nep-cna New Economics Papers
on China
Issue of 2017‒05‒07
ten papers chosen by
Zheng Fang
Ohio State University

  1. The Shadow Price of CO2 Emissions in China's Iron and Steel Industry By Ke Wang; Linan Che; Chunbo Ma; Yi-Ming Wei
  2. The paradox of power: understanding fiscal capacity in Imperial China and absolutist regimes By Debin Ma; Jared Rubin
  3. Evolving Walkability of Major Cities in the People’s Republic of China By Fan, Peilei; Wan, Guanghua; Xu, Lihua; Park, Hogeun; Xie, Yaowen; Liu, Yong; Yue, Wenze; Chen, Jiquan
  4. Costly Posturing: Ceremonies and Early Child Development in China By Chen, Xi; Zhang, Xiaobo
  5. China's socioeconomic risk from extreme events in a changing climate: a hierarchical Bayesian model By Xiao-Chen Yuan; Xun Sun; Upmanu Lall; Zhi-Fu Mi; Jun He; Yi-Ming Wei
  6. Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence By Desmet, Klaus; Greif, Avner; Parente, Stephen L.
  7. Explaining low employment rates among older women in urban China By Wenchao (Michelle) Jin
  8. Rise of ‘Red Zaibatsu’ in China: entrenchment and expansion of large state-owned enterprises, 1990-2016 By Huangnan Shen; Lei Fang; Kent Deng
  9. The People’s Republic of China’s Import Competition and Skill Demand in Japanese Manufacturing By Yamashita, Nobuaki
  10. Impact of Latin-American and Caribbean Antidumping Measures on Chinese Exports By Yan Zhang

  1. By: Ke Wang; Linan Che; Chunbo Ma; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: As China becomes the world¡¯s largest energy consumer and CO2 emitter, there has been a rapidly emerging literature on estimating China's abatement cost for CO2 using a distance function approach. However, the existing studies have mostly focused on the cost estimates at macro levels (provinces or industries) with few examining firm-level abatement costs. No work has attempted to estimate the abatement cost of CO2 emissions in the iron and steel industry. Although some have argued that the directional distance function (DDF) is more appropriate in the presence of bad output under regulation, the choice of directions is largely arbitrary. This study provides the most up-to-date estimate of the shadow price of CO2 using a unique dataset of China's major iron and steel enterprises in 2014. The paper uses output quadratic DDF and investigates the impact of using different directional vectors representing different carbon mitigation strategies. The results show that the mean CO2 shadow price of China's iron and steel enterprises is very sensitive to the choice of direction vectors. The average shadow prices of CO2 are 407, 1226 and 6058 Yuan/tonne respectively for the three different direction vectors. We also find substantial heterogeneity in the shadow prices of CO2 emissions among China's major iron and steel enterprises. Larger, listed enterprises are found to be associated lower CO2 shadow prices than smaller, unlisted enterprises.
    Keywords: Directional distance function; Marginal abatement cost; Shadow price; Iron and steel; CO2 emissions; Heterogeneity
    JEL: Q54 Q40
    Date: 2017–04–05
  2. By: Debin Ma; Jared Rubin
    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: O53 N0
    Date: 2017–03
  3. By: Fan, Peilei (Asian Development Bank Institute); Wan, Guanghua (Asian Development Bank Institute); Xu, Lihua (Asian Development Bank Institute); Park, Hogeun (Asian Development Bank Institute); Xie, Yaowen (Asian Development Bank Institute); Liu, Yong (Asian Development Bank Institute); Yue, Wenze (Asian Development Bank Institute); Chen, Jiquan (Asian Development Bank Institute)
    Abstract: Walkability is an important element for assessing urban sustainability. As the People’s Republic of China (PRC) rapidly urbanizes, there are increased concerns that more of its cities have become less walkable. We aim to develop a composite walkability index to evaluate the spatiotemporal evolution of the walkability of PRC cities. We developed a comprehensive walkability index that integrates five aspects of the urban built environment: dwelling density, street connectivity, land-use mix, access to public transit, and elevation variation. Using Shanghai, Hangzhou, Chongqing, and Lanzhou as cases, we evaluated the spatiotemporal patterns and changes of walkability in the context of rapid urban expansion. All four cities expanded their urban land from 1990 to 2010, but that there was a higher expansion rate in 2000–2010 than in 1990–2000. For inner cities, Shanghai had the highest average walkability index, whereas Lanzhou held the lowest. In 2000–2010, however, the inner cities of Hangzhou, Chongqing, and Lanzhou and the entire cities of Shanghai and Chongqing increased their walkability index, whereas the inner city of Shanghai had decreased walkability. Furthermore, while inner cities of Shanghai and Hangzhou experienced decreased or stable walkability, inner cities of Lanzhou and Chongqing enjoyed moderate to high increases in walkability. The spatiotemporal changes in walkability seem to be directly associated with governmental policies at both central and local levels. The walkability index method can be widely implemented for any urban landscape because of its comprehensiveness, simplicity, and flexibility.
