nep-cna New Economics Papers
on China
Issue of 2017‒08‒13
nine papers chosen by
Zheng Fang
Ohio State University

  1. Network Effects on Labor Contracts of Internal Migrants in China: A Spatial Autoregressive Model By Baltagi, Badi H.; Deng, Ying; Ma, Xiangjun
  2. Offshoring and Wage Inequality: Theory and Evidence from China By Sheng, Liugang; Yang, Dennis T.
  3. Do Rural Migrants Benefit from Labor Market Agglomeration Economies? Evidence from Chinese Cities By Yang, Guangliang; Li, Lixing; Fu, Shihe
  4. Interest-Rate Liberalization and Capital Misallocations By Liu, Zheng; Wang, Pengfei; Xu, Zhiwei
  5. Do Females Always Generate Small Bubbles? Experimental Evidence from U.S. and China By Jianxin Wang; Daniel Houser; Hui Xu
  6. The Effect of Education Expansion on Intergenerational Mobility of Education: Evidence from China By Liu, Ling; Wan, Qian
  7. Do Speculative Bubbles Migrate in the Chinese Stock Market? By He, Qing; Qian, Zongxin; Fei, Zhe; Chong, Terence Tai Leung
  8. Exporting and Frictions in Input Markets : Evidence from Chinese Data By Maria D. Tito; Ruoying Wang
  9. Ownership structure and bank performance: An emerging market perspective By Mamatzakis, Emmanuel; Zhang, Xiaoxiang; Wang, Chaoke

