nep-cna New Economics Papers
on China
Issue of 2018‒03‒12
five papers chosen by
Zheng Fang
Ohio State University

  1. Markups and Markets: A New Empirical Framework and Evidence on Exporters from China By Corsetti, G.; Crowley, M.; Han, L.; Song, H.
  2. Restructuring the Chinese Electricity Supply Sector: An assessment of the market pilot in Guangdong Province By Pollitt, M.; Yang, C.; Chen, H.
  3. Firm Expectations and Investment: Evidence from the China-Japan Island Dispute By Cheng Chen; Tatsuro Senga
  4. The Causes of China's Great Famine, 1959-1961: County-Level Evidence By Hiroyuki Kasahara; Bingjing Li
  5. Employment in China's Hi-Tech Zones By Chen, ChuChu; Link, Albert

  1. By: Corsetti, G.; Crowley, M.; Han, L.; Song, H.
    Abstract: We develop a new empirical framework to analyse destination-specific markup and quantity adjustments to bilateral exchange rates by exporters. The framework offers two methodological innovations. First, we develop an unbiased estimator of the markup elasticity that correctly isolates marginal costs in large unbalanced panels where the set of markets served by firms varies endogenously with currency movements. Second, we exploit Chinese linguistics to process characters recorded in Chinese custom forms to build a novel, general, product classification distinguishing high and low differentiation goods---which we can use to proxy for exporters' market power. Applying this framework to exporters from China over 2000-2014, we document substantial heterogeneity in destination-specific markup elasticities across product classes and firm types. Conditional on a price change, the average markup elasticity for highly differentiated consumption goods is 32%; markup adjustments explain three quarters of incomplete pass through into import prices for these goods. In contrast, the average for low-differentiation intermediates is only 5%, suggesting that pricing for these goods responds to global, rather than local, economic conditions. Markup elasticities are higher for both state-owned and foreign-invested enterprises than for private enterprises, which, on average, pursue aggressively competitive strategies throughout our sample.
    Keywords: Exchange rates, pricing-to-market, product classification, differentiated goods, market power, markup elasticity, trade elasticity, China.
    JEL: F31 F41
    Date: 2018–02–13
  2. By: Pollitt, M.; Yang, C.; Chen, H.
    Abstract: This paper examines power sector reform in China's largest province, Guangdong, following the publication of the No.9 document of the China State Council on 'Deepening Reform of the Power Sector' in March 2015. We look at the operation of the pilot wholesale power market in Guangdong in the light of international experience. We discuss how the power market pilot is working in Guangdong and the extent to which the current market design is in line with successful power markets we see elsewhere. We examine the evidence on whether the market reform has successfully brought new players into the electricity system in Guangdong. We consider the effects of the reform on the operational and investment decisions of firms in the sector. We conclude with several lessons for the Chinese government's ongoing power sector reform programme.
    Keywords: power market reform, international experience, Guangdong, China, industrial electricity price
    JEL: L94
    Date: 2018–02–26
  3. By: Cheng Chen (Department of Statistics, London School of Economics); Tatsuro Senga (Queen Mary University of London)
    Abstract: How do real-time expectations affect firms’ economic decisions? We provide evidence by using a dataset on Japanese multinational firms’ sales forecasts and exploring an unexpected escalation of a territorial dispute between China and Japan in 2012. Our estimation substantiates that, after the escalation of the dispute, affiliates of Japanese multinational firms in China experienced a sharp but temporary decline in total sales relative to affiliates in other countries and a more persistent decline in investment. Moreover, the territorial dispute has led to persistent pessimism in these firms’ expectations about future sales, which can explain 60% of the overall decline in investment.
    Keywords: forecasts, pessimistic expectations, geopolitical events, investment
    JEL: E22 E32 D84 F51
    Date: 2017–10–14
  4. By: Hiroyuki Kasahara; Bingjing Li
    Abstract: This study provides evidence that the over-export of grains aggravated the severity of China’s Great Famine. We collect county-level data for the 1953-1965 period on death rates, birth rates, amounts of grain procured, output of different types of grain, crop productivity, weather conditions, distance to railways, and the number of Chinese Communist Party (CCP) members. We exploit county-level variations in the types of crops each county specialized in to construct Bartik-style measures of export shocks. We regress the death rates on the Bartik export measures and use the weather shocks as instruments for measuring output and consumption. The regression results suggest that increases in grain exports substantially increase death rates, and the effect of grain exports on death rates is larger in counties with lower current output, higher two-period lagged output, larger distance to railways, and a smaller percentage of local CCP members. We also estimate the effects of the procurement policy, examine the relationship between the death rates and the average level of consumption at the county-level during the famine period, and conduct counterfactual experiments to quantify the relative importance of different causes of the Great Famine. The counterfactual experiments indicate that the effect of grain exports explains 12 percent of the excess deaths, which amounts to 1/5 of the effect of the increase in procurement rates between 1957 and 1959. By comparing the distribution of county-level counterfactual changes in death rates if the amount of grain exports in 1959 had been the same as that in 1957, we find that the distribution of the high-export-exposure counties first-order stochastically dominates that of the low-export-exposure counties.
    Keywords: famine, over-export of grains, inflexible procurement, Great Leap Forward
    JEL: F14
    Date: 2017
  5. By: Chen, ChuChu (University of North Carolina at Greensboro, Department of Economics); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: The purpose of this paper is to explore employment differences over time across China’s hi-tech zones. Using data from China’s Ministry of Science and Technology, we find that if a university science park is within a hi-tech zone, employment in that zone is higher, but that finding only holds for zones established in the pre-information communication technology period. After 2000, proximity to a university science park does not appear to be necessary for the exchange of tacit knowledge which we contend leverages the technology base of firms and organizations in the zone and thus their level of employment. We also find greater employment in hi-tech zones in which information technology is a dominant industry.
    Keywords: Program management; Employment; Hi-tech zones; University science park; Information technology
    JEL: H42 H44 J48 L26 O32
    Date: 2018–02–13

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