    Keywords: urban planning; urban development; urban landscape; Shanghai; Hangzhou; Chongqing; Lanzhou; walkability index; dwelling density; street connectivity; land-use mix; public transit; elevation
    JEL: O18
    Date: 2017–01–25
  4. By: Chen, Xi (Yale University); Zhang, Xiaobo (Peking University)
    Abstract: Participating in and presenting gifts at funerals, weddings, and other ceremonies held by friends and neighbors have been regarded as social norms in many parts of the world for thousands of years. However, due to the reciprocal nature of gift giving, it is more burdensome for the poor to take part in these social occasions than for the rich. Because the poor often lack the necessary resources, they are forced to cut back on basic consumption, such as food, in order to afford a gift to attend the social festivals. For pregnant women in poor families, such a reduction in nutrition intake as a result of gift-giving can have a lasting detrimental health impact on their children. Using a primary census-type panel household survey in rural China, this paper provides empirical evidence on the squeeze effect of gift giving.
    Keywords: economic status, squeeze effects, food consumption, gift-giving, stunting, malnutrition
    JEL: D13 I14 I32 O15 Z13
    Date: 2017–03
  5. By: Xiao-Chen Yuan; Xun Sun; Upmanu Lall; Zhi-Fu Mi; Jun He; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: China has a large economic and demographic exposure to extreme events that is increasing rapidly due to its fast development, and climate change may further aggravate the situation. This paper investigates China's socioeconomic risk from extreme events under climate change over the next few decades with a focus on sub-national heterogeneity. The empirical relationships between socioeconomic damages and their determinants are identified using a hierarchical Bayesian approach, and are used to estimate future damages as well as associated uncertainty bounds given specified climate and development scenarios. Considering projected changes in exposure we find that the southwest and central regions and Hainan Island of China are likely to have a larger percentage of population at risk, while most of the southwest and central regions could generally have higher economic losses. Finally, the analysis suggests that increasing income can significantly decrease the number of people affected by extremes.
    Keywords: socioeconomic risk; hierarchical Bayesian; natural disasters; climate change
    JEL: Q54 Q40
    Date: 2017–04–07
  6. By: Desmet, Klaus; Greif, Avner; Parente, Stephen L.
    Abstract: Why do some countries industrialize much earlier than others? One widely-accepted answer is that markets need to be large enough for producers to find it profitable to bear the fixed cost of introducing modern technologies. This insight, however, has limited explanatory power, as illustrated by England having industrialized nearly two centuries before China. This paper argues that a market-size-only theory is insufficient because it ignores that many of the modern technologies associated with the Industrial Revolution were fiercely resisted by skilled craftsmen who expected a reduction in earnings. Once we take into account the incentives to resist by factor suppliers' organizations such as craft guilds, we theoretically show that industrialization no longer depends on market size, but on the degree of spatial competition between the guilds' jurisdictions. We substantiate the relevance of our theory for the timing of industrialization in England and China (i) by providing historical and empirical evidence on the relation between spatial competition, craft guilds and innovation, and (ii) by showing that a model of our theory calibrated to historical data on spatial competition correctly predicts the timing of industrialization in both countries. The theory can therefore account for both the Industrial Revolution and the Great Divergence.
