nep-cna New Economics Papers
on China
Issue of 2018‒11‒19
fourteen papers chosen by
Zheng Fang
Ohio State University

  1. Barriers to Entry and Regional Economic Growth in China By Loren Brandt; Gueorgui Kambourov; Kjetil Storesletten
  2. Time Preference and Food Nutrition Information Search: Evidence from 1220 Chinese Consumers By Guan, L.; Jin, S.; Huang, Z.
  3. Does urban-rural income inequality increase agricultural fertilizer or pesticide use? A provincial panel data analysis in China By Zhang, C.; Sun, Y.; Hu, R.
  4. When Opportunity Knocks: China's Open Door Policy and Declining Educational Attainment By Jiang, Xuan; Kennedy, Kendall; Zhong, Jiatong
  5. Arrival of Young Talents: The Send-down Movement and Rural Education in China By Chen, Yi; Fan, Ziying; Gu, Xiaomin; Zhou, Li-An
  6. The Impact of Corporate Taxes on Firm Innovation: Evidence from the Corporate Tax Collection Reform in China By Jing Cai; Yuyu Chen; Xuan Wang
  7. Identifying the Effects of Migration on Parental Health: Evidence from Left-Behind Elders in China By Liu, C.; Yi, F.; Xu, Z.
  8. Son Preference and Human Capital Investment Among China’s Rural-Urban Migrant Households By Lin, Carl; Sun, Yan; Xing, Chunbing
  9. Beyond quantity: the crowding-in effects of perception of climate risk on chemical use by Chinese rice farmers By Tang, L.; Zhou, J.; Liu, Q.
  10. Tenure security, social relations and contract choice: Endogenous matching in the Chinese land rental market By Ma, X.; Zhou, Y.; Heerink, N.; Shi, X.; Liu, H.
  11. Agricultural Development under Environmental Constraints: A Micro-Level Study of Four Villages in Eastern Hebei By Cheng, Y.
  12. Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey By Yao Amber Li; Valérie Smeets; Frédéric Warzynski
  13. Non-economic societal impact or economic revenue? Performance and efficiency analysis of farmer cooperatives in China By Yu, L.; Huang, W.
  14. Government size, institutional quality, and capital flows across regions in China: a specific exploration on the failure of capital flows across Shanhai Pass By Lin, S.; Han, H.

  1. By: Loren Brandt; Gueorgui Kambourov; Kjetil Storesletten
    Abstract: The non-state manufacturing sector has been the engine of China's economic transformation. Up through the mid-1990s, the sector exhibited large regional differences; between 1995 and 2004 we observe rapid convergence in terms of productivity, wages, and new firm start-up rates. To analyze the drivers of this behavior, we construct a Hopenhayn (1992) model that incorporates location-specific capital wedges, output wedges, and a novel entry barrier. Using Chinese Industry Census data we estimate these wedges and examine their role in explaining differences in performance across prefectures and over time. Entry barriers turn out to be the salient factor explaining performance differences. We investigate the empirical covariates of these entry barriers and find that barriers are causally related to the size of the state sector. Thus, the downsizing of the state sector after 1997 may be important in explaining the regional convergence and manufacturing growth after 1995.
    Keywords: Chinese economic growth; SOEs; fi rm entry; entry barriers; capital wedges; output wedges; SOE reform
    JEL: O11 O14 O16 O40 O53 P25 R13 D22 D24 E24
    Date: 2018–11–07
  2. By: Guan, L.; Jin, S.; Huang, Z.
    Abstract: Time preference has been recognized by numerous studies as an important driver of a number of health-related behaviors such as fatness, smoking and food choices. However, its possible role in food nutrition information search has been widely neglected. This study aims to examine directly if food nutrition information search is associated with the behavioral inclinations in time preference in China. Based on theoretical analysis, this paper illustrated that individuals with lower time preference stress more on future utility and tend to search more nutrition information. In empirical investigation, time preference was elicited in two ways: psychological perspective and monetary perspective. Data for the analysis were collected in 10 cities of 5 provinces in China through face-to-face interviews on sample of 1220 Chinese consumers undertaken in 2016. In the psychological perspective, this paper found that future-oriented (low time preference) individuals were more likely to search food nutrition information both in nutrition facts panels and nutrition claims. In monetary perspective, this paper found that only time-consistent long-run patience had a weak impact on food nutrition information search. Different significance between monetary and psychological health domain results confirmed the existence of domain independence. Acknowledgement : The authors would like to thank research assistant Haiyue Guo, Yue Jin, Changhua Qian, Rao Yuan, Zhanyi Shi, Yu Jiang for their helpful support. We gratefully acknowledge the support from the National Natural Science Foundation of China (NNSFC-71273233, 71333011) and the Major Program of the Key Research Institute of Chinese Ministry of Education (No. 15JJD790032).
