nep-cna New Economics Papers
on China
Issue of 2017‒11‒12
six papers chosen by
Zheng Fang
Ohio State University

  1. What Drives Spatial Clusters of Entrepreneurship in China? Evidence from Economic Census Data By Zheng, Liang; Zhao, Zhong
  2. Structural Adjustments and International Trade: Theory and Evidence from China By Hanwei Huang; Jiandong Ju; Vivian Z. Yue
  3. Do Border Effects Alter Regional Development: Evidence from China By Partridge, Mark D.; Yang, Benjian; Chen, Anping
  4. Supplier search and re-matching in global sourcing: Theory and evidence from China By Defever, Fabrice; Fischer, Christian; Suedekum, Jens
  5. Impacts of Late School Entry on Children's Cognitive Development in Rural Northwestern China—Does Preprimary Education Matter? By Qihui Chen
  6. Labour Market Polarization in Advanced Countries: Impact of Global Value Chains, Technology, Import Competition from China and Labour Market Institutions By Koen Breemersch; Jože P. Damijan; Jozef Konings

  1. By: Zheng, Liang (Central University of Finance and Economics); Zhao, Zhong (Renmin University of China)
    Abstract: Since Chinese government initiated economic reform in the late 1970s, entrepreneurship and private sectors have emerged gradually and played an increasingly important role in promoting economic growth. However, entrepreneurship is distributed unevenly in China. Using micro data from 2008 economic census and 2005 population census, this paper explains spatial clusters of entrepreneurship for both manufacturing and services. For both sectors, entrepreneurship (measured by new private firms) tends to emerge in places with more relevant upstream and downstream firms. Moreover, Chinitz's (1961) theories are also supported for manufacturing: small upstream and downstream firms seem to be more important for manufacturing entrepreneurship. For both sectors, entrepreneurship is positively related to city size, the share of young adults and the elderly population, and foreign direct investment. More migrants are also found to promote service entrepreneurship. Our paper is the first to consider both manufacturing and service entrepreneurship in China and should be of interest to both local and national policymakers who plan to encourage entrepreneurship.
    Keywords: new firm formation, entrepreneurship, Marshallian effect, Chinitz effect, China
    JEL: L26 L60 L80 R10 R12
    Date: 2017–10
  2. By: Hanwei Huang; Jiandong Ju; Vivian Z. Yue
    Abstract: This paper studies how changes in factor endowment, technology, and trade costs jointly determine the structural adjustments, which are defined as changes in distributions of production and exports. We document the structural adjustments in Chinese manufacturing firms from 1999 to 2007 and find that production became more capital-intensive while exports did not. We structurally estimate a Ricardian and Heckscher-Ohlin model with heterogeneous firms to explain this seemingly puzzling pattern. Counterfactual simulations show that capital deepening made Chinese production more capital-intensive, but technology changes that biased toward the labor-intensive sectors and trade liberalizations provided a counterbalancing force.
    Keywords: structural adjustments, comparative advantage, heterogeneous firm
    JEL: F12 L16
    Date: 2017–11
  3. By: Partridge, Mark D.; Yang, Benjian; Chen, Anping
    Abstract: Market access/potential are main explanations for spatial variation in economic activity. Past research has recently used the quasi-natural experiment of the imposition and removal of Iron Curtain to assess how changes in market access influenced economic outcomes. Rather, we focus on key quantity effects of market access by tracking population changes induced by the creation of a subnational border. We exploit a quasi-natural experiment in China and use a difference-in-difference identification strategy to estimate the effects of introducing a new border when Sichuan province was split into Chongqing and Sichuan in 1997. We find that the new border has negative population effects on Sichuan counties located near the new border. These counties experienced a substantial decline in population growth after 1997 compared to Sichuan counties farther from the border, with the negative effects mainly confined to a band within 50-100 kilometers to the new border. Further investigation with falsification tests found that such border effects are unique to the new border region and are not related to the new Sichuan border region being more rural or to being on any provincial border.
    Keywords: border effects; population changes; difference in difference; market access; agglomeration; China
    JEL: R10
    Date: 2017–10
  4. By: Defever, Fabrice; Fischer, Christian; Suedekum, Jens
    Abstract: In this paper, we consider a dynamic search-and-matching problem of a firm with its intermediate input supplier. In our model, a headquarter currently matched with a supplier, has an interest to find and collaborate with a more efficient partner. However, supplier switching through search and re-matching is costly. Given this trade-off between the fixed costs and the expected gains from continued search, the process will stop whenever the headquarter has found a sufficiently efficient supplier. Using firm-product-level data of fresh Chinese exporters to the United States, we obtain empirical evidence in line with the predictions of our theory. In particular, we find that the share of short-term collaborations is higher in industries with more supplier-cost dispersion, an indication of higher expected search opportunities.
    Keywords: input sourcing,relational contracts,supplier search
    JEL: F23 D23 L23
    Date: 2017
  5. By: Qihui Chen
    Abstract: This article estimates the causal effect of primary school entry age on children's cognitive development in rural northwestern China, using data on nearly 1,800 primary school aged children from the Gansu Survey of Children and Families. Instrumental variable estimates, exploiting the discontinuity structure in children's school entry age around the enrolment cut-off date, indicate that a 1-year delay in school entry reduces children's scores on a cognitive ability test administered when they were aged 9–12 by 0.11–0.16 standard deviations (of the distribution of test scores). The negative late-school-entry effect is significantly larger in villages with no preprimary schools. It also persists as children advance to higher grades. These findings suggest that delayed school entry, even if it may be rural parents' rational response to resource constraints, can be harmful for children's cognitive development in developing areas with underdeveloped preprimary school systems.
    Keywords: school entry age, cognitive development, preprimary school, rural China
  6. By: Koen Breemersch (University of Leuven); Jože P. Damijan (University of Ljubljana); Jozef Konings (Nazarbayev University)
    Abstract: This paper explores the effects of offshoring, technology and Chinese import competition on labor market polarization in European countries. We find that polarization occurs mostly as a result of polarization within individual industries, while the reallocation of employment away from less polarized industries towards more highly polarized industries also contributed to a lesser extent. In manufacturing, within-industry polarization is mostly associated with technological change, but we also find some tentative evidence that Chinese import competition contributed as well. In other private industries outside of manufacturing, technological change and offshoring are the most relevant forces affecting within-industry polarization. The process of between-industry polarization is driven by widespread deindustrialization in developed countries. We find that Chinese import competition contributed to the decline of employment in the less polarized manufacturing industries. Differences in labor market institutions only explain a limited amount of cross-country variation in the association of polarization and the three forces we consider.
    JEL: E24 F14 F16 J23 J31 L60 O47
    Date: 2017–10–31

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