nep-cna New Economics Papers
on China
Issue of 2017‒03‒26
five papers chosen by
Zheng Fang
Ohio State University

  1. Smog in Our Brains: Gender Differences in the Impact of Exposure to Air Pollution on Cognitive Performance By Chen, Xi; Zhang, Xiaobo; Zhang, Xin
  2. The Paradox of Power: Understanding Fiscal Capacity in Imperial China and Absolutist Regimes By Jared Rubin; Debin Ma
  3. Social transfers in rural China: Do they contribute to poverty reduction? By Kuhn, Lena; Brosig, Stephan; Zhang, Linxiu
  4. China's growth challenges By Liu, Wan-Hsin; Langhammer, Rolf J.
  5. Collective Learning in China's Regional Economic Development Formations of Co-Inventors During the Dot-com Bubble in the Research Triangle Region By Jian Gao; Bogang Jun; Alex "Sandy" Pentland; Tao Zhou; CŽsar A. Hidalgo

  1. By: Chen, Xi; Zhang, Xiaobo; Zhang, Xin
    Abstract: While there is a large body of literature on the negative health effects of air pollution, there is much less written about its effects on cognitive performance for the whole population. This paper studies the effects of contemporaneous and cumulative exposure to air pollution on cognitive performance based on a nationally representative survey in China. Bymerging a longitudinal sample at the individual level with local air-quality data according to the exact dates and counties of interviews, we find that contemporaneous and cumulative exposure to air pollution impedes both verbal and math scores of survey subjects. Interestingly, the negative effect is stronger for men than for women. Specifically, the gender difference is more salient among the old and less educated in both verbal and math tests.
    Keywords: cognitive performance,air pollution,gender difference
    JEL: I24 Q53 Q51 J16
    Date: 2017
  2. By: Jared Rubin (Chapman University); Debin Ma (London School of Economics)
    Abstract: Tax extraction in Qing China was low relative to Western Europe. It is not obvious why: China was much more absolutist and had stronger rights over property and people. Why did the Chinese not convert their absolute power into revenue? We propose a model, supported by historical evidence, which suggests that i) the center could not ask its tax collecting agents to levy high taxes because it would incentivize agents to overtax the peasantry; ii) the center could not pay agents high wages in return for high taxes because the center had no mechanism to commit to refrain from confiscating the agent’s resources in times of crisis. A solution to this problem was to offer agents a low wage and ask for low taxes while allowing agents to take extra, unmonitored taxes from the peasantry. This solution only worked because of China’s weak administrative capacity due its size and poor monitoring technology. This analysis suggests that low investment in administrative capacity can be an optimal solution for an absolutist ruler since it substitutes for a credible commitment to refrain from confiscation. Our study carries implications for state capacity beyond Imperial China.
    Keywords: administrative capacity, fiscal capacity, state capacity, principal-agent problem, monitoring, credible commitment, absolutism, limited government, taxation, China, Europe, Qing Empire
    JEL: N45 N43 H20 P48 P51
    Date: 2017
  3. By: Kuhn, Lena; Brosig, Stephan; Zhang, Linxiu
    Abstract: In order to combat absolute poverty in rural China, the “Rural Minimum Living Standard System” was launched nationally in 2007. The program provides direct monetary transfers to rural households living below the poverty line. A recent research project working with a sample of around 5000 households found that monetary transfers were being misallocated to a considerable extent, which greatly reduced the effectiveness of the program: 89 percent of the recipient households were not eligible according to their (reported) income while 79 percent of households assessed to be eligible according to their reported income were unable to receive the necessary assistance. Qualitative investigations revealed that these misallocations were often caused by a lack of human resources among local administrations within structurally weak regions. Additional financial aid provided by the central government towards the cost of the program's implementation could lead to considerable improvement in targeting, i.e. the identification of households eligible to receive transfers. However, due to an inability to accurately measure and document income, the implementation of a closely supervised system such as those found in central Europe does not appear to be suitable in the near future. In the mid-term, a step by step replacement of social transfers with health and pension benefits should be discussed in order to alleviate the high administrative cost engendered by targeting based on income.
    Date: 2017
  4. By: Liu, Wan-Hsin; Langhammer, Rolf J.
    Abstract: Against the background of the continuously weaker economic growth in China in the past few years, the Chinese government is convinced that the Chinese economy needs to adapt itself to getting used to "the New Normal". Under "the New Normal" the Chinese economy will grow at lower rates of about 6-7% annually, whereas China would strive for substantial quality advancement that should become a core element in its future growth model in the long run. To realize a more quality- and domestic-market-oriented sustainable economic development, several reform measures need to be implemented and expanded and new reform policies need to be initiated. Focusing on three key growth challenges faced by China - domestic consumption, innovation and entrepreneurship, and foreign trade and investment, this paper aims at providing more insight into these challenges and sketching potential policy measures that are required to deal with them. Reforms and policy measures to be implemented need to have a clear long-term orientation to support adequate long-term structural changes, and such orientation requires consistency, credibility, and transparency in order to avoid confusing signals received by market participants.
    Date: 2016
  5. By: Jian Gao; Bogang Jun; Alex "Sandy" Pentland; Tao Zhou; CŽsar A. Hidalgo
    Abstract: Industrial development is the process by which economies learn how to produce new products and services. But how do economies learn? And who do they learn from? The literature on economic geography and economic development has emphasized two learning channels: inter-industry learning, which involves learning from related industries; and inter-regional learning, which involves learning from neighboring regions. Here we use 25 years of data describing the evolution of China's economy between 1990 and 2015--a period when China multiplied its GDP per capita by a factor of ten--to explore how Chinese provinces diversified their economies. First, we show that the probability that a province will develop a new industry increases with the number of related industries that are already present in that province, a fact that is suggestive of inter-industry learning. Also, we show that the probability that a province will develop an industry increases with the number of neighboring provinces that are developed in that industry, a fact suggestive of inter-regional learning. Moreover, we find that the combination of these two channels exhibit diminishing returns, meaning that the contribution of either of these learning channels is redundant when the other one is present. Finally, we address endogeneity concerns by using the introduction of high-speed rail as an instrument to isolate the effects of inter-regional learning. Our differences-in-differences (DID) analysis reveals that the introduction of high speed-rail increased the industrial similarity of pairs of provinces connected by high-speed rail. Also, industries in provinces that were connected by rail increased their productivity when they were connected by rail to other provinces where that industry was already present. These findings suggest that inter-regional and inter-industry learning played a role in China's great economic expansion. Length:
    Date: 2017–03

This nep-cna issue is ©2017 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.