrace trade versus autarky. Consistent with the presence of Williamsonian transaction costs featuring uncertainty, incomplete contracting, and asset specificity, we find that leader career networks facilitate trade, controlling for institutional similarity and prior trade relations. However, trade gains can be limited if leader networks offer selective coverage. Using data from the Chinese experiment, we find evidence consistent with trade match distortions induced by leader networks.
    Keywords: transaction cost, government leader network, interjurisdictional contracting
    JEL: H11 H77 P35 R52 D23
    Date: 2016–01
  7. By: ITO Hiroyuki; KAWAI Masahiro
    Abstract: In this paper, we investigate how much a major national currency is used for trade invoicing by focusing primarily on the experiences of the U.S. dollar, Japanese yen, and Deutsche mark (DM) in the 1970s through the 1990s. We then attempt to draw lessons for China's renminbi (RMB) internationalization. Our data on the shares of the three major currencies in export invoicing show that the dollar has unequivocally been a global invoicing currency, the DM was a major regional currency in Europe, while the yen has neither been a global nor regional currency. DM invoicing was driven by European countries' trade ties with Germany. In contrast, the yen was not and is still not widely used for trade invoicing by Asia-Oceania countries, even including Japan itself, despite the region's strong trade ties with Japan. Our regression analysis on the determinants of the major currency share for trade invoicing (also including UK pound, French franc, Italian lira, and Swiss franc) in the 1970-1998 period suggests that the invoicing share of a major currency tends to be positively affected by the degree of other economies' trade ties with the major currency country and negatively affected by the degree of their financial development or openness. Also, the major currency share for trade invoicing is affected by both the weight of the major currencies in the implicit currency baskets of other economies or these economies' trade shares with major-currency zone countries. Economies belonging to the U.S. dollar zone tend to invoice their trade more in the dollar and less in the DM, while the opposite is observed for economies in the DM zone. The use of yen for trade invoicing is not much affected by its currency weight or the trade share with currency zones. European countries largely belonged to the DM zone, thereby contributing to higher DM use for trade invoicing, whereas Asia-Oceania countries belonged mainly to the U.S. dollar zone, leading to a lower degree of yen use. We also find that major currency countries tend to invoice their trade in their own currencies when they have a large presence in international trade and high levels of per capita income, and when their financial markets are more developed and at the same time are sufficiently open. Furthermore, major currency countries with high trade shares with U.S. dollar zone countries tend to invoice their exports less in their own currencies. For China, its low level of per capita income and limited financial openness as well as the presence of the U.S. dollar bloc in Asia stand as a big challenge to the nation's ambition to promote the RMB as a major regional or global trade-invoicing currency.
    Date: 2016–01
  8. By: Fuchs, Andreas; Dreher, Axel; Hodler, Roland; Parks, Bradley C.; Raschky, Paul
    Abstract: We investigate whether the political leaders of aid-receiving countries use foreign aid inflows to further their own political or personal interests. Aid allocation biased by leaders selfish interests arguably reduces the effectiveness of aid, negatively affecting development outcomes. We examine whether more Chinese aid is allocated to the political leaders birth regions and regions populated by the ethnic group to which the leader belongs, controlling for objective indicators of need. We have collected data on 117 African leaders birthplaces and ethnic groups and geocoded 1,955 Chinese development finance projects across 3,553 physical locations in Africa over the 2000-2012 period. The results from various fixed-effects regressions show that current political leaders birth regions receive substantially larger financial flows than other regions. We do not find evidence that leaders shift aid to regions populated by groups who share their ethnicity.
    JEL: D73 F35 P33
    Date: 2015
  9. By: Ou, Dongshu (Chinese University of Hong Kong); Zhao, Zhong (Renmin University of China)
    Abstract: We examine the causal impact of China's higher education expansion on labor market outcomes for young college graduates using China's 2005 1% Population Sample Survey. Exploiting variation in the expansion of university spots across provinces and high school cohorts and applying a difference-in-differences model, we find that the expansion of higher education in China decreases unemployment rates, especially among males and high school graduates. However, the policy also decreases women's labor force participation and individual earnings in highly-skilled white-collar jobs. We further discuss potential channels affecting the observed outcomes. Our results illustrate the strong demand for a skilled labor force in China and the broad economic benefits of higher education.
    Keywords: higher education expansion, labor force participation, unemployment, wage, difference-in-differences
    JEL: I23 I28 J31 O15
    Date: 2016–01

This nep-cna issue is ©2016 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.