  1. By: Baltagi, Badi H. (Syracuse University); Deng, Ying (School of International Trade and Economics, Beijing); Ma, Xiangjun (School of International Trade and Economics, Beijing)
    Abstract: This paper studies the fact that 37 percent of the internal migrants in China do not sign a labor contract with their employers, as revealed in a nationwide survey. These contract-free jobs pay lower hourly wages, require longer weekly work hours, and provide less insurance or on-the-job training than regular jobs with contracts. We find that the co-villager networks play an important role in a migrant's decision on whether to accept such insecure and irregular jobs. By employing a comprehensive nationwide survey in 2011 in the spatial autoregressive logit model, we show that the common behavior of not signing contracts in the co-villager network increases the probability that a migrant accepts a contract-free job. We provide three possible explanations on how networks influence migrants' contract decisions: job referral mechanism, limited information on contract benefits, and the "mini labor union" formed among co-villagers, which substitutes for a formal contract. In the sub-sample analysis, we also find that the effects are larger for migrants whose jobs were introduced by their co-villagers, male migrants, migrants with rural Hukou, short-term migrants, and less educated migrants. The heterogeneous effects for migrants of different employer types, industries, and home provinces provide policy implications.
    Keywords: contract, co-villager network, spatial autoregressive logit model, internal migrants
    JEL: O15 R12 J41
    Date: 2017–07
  2. By: Sheng, Liugang (Chinese University of Hong Kong); Yang, Dennis T. (University of Virginia)
    Abstract: We present a global production sharing model that integrates the organizational choices of offshoring into the determination of relative wages in developing countries. The model shows that offshoring through foreign direct investment contributes more prominently than arm's length outsourcing to the demand for skill in the South, thereby increasing the relative wage of skilled workers. We incorporate these theoretical results into an augmented Mincer earnings function and test the model based on a natural experiment in which China lifted its restrictions on foreign ownership for multinational companies upon its accession to the World Trade Organization in 2001. Empirical findings based on detailed Urban Household Surveys and trade data from Chinese customs provide support to our proposed theory, thus shedding light on the changes in firm ownership structure, the skill upgrading in exports, and the evolution of wage inequality from 1992 to 2008 in China's manufacturing sector.
    Keywords: offshoring, ownership structure, processing trade, wage inequality, China
    JEL: F16 J31 D23
    Date: 2017–07
  3. By: Yang, Guangliang; Li, Lixing; Fu, Shihe
    Abstract: We combine the 2005 China Inter-Census Population Survey data and the 2004 China Manufacturing Census to test whether workers, particularly rural migrants, benefit from labor market Marshallian externalities. We find that workers in general, and rural migrants in particular, benefit from labor market pooling effect (measured by total employment in a city-industry cell) and human capital externalities (measured by share of workers with a college degree or above in a city-industry cell). These findings are robust to various sorting bias tests. However, rural migrants benefit much less than do local or urban workers, possibly because rural migrants lack social networks and are discriminated doubly in terms of being both “rural” and “migrants.” Our findings have policy implications on how Chinese cities can become skilled during the rapid urbanization process coupled with global competition.
    Keywords: Rural migrants; labor market agglomeration economies; Marshallian externalities; labor market pooling; human capital externalities
    JEL: J30 J61 J71 O15 O18 R23
    Date: 2017–08–08
  4. By: Liu, Zheng (Federal Reserve Bank of San Francisco); Wang, Pengfei (Hong Kong University of Sciences and Technology); Xu, Zhiwei (Shanghai Jiao Tong University)
    Abstract: We study the consequences of interest-rate liberalization in a two-sector general equilibrium model of China. The model captures a key feature of China's distorted financial system: state-owned enterprises (SOEs) have greater incentive to expand production and easier access to credit than private firms. In this second-best environment, liberalizing interest rate controls improves capital allocations within each sector, but exacerbates misallocations across sectors. Under calibrated parameters, interest-rate liberalization may reduce aggregate productivity and welfare, unless other policy reforms are also implemented to alleviate SOEs' distorted incentives or improve private firms' credit access.
    JEL: E44 G18 O41
    Date: 2017–07–10
  5. By: Jianxin Wang (School of Business, Central South University); Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Hui Xu (Department of Economics, Beijing Normal University)
    Abstract: Is it universal across cultures that females generate smaller bubbles than males? We conduct classic bubble experiments in China and the U.S. using groups of exclusively females, exclusively males and mixed gender participants. We find that female groups in China generate a similar level of bubbles as found in exclusively males groups in China and the U.S., which in turn is significantly larger than bubbles generated by exclusively female groups in the U.S. Our results imply that gender differences in financial markets may be sensitive to culture.
    Keywords: gender differences, bubbles, experimental asset markets, culture differences
    JEL: G01 G11 J16 Z13
    Date: 2017–07
  6. By: Liu, Ling; Wan, Qian
    Abstract: Using the data from Chinese Household Income Project, we study the effect of education expansion on intergenerational mobility of education measured with intergenerational transmission of education (ITE) through an exogenous shock, higher education expansion in 1999. Measuring ITE with years of schooling, higher education expansion (HEE) significantly decreases ITE, meaning that the gap of years of schooling between the children from different family educational background is narrowed by HEE and intergeneration mobility of education is promoted by HEE. However, when we take school quality into account and measure ITE with score of college entrance examination (CEE), HEE insignificantly decreases ITE measured with score of CEE, indicating that HEE fails to reduce the gap of higher education quality between the children from different family educational background and the inequality of higher education still maintains in some way even after HEE. We also find that ITE measured with years of schooling has an inverted-U relationship with college admission rate and ITE measured with score of CEE seems not correlate with college admission rate, which directly demonstrate the theories of MMI and EMI in the field of sociology. We further investigate the internal mechanism of the effects and we consider that the original of the inequality of higher education is the inequality of basic education. At last, we investigate the heterogeneity in the effect of HEE on ITE by gender, type of Hukou and category of CEE.
    Keywords: Higher Education Expansion; Intergenerational Transmission of Education; Inequality of Opportunity
    JEL: I28 J62
    Date: 2017–05
  7. By: He, Qing; Qian, Zongxin; Fei, Zhe; Chong, Terence Tai Leung
    Abstract: In this paper, a duration dependence test for speculative bubbles in the Chinese stock market is developed. It is found that bubbles in the aggregate stock price existed before the split share reform. After the reform, we observe the phenomenon of bubble migration across industries. In particular, bubbles migrate from the telecommunications industry to the health care industry. Moreover, we find that monetary policy used to have a significant impact on the bubble size before the reform but the impact diminished after the reform.
    Keywords: Survival analysis; Speculative bubbles; Non-tradable shares reform
    JEL: G12
    Date: 2016–12–01
  8. By: Maria D. Tito; Ruoying Wang
    Abstract: This paper investigates the impact of international trade on input market distortions. We focus on a specific friction, binding borrowing constraints in capital markets. We propose a theoretical model where a firm's demand for capital is constrained by an initial asset allocation and past sales. While the initial distribution of assets induces misallocation if the asset endowment at more productive firms does not fully cover their demand for capital, the dependence of the borrowing constraint from past sales proxies for cross-firm differences in the cost of default, which is empirically higher at larger firms. Overtime, an increase in sales relaxes the borrowing constraint; similarly, shocks to market access--such as opening to trade--contribute to easing the financial constraints, thus accelerating the convergence toward the frictionless allocation. To analyze the empirical relationship between market access and credit frictions, we draw on the annual surveys conducted by the Chinese National Bureau of Statistics (NBS) for 1998 to 2007, and we construct firm-level measures of distortions that control for firm heterogeneity. We find smaller labor and capital distortions across exporting firms; such distortions are even smaller in sectors where firms face lower tariffs or are more dependent on external financing, a proxy for the presence of binding financial constraints. Our empirical analysis also shows that export shocks significantly reduce the dispersion across input returns over time, with the effect mostly occurring at constrained firms. Our findings point to within-sector input reallocation as an important channel to overcome misallocation in open economies.
    Keywords: Financial Frictions ; Heterogeneous Firms ; International Trade ; Misallocation
    JEL: F12 F14
    Date: 2017–08–03
  9. By: Mamatzakis, Emmanuel; Zhang, Xiaoxiang; Wang, Chaoke
    Abstract: This study investigates whether ownership type does matter for bank performance in an emerging market. By tracing the identity of top owners, I group large shareholder of China’s commercial banks into government, state owned enterprises (SOEs), domestic private investors and foreign investors. These distinct types of shareholders have multiple motivations and incentives, in turn, this will affect how they perform their control rights and monitor over the invested banks. The main findings regarding the impact of ownership structure on bank performance suggest that banks with high state shareholding tend to have poorer performance and low profitability, consistent with much of the literature. In addition, banks with higher domestic privately shareholders are generally operated more profitably. Furthermore, higher foreign ownership may negatively affect bank performance. Moreover, ownership type diversity is positively associated with bank performance, and banks with concentrated ownership are worse performing. My findings are robustness under the different measures of bank performance.
    Keywords: Banks, Ownership structure, Corporate governance
    JEL: G21 G28 G32
    Date: 2017–07–01

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