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on China |
| By: | Harald Hau; Yi Huang; Gewei Wang |
| Abstract: | The large regional variation in minimum wage levels in the period 2002-08 in China implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from labor to capital, reduce employment growth and accelerate total factor productivity growth–particularly among the less productive firms under private Chinese or foreign ownership, but not among state-owned enterprises. The heterogeneous firm response to labor cost shocks can be explained by differences in management practices, and suggests that management quality and competitive pressure are complementary. |
| Keywords: | firm productivity, capital investment, minimum wage policy |
| JEL: | D24 G31 J24 J31 O14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6637&r=cna |
| By: | Qing, He; Korhonen, Iikka; Zongxin, Qian |
| Abstract: | In emerging market economies, transmission of monetary policy through the foreign exchange market is complicated by the coexistence of financial restrictions and arbitrages. Using China as an example, we show that the coexistence of exchange rate interventions, capital controls and an on-shore-offshore exchange rate differential makes the long run equilibrium in the currency market nonlinear. Disturbances to this nonlinear long run equilibrium could offset the impact of monetary policy actions on domestic price stability. Omitting such nonlinearity leads to biased inference on the effectiveness of monetary policy. |
| JEL: | E52 F31 F40 |
| Date: | 2017–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2017_014&r=cna |
| By: | Carsten A. Holz |
| Abstract: | For the past nearly forty years, China has experienced average annual real GDP growth of close to ten percent, much of it driven by investment and capital accumulation. By 2014, gross capital formation had reached 46 percent of aggregate expenditures. This paper documents the role of investment in driving economic growth in China, questions how much longer China can sustain a relatively high investment rate, and examines the arguments that have been offered for an impending drastic reduction in investment. It also notes that investment in China remains broad-based across all economic sectors, with little specialization; the size of the Chinese economy may allow continued comprehensive development across all economic sectors. At the same time, the relative size of foreign investment in China has become negligible and the China growth story thus has become a domestic one. |
| Keywords: | investment rate, capital-output ratio, ICOR, national investment strategy, economic growth |
| JEL: | E01 E22 E60 O11 O53 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6496&r=cna |
| By: | Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); YingDeng (University of International Business and Economics); Xiangjun Ma (University of International Business and Economics) |
| 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 covillagers, 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 J14 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:max:cprwps:207&r=cna |
| By: | Antonio Rodriguez-Lopez; Miaojie Yu |
| Abstract: | Chinese firms faced an all-around trade liberalization process during the early 2000s: lower barriers from other countries on Chinese goods, and lower Chinese barriers on other countries’ goods and inputs. Using novel firm-level tariff data for trading Chinese manufacturing firms, this paper disentangles the effects of each type of trade liberalization on Chinese firm-level em-ployment. For each firm type, reductions in Chinese and foreign final-good tariffs are associated with job destruction in low-productivity firms and job creation in high-productivity firms. In contrast, the net effect of reductions in Chinese input tariffs is limited to job destruction in low-productivity ordinary exporters. |
| Keywords: | firm-level employment, firm-level tariffs, heterogeneous firms |
| JEL: | F12 F14 F16 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6710&r=cna |
| By: | Yun Liang and John Gibson |
| Abstract: | China's fertility rate is below replacement level. The government is attempting to increase this rate by relaxing the one-child policy. China faces a possible tradeoff because further urbanization is needed to raise incomes but may reduce future fertility. We decompose China's rural–urban fertility gaps using both de facto and de jure criteria for defining the urban population. The fertility-depressing effects of holding urban hukou are more than three times larger than effects of urban residence. Less of the rural–urban fertility gap by hukou status is due to differences in characteristics than is the case for the fertility gap by place of residence. |
| Keywords: | fertility, hukou, urbanization, China |
| URL: | http://d.repec.org/n?u=RePEc:een:appswp:201738&r=cna |
| By: | Pedro Naso; Yi Huang Author Name: Tim Swanson |
| Abstract: | We examine the relationship between environmental regulation and competitiveness in China. Exploiting exogenous changes in national pollution standards for three industries—ammonia, paper and cement—we test whether environmental regulation increases industry productivity. Our results show that the strong version of the Porter hypothesis does not hold, but that regulation might reallocate productivity spatially. We show that regulated industries that are located in newly developing cities see an increase in their productivity as compared to the same industries in other cities. This means that environmental regulation is more likely to drive the spatial distribution of productivity changes than it is to drive the pace and direction of technological change. |
| Keywords: | Tax competition; Production Technology and Environment and Development |
| JEL: | H71 O13 Q56 D24 |
| Date: | 2017–10–04 |
| URL: | http://d.repec.org/n?u=RePEc:gii:ciesrp:cies_rp_53&r=cna |
| By: | Heiwai Tang; Yifan Zhang |
| Abstract: | We study the global diffusion of culture through multinationals, focusing on gender norms. Using data on manufacturing firms in China over 2004-2007, we find that foreign affiliates from countries with a more gender-equal culture tend to employ proportionally more women and appoint female managers. They also generate cultural spillovers, increasing domestic firms’ female labor shares in the same industry or city. Based on a multi-sector model with firm heterogeneity in productivity, gender biases, and learning, we perform counterfactual exercises. Hypothetically eliminating firms’ gender biases raises China’s aggregate total factor productivity by 5%, of which spillovers from multinationals account for 19%. |
