nep-cna New Economics Papers
on China
Issue of 2016‒12‒11
five papers chosen by
Zheng Fang
Ohio State University

  1. Economic growth and particulate pollution concentrations in China By Stern, David I.; Zha, Donglan
  2. China’s pursuit of environmentally sustainable development: Harnessing the new engine of technological innovation By Jin, Wei; Zhang, ZhongXiang
  3. Regional Concentration of Industry in China: decentralised choices or a central plan? By Stephen Sheppard; Dan Zhao
  4. Export Tax and Tariff Evasion: Evidence of Misinvoicing in China-New Zealand Trade By Kuntal K. Das; Laura Meriluoto; Amy Rice
  5. Geographic Politics, Loss Aversion, and Trade Policy: The Case of Cotton and China By Wenshou Yan

  1. By: Stern, David I.; Zha, Donglan
    Abstract: Though the environmental Kuznets curve (EKC) was originally developed to model the ambient concentrations of pollutants, most subsequent applications have focused on pollution emissions. Yet, it seems more likely that economic growth could eventually reduce the concentrations of local pollutants than emissions. We examine the role of income, convergence, and time related factors in explaining recent changes in PM 2.5 and PM 10 particulate pollution in 50 Chinese cities using new measures of ambient air quality that the Chinese government has published only since the beginning of 2013. We use a recently developed model that relates the rate of change of pollution to the growth of the economy and other factors as well as the traditional environmental Kuznets curve model. Pollution fell sharply from 2013 to 2014. We show that economic growth, convergence, and time effects all served to lower the level of pollution. The results also demonstrate the relationship between the two modeling approaches.
    Keywords: Air pollution, economic growth, environmental Kuznets curve, China, Environmental Economics and Policy, O44, P28, Q53, Q56,
    Date: 2016–02
  2. By: Jin, Wei; Zhang, ZhongXiang
    Abstract: Whether China continues its business-as-usual investment-driven, environment-polluting growth pattern or adopts an investment and innovation-driven, environmentally sustainable development holds important implications for both national and global environmental governance. Building on a Ramsey-Cass-Koopmans growth model that features endogenous technological change induced by R&D and knowledge stock accumulation, this paper presents an exposition, both analytically and numerically, of the mechanism underlining China’s economic transition from an investment-driven, pollution-intensive to an investment and innovation-driven, environmentally sustainable growth path. We show that if R&D technological innovation is incorporated into China’s growth mechanism, then at some tipping point in time when marginal welfare gain of R&D for knowledge accumulation becomes equalized with that of investment for physical asset deployment, China’s economy will launch capital investment and R&D simultaneously and make a transition to a sustainable growth path along which consumption, capital investment, and R&D have a balanced share of 5: 4: 1, consumption, capital stock, and knowledge stock all grow at a rate of 4.9%, and environmental quality improves at a rate of 2.5%. In contrast, if R&D technological innovation is not harnessed as a new growth engine, then China’s economy will follow its business-as-usual investment-driven growth path along which standalone accumulation of dirty physical capital stock will lead to a more than 200-fold increase in environmental pollution.
    Keywords: Endogenous technological change, sustainable development, economic growth model, China’s economic transition, Research and Development/Tech Change/Emerging Technologies, Q55, Q58, Q43, Q48, O13, O31, O33, O44, F18,
    Date: 2016–01
  3. By: Stephen Sheppard (Williams College); Dan Zhao (Williams College)
    Abstract: The economic growth and development of China during the past 35 years has been associated with profound impacts on the well-being of the Chinese people, on patterns of global trade and prices of manufactured goods, and on industrial location within China itself. Many would view China’s government and its policies as the dominant, perhaps exclusive, force in determining location and concentration of Chinese industry. This raises the question: can a theoretical approach based on decentralised optimization and location choice provide insights concerning the ongoing changes in industrial concentration in China? We address this question, putting forward a simple model and testing it using Chinese data.
    Keywords: Industrial location, China, location quotient
    JEL: R12 R30 P25 O18
    Date: 2016–12
  4. By: Kuntal K. Das (University of Canterbury); Laura Meriluoto (University of Canterbury); Amy Rice
    Abstract: The trade between New Zealand and China has grown rapidly after the signing of their free trade agreement, but it is difficult to gauge the exact growth in trade due to gross inconsistencies in the trade data provided by the two countries. We investigate the roles that tax and tariff evasion play in systematically explaining this discrepancy. We find that exports and imports are heavily underreported at the Chinese border to avoid having to pay China's value-added tax and import tariffs. We also find some evidence of underreporting of imports at the New Zealand border to avoid import tariffs.
    Keywords: Trade misinvoicing, Export VAT rebate, Tax evasion, Tariff evasion
    JEL: F14 F38
    Date: 2016–12–02
  5. By: Wenshou Yan (School of Economics, University of Adelaide)
    Abstract: This paper seeks to explain how governments respond to world market price fluctuations. It develops a theoretical model of trade policy incorporating loss aversion and reference dependence. Like Freund and Özden (2008), this paper assumes only trade policy instruments are available to the government, but it goes beyond their model by adding a spatial dimension to interest-group politics. The model suggests that: (1) politically sensitive products receive more trade protection; (2) the governmentÂ’s changing trade distortions insulate the domestic market from international price fluctuations by setting trade protection lower (higher) when the world price is higher (lower) than a targeted domestic reference price; and (3) variations in market intervention help producers at the expense of consumers in periods when the international price is well below trend, and help consumers at the expense of producers in high-price periods. These predictions from theory are shown to still hold when the model is extended to a large country case involving terms of trade effects. The model is tested empirically and found to offer a plausible explanation of the puzzling changes in cotton protection in China.
    Keywords: Political economy, Geographic politics, Loss aversion, Reference dependency, Political sensitive product, Price volatility
    JEL: F13 F14 F59 Q17 Q18
    Date: 2016–11

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