nep-cna New Economics Papers
on China
Issue of 2017‒07‒16
six papers chosen by
Zheng Fang
Ohio State University

  1. Does Daughter Deficit Promote Parental Substance Use? Longitudinal Evidence on Smoking from Rural China By Chen, Xi
  2. Law, Trust & Institutional Change in China: Evidence from Qualitative Fieldwork By Ding Chen; Simon Deakin; Mathias Siems; Boya Wang
  3. State and Knowledge Production: Industrial Relations Scholarship under Chinese Capitalism By Enying Zheng; Simon Deakin
  4. Credit Market Development and Firm Innovation: Evidence from the People’s Republic of China By Shang, Hua; Song, Quanyun; Wu, Yu
  5. Pricing Labour Capacity: The Unexpected Effects of Formalizing Employment Contracts in China By Enying Zheng; Simon Deakin
  6. Ownership, Institutions & Firm Value: Cross-Provincial Evidence from China By Boya Wang

  1. By: Chen, Xi (Yale University)
    Abstract: China and some other Asian countries have experienced skewed sex ratios, triggering intense competition and pressure in the marriage market. Meanwhile, China has more smokers than any other country, with half of men smoke while few women smoke. Men are the major income earners in most Chinese families and thus bear much of the financial burden in preparation for children's marriage. This paper investigates how a demographic factor – a large number of surplus men in the marriage market in China – affects their fathers' smoking behavior. We utilize two household longitudinal surveys as well as a random subsample of the China Population Census to examine fathers' smoking in response to skewed sex ratios. Strikingly, fathers smoke more for families with a son living in communities with higher sex ratios. In contrast, those with a daughter do not demonstrate this pattern. Coping with the marriage market pressure is a more plausible pathway linking the observed skewed sex ratios among children and intense smoking among fathers. Considering worsening sex ratios and highly competitive marriage market in the coming decade as well as lasting health impacts due to smoking, policies suppressing unbalanced sex ratios could lead to welfare gains.
    Keywords: sex ratios, marriage market, paternal smoking, stress
    JEL: J13 D12 I19
    Date: 2017–06
  2. By: Ding Chen; Simon Deakin; Mathias Siems; Boya Wang
    Abstract: China’s rapid growth in the absence of autonomous legal institutions of the kind found in the west appears to pose a problem for theories which stress the importance of law for economic development. In this paper we draw on interviews with lawyers, entrepreneurs and financial market actors to illustrate the complexity of attitudes to law and economic growth in contemporary China. In the case of product markets, business relations are increasingly characterised by a mix of trust-based transacting and legal formality which is not fundamentally different from practice in the west. Financial markets are less like their western counterparts, thanks to the preponderant role of government in asset allocation, and a lack of transparency in market pricing. However, in both sets of markets we find evidence of a transition from inter-personal trust (guanxi) to impersonal transacting, and of growing demands from business and legal groups for the impartial application of legal rules and market regulations. China’s experience does not suggest that law is irrelevant or unrelated to growth, but that legal and economic institutions coevolve in the transition from central planning to a market economy.
    Keywords: Chinese law; new institutional economics; law and finance; law and development; guanxi
    JEL: G38 K12 K22
    Date: 2016–12
  3. By: Enying Zheng; Simon Deakin
    Abstract: We use the evolution of industrial relations scholarship in China to study the role of the state in the process of knowledge production. In the course of the last decade the policy of the Chinese state has shifted from promoting a flexible labour market as part of an export-led growth strategy, to addressing problems of growing labour unrest. This shift has, however, yet to be reflected in research and teaching of industrial relations. Drawing on an archive of over 7,000 articles published in Chinese-language journals, we show that the industrial relations field has failed to cohere in China as it did in North America and Western Europe in response to similar pressures in the middle decades of the twentieth century. Chinese research on labour issues is divided between a practice-orientated human resource management literature and a sociological approach which is isolated from practice and policy. We explain this pattern in terms of the distinctive nature of Chinese capitalism, which manages to be simultaneously state-encompassed yet individualistic, leaving little space for the collective institutions of civil society which have been the focus of industrial relations research in the West.
    Keywords: Encompassing state, knowledge production, industrial relations, management education, civil society
    JEL: J41 J83 K31 O43
    Date: 2016–06
  4. By: Shang, Hua (Asian Development Bank Institute); Song, Quanyun (Asian Development Bank Institute); Wu, Yu (Asian Development Bank Institute)
    Abstract: From the perspective of credit allocation, this paper analyzes the effects of credit market development on the innovative capacities of industrial firms in the People’s Republic of China. Using a large dataset of industrial firms in 31 provinces in the People’s Republic of China, we find that credit market development enhances firms’ product innovation incentives and outcomes. We further show that firms’ credit constraints and firms’ performances are two channels through which credit market development affects innovative capacities of firms. Our results are neither driven by the increase in the quantity of credit, nor by the increase in the number of firms in a province. The results are robust to different samples, different estimation methods, and alternative measures of credit market development.
    Keywords: credit market development; credit allocation; firm innovation; product innovation; innovation incentives; innovation outcomes
    JEL: G15 O31 R11
    Date: 2017–01–27
  5. By: Enying Zheng; Simon Deakin
    Abstract: This paper analyses the effects of recent laws formalising employment contracts in China, part of a wider policy to normalise features of an emerging market economy. Using a unique hand-collected dataset of 294 industrial injury claims handled by a labour dispute arbitration commission in 2010, we study the impact of having a formal contract on the amount of compensation paid to victims of workplace accidents. An inherent feature of the employment contract under a market economy is its incompleteness: because work-effort bargain and labour capacity cannot be accurately specified ex ante, the employer can expropriate the surplus from production ex post. The legally-driven formalisation of employment contracts is intended to redress this effect by holding the employer to the terms of the parties’ agreement and proving for third party enforcement. Our empirical analysis shows that having a written employment contract makes an injury claim more than twice likely to be arbitrated than mediated, in line with the intended effect of the law, but that it also leads to a reduction of around half in the amount of compensation awarded. Formalisation of employment contracts may reduce employer discretion during the course of the employment relationship, but it also makes it difficult for workers to invoke actual or customary wage levels for the purposes of putting a value on an accident compensation claim, in the face of the formal wage stated in the contract. Formalisation ends up reinforcing the hierarchical power of the employer which is a feature of capitalist work relations.
    Keywords: Contracts; labour valuation; emerging markets; China; injury compensation; wages
    JEL: J41 J83 K31 O43
    Date: 2016–06
  6. By: Boya Wang
    Abstract: The distinctive political-economic setups of emerging economies engender special corporate governance issues that warrant added attention to the broader institutional environments. Using a unique provincial firm-level dataset, we investigate how control natures, ownership concentration, and provincial differences in government quality and financial deregulation jointly affect the market value of Chinese listed companies. Firstly, the presence of a central government controller is generally associated with higher Tobin's Q, while a negative premium is found for firms ultimately controlled by local governments. We then use alternative concentration measures and an instrumental variable approach to confirm a nonlinear relationship between blockholder ownership and Tobin's Q, implying that firm value first decreases and then increases as blockholders own more shares. Further analysis reveals that government quality has a significant, positive moderating effect on the relationship between different control natures and firm value, while the valuation effect of ownership concentration also depends on regional financial development.
    Keywords: Control natures, ownership concentration, government quality, financial development, firm value
    JEL: G31 H77 P30 P48 H77
    Date: 2016–12

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