| Keywords: | cultural spillover, gender inequality, FDI, misallocation |
| JEL: | F11 F21 J16 L22 O47 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6295&r=cna |
| By: | Carsten A. Holz |
| Abstract: | The investment-intensive growth model of the People’s Republic of China (PRC) is often viewed as state-driven and ultimately unsustainable. But largely unnoticed, a shift has taken place. This paper examines the changes in investment patterns since 2003 and the potential impact of industrial policies on these patterns. The point of view is macroeconomic, based on economy-wide data with various breakdown. Significant shifts in investment patterns across sectors and ownership forms have occurred over time, supporting a new growth model with a reduced role of the state, and these shifts appear driven more by market factors than by government policies. |
| Keywords: | investment rate, investment policy, national investment strategy, sector distribution of investment, ownership distribution of investment, causes of investment, economic growth |
| JEL: | E22 E60 L52 O11 O25 O53 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6484&r=cna |
| By: | Robert J. Hanlon |
| Abstract: | This article offers three arguments outlining the Asian Infrastructure Investment Bank's significance and to help policy planners navigate the complex relationship between China, the Bank and themes of sustainability. First, there is little uncertainty that China is serious about development and sustainability. The Asian Infrastructure Investment Bank is but one extension of China's increasing commitment to sustainability and should therefore be embraced by development stakeholders. Second, the Asian Infrastructure Investment Bank's commitment to infrastructure development complements other multilateral development banks and should not be considered a challenger to the existing order of development lending practices. Rather, China's interest in establishing the Asian Infrastructure Investment Bank points to competitive pluralism and poses no threat to the existing international order. Finally, the Asian Infrastructure Investment Bank's sustainability guidelines are not unique and fall in line with similar policy of other large development banks. The Asian Infrastructure Investment Bank therefore reinforces sustainability norms while posturing itself as a partner for development. |
| Keywords: | AIIB, China, multilateral development banks, sustainability, construction |
| Date: | 2017–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:een:appswp:201739&r=cna |
| By: | Hermosilla, Manuel; Gutierrez-Navratil, Fernanda; Prieto-Rodriguez, Juan |
| Abstract: | In various cultural and behavioral respects, emerging market consumers differ significantly from their counterparts of developed markets. They may thus derive consumption utility from different aspects of product meaning and functionality. Based on this premise, we investigate whether the economic rise of emerging markets may have begun to impact the typical “one-size-fits-all” design of many international product categories. Focusing on Hollywood films, and exploiting a recent relaxation of China’s foreign film importation policy, we provide evidence suggesting that these impacts may exist and be non-negligible. In particular, we show that the Chinese society’s aesthetic preference for lighter skin can be linked to the more frequent casting of pale-skinned stars in films targeting the Chinese market. Implications for the design of international products are drawn. |
| Keywords: | Emerging Markets, Hollywood, Culture, Product Design, Innovation, Skin Color |
| JEL: | L7 L70 M3 M31 O3 O30 Z1 Z11 |
| Date: | 2017–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82040&r=cna |
| By: | Carsten A. Holz; SUN Yue |
| Abstract: | Capital estimates are widely used in economic growth and productivity studies, for profitability considerations and wealth accounting exercises. Yet the calculation of “capital†frequently receives only cursory attention, despite the challenges posed by conceptual difficulties, the complexity of calculations, and the extensive data requirements. This paper (i) calculates long-run provincial (and national) physical capital series for China, (ii) distinguishes between capital services and wealth capital stock, and (iii) applies the most recent methodology advanced by the OECD, the U.S. Bureau of Labor Statistics, and the Australian Bureau of Statistics. The complete set of data is available online and is expected to be updated on an annual basis in the future. |
| Keywords: | capital services, wealth capital stock, capital concepts |
| JEL: | E01 E22 O11 O53 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6472&r=cna |
| By: | Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Peter H. Egger (ETH Zurice, CEPR, CESifo, GEP); Michaela Kesina (ETH Zurich) |
| Abstract: | This paper studies the determinants of firm-level revenues, as a measure of the performance of firms in China's domestic and export markets. The analysis of the determinants of the aforementioned outcomes calls for a mixed linear-nonlinear econometric approach. The paper proposes specifying a system of equations, which is inspired by Basmann's work and recent theoretical work in international economics and conducts comparative static analyses regarding the role of exogenous shocks to the system to flesh out the relative importance of transmissions across outcomes. |
| Keywords: | Spatial Econometrics, Spillovers, Panel-Data Econometrics, Nonlinear Systems, Firm- Level Sales, Chinese Firms |
| JEL: | C23 C31 D24 L65 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:max:cprwps:209&r=cna |
| By: | Pedro Naso Author name: Tim Swanson |
| Abstract: | We propose a novel theoretical framework to study how environmental regulation shapes economic development in a developing country such as China. We develop a dynamic tax competition model in which local governments, located in development zones, use variation in taxes to attract workers to their jurisdictions. Their objective is to maximize tax revenue less local health costs that are proportional to local pollution. Our main result is that competition generates a reallocation of productive factors when national regulation is introduced. Local governments in more productive regions set greater production taxes than in other regions. This makes workers and output to shift from more to less developed regions of the country. |
| Keywords: | Tax competition; Asymmetric tax competition; Environment and Development |
| JEL: | H71 H72 Q56 O13 |
| Date: | 2017–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:gii:ciesrp:cies_rp_54&r=cna |