    Keywords: adoption of technology; craft guilds; endogenous institutions; Great Divergence; industrial revolution; innovation; inter-city competition; market size; spatial competition
    JEL: N10 O11 O14 O31 O43
    Date: 2017–04
  7. By: Wenchao (Michelle) Jin (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: In China, the employment rate among middle-aged and older urban residents is exceptionally low. For example, 27% of 55-64-year-old urban women were in work in 2013, compared to more than 50% in UK, Thailand and Philippines. This paper investigates potential explanations of this low level of employment in urban China. I document the stylized fact that a majority of individuals stop working as soon as they qualify for a public pension, which most often happens at age 50 for women. I also highlight the presence of signi cant amounts of financial and time transfers between generations. I provide descriptive evidence that transfers from children are responsive to parental incomes, and that mother's labour supply is aff ected by the expectation of transfers from her children. I then built and calibrate a life-cycle model of labour supply and saving. I fi nd that both the pension system and transfers from children have large eff ects on female labour supply. Increasing the female pension age from the status-quo to 60 would raise the employment rate of 50-59 year old women by 28 percentage points.
    Keywords: employment, employment rates, China
    Date: 2016–12–05
  8. By: Huangnan Shen; Lei Fang; Kent Deng
    Abstract: Ever since Deng Xiaoping’s reforms commencing in the 1980s, how to improve efficiency of state-owned enterprises has been on the government agenda. Progress has been made but more slowly than one expects in the decade. Even worse, against all the odds, China’s large state-owned firms, mega-SOEs, the backbone of Maoist economy previously, have gained exponential growth in the past decade. Reforms of that part of the economy have stalled. Why? To reveal the rationale and mechanisms of the rise of mega-SOEs, this study establishes a two-stage game model for an ‘authoritarian market economy’ (or a ‘market-Leninist economy’) where market monopoly and rent-seeking by state-owned conglomerates is firmly entrenched. Our findings confirm a ‘subgame perfect Nash equilibrium’ in China’s authoritarian market economy that has led the state (the owner or ‘principal’) and the large state-owned firms (the manager or the ‘agent’) to a paradox which prevents continuous reforms towards a Pareto solution for efficiency improvement.
    Keywords: authoritarian market economy; rent-seeking; subgame perfect Nash equilibrium; SOEs; economic reforms; economic efficiency
    JEL: O53 N0
    Date: 2017–03
  9. By: Yamashita, Nobuaki (Asian Development Bank Institute)
    Abstract: We examine the hypothesis that manufacturing industries in Japan that have been exposed to import competition from the People’s Republic of China (PRC) experience greater skill upgrading (increased demand for skilled workers). Using an industry panel dataset over the period 1980–2010, we exploit variations of worker skill categories by occupation, paired with detailed information and communication technology investment data in the employment share regression. We find that while the PRC’s comparative advantages in exports have shifted from labor-intensive to more capital-intensive products, this has not resulted in substituting skilled workers in Japanese manufacturing. Rather, it has had the profound positive effect of raising overall demand for skilled workers. Most of the competition effects were felt among production workers, leaving middle-skilled workers largely unaffected.
    Keywords: import competition; skill upgrading; skilled workers; manufacturing
    JEL: D24 F17 O47 O57 R15
    Date: 2017–01–24
  10. By: Yan Zhang
    Abstract: This paper uses customs transaction data covering all Chinese exporters and the World Bank's antidumping database to investigate how they responded to Latin-American and Caribbean (LAC) antidumping measures during 2000-2012 period. The paper uses the difference-in-differences identification strategy, and finds a substantial trade-dampening effect of these measures at the product level which operates through the intensive margin (i.e., a decrease in export volume per exporter) rather than the extensive margin (i.e., a decrease in the number of exporters) on average. Although we do not find a significant extensive margin effect, we still observe a positive number of exporters exited the LAC market after antidumping measures, specifically, less productive firms and trade intermediaries are more likely to exit the market. The pattern of Chinese exporters exiting the protected market was the same in ARG, BRA, MEX and COL. The antidumping measures taken by different countries had different impacts on Chinese exporters. MEX and BRA antidumping measures not only had an intensive margin but also an extensive margin effect on Chinese exports. ARG antidumping measures only had an intensive margin effect. COL antidumping measures had no effect. The paper also finds that MEX antidumping measures caused a significant increase in the export prices of the affected Chinese products, but no significant increase in the export prices for the other three countries. The paper does not find any shift in the destinations of the affected Chinese exports.
    Keywords: Antidumping Measures, Export Performance, Exporting Firm, Impact evaluation, Productivity Level, Firm performance, Bilateral trade, Manufacturing Exports, Non-tariff Barriers, Export Market, International Trade, The Caribbean, Latin America, China-LAC, Antidumping
    JEL: L25 F14 D22 F13
    Date: 2017–03

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