    Keywords: Consumer/Household Economics
    Date: 2018–07
  3. By: Zhang, C.; Sun, Y.; Hu, R.
    Abstract: The large urban-rural income inequality and indiscriminate use of fertilizer and pesticide, as well as the related environment degradation in China during the past decades concern the society. However, little is known about the relationship between the urban-rural income inequality and agricultural fertilizer and pesticide use in China. Based on the environmental Kuznets curve hypothesis, this study aims to reveal how the urban-rural income inequality affects fertilizer and pesticide use from 1995 to 2015 in China. The results show that the relationship between per capita income of the rural households and per hectare fertilizer and pesticide use supports the environmental Kuznets curve hypothesis. Meanwhile, there exists a significant and positive relationship between the urban-rural income inequality and per hectare fertilizer and pesticide use. The share of agricultural value added in provincial gross domestic product not only directly influences fertilizer and pesticide use, but affects the relationship between the urban-rural income inequality and fertilizer and pesticide use. This study demonstrates that more efforts should be devoted to narrowing the urban-rural income inequality and deepening the reform of agricultural research and extension system to reduce agricultural fertilizer and pesticide use in China. Acknowledgement : This study was supported by the Beijing Institute of Technology [grant number 20172242001] and the Ministry of Science and Technology of China [grant number 2016YFD0201301].
    Keywords: Community/Rural/Urban Development
    Date: 2018–07
  4. By: Jiang, Xuan; Kennedy, Kendall; Zhong, Jiatong
    Abstract: At the end of 1978, China opened the door to trade with foreign businesses. This study investigates how the Open Door Policy's implementation affected the skill composition and skill premium for workers born 1960-1970. Using measures of local labor markets' export exposure, we find that for every $1000 increase in exports per worker, high school completion rates decreased by 4.5 p.p. for workers born in 1970, compared to those born in 1960. Linking this to mid-career outcomes in 2010, we show that highly export-exposed workers in China have a $124 greater return to an additional year of schooling than their less export-exposed brethren. This suggests China's growth was likely dampened and its income inequality widened during the early industrialization of the 1980s and 1990s, as the Open Door Policy simultaneously reduced the availability of skilled labor and increased the skill premium.
    Keywords: Open Door Policy, educational attainment, high school completion, skill premium
    JEL: I20 I25
    Date: 2018–06
  5. By: Chen, Yi; Fan, Ziying; Gu, Xiaomin; Zhou, Li-An
    Abstract: This paper studies human-capital spillovers and its persistence by exploiting a unique event in modern China|the send-down movement. From 1962 to 1979, the Chinese central government mandated the temporary resettlement of roughly 18 million urban youths to rural areas across the country. The movement's coercive features, together with strict restrictions on migration during that period, provide an ideal natural experiment to identify the causal impact of the better-educated sent-down youths (SDYs) on the less-educated local rural residents. Using a county-level dataset compiled from over 3,000 book-length local gazetteers and microlevel population censuses, we find that a greater exposure to SDYs significantly increased local residents' educational achievement. Our estimate shows that the unintended gain of rural education almost compensated the loss in urban China due to the educational disruption during the Cultural Revolution. The positive effect gradually declined as SDYs started to return to their urban homes in the late 1970s, but it never dropped to zero, indicating the persistence of human-capital spillovers. We also find suggestive evidence that the arrival of young talents reshapes the attitudes of local residents toward education.
    Keywords: Send-down Movement,Rural Education,Human-capital Spillovers
    JEL: I25 J24 N35 O15 R23
    Date: 2018
  6. By: Jing Cai; Yuyu Chen; Xuan Wang
    Abstract: This paper exploits a tax reform on manufacturing firms in China to study the impact of taxes on firm innovation. The reform switched the corporate income tax collection from the local to the state tax bureau and reduced the effective tax rate by 10%. The reform only applied to firms established after January 2002, allowing us to use regression discontinuity design as the identification strategy. The results show that lower taxes improved both quantity and quality of firm innovation. Moreover, the reform has a bigger impact on firms that are financially constrained and firms that engage more in tax evasion.
    JEL: H25 O31
    Date: 2018–10
  7. By: Liu, C.; Yi, F.; Xu, Z.
    Abstract: This study pioneers the application of the New Economics of Labor Migration theory to outline and estimate two opposite effects of labor loss driven by the migration and remittances of adult children on the health of left-behind elderly parents through the changing rural market constraints. We use China's rural household survey data and simultaneous equation econometric techniques to estimate the effects of migration on the physical and mental health of left-behind elders. Results indicate that the loss of labor to migration has a significantly negative effect on the health of left-behind elders, but remittances from migrants can compensate for the adverse effect. This study provides a comprehensive understanding that remittances from migration relax the constraints on household resource allocations in undeveloped rural areas with imperfect market conditions. Overall, left-behind elderly parents benefit from migrant children both physically and mentally. Acknowledgement : Authors gratefully acknowledge the financial support by National Science Foundation of China (Grants: 71673137), Nanjing Agricultural University (Grants: Y0201400037, SKCX2015004), Education department of Jiangsu province (Grant: 2014SJD069), Priority Academic Program Development of Jiangsu Higher Education Institutions (PAPD), China Center for Food Security Studies at Nanjing Agricultural University, Jiangsu Rural Development and Land Policy Research Institute, and Jiangsu Agriculture Modernization Decision Consulting Center. All remaining errors are ours.
    Keywords: Health Economics and Policy
    Date: 2018–07
  8. By: Lin, Carl; Sun, Yan; Xing, Chunbing
    Abstract: We use several datasets to study whether son preference prevails in the human capital investment among Chinese rural-urban migrant households. We find that son preference exists among the rural migrants’ households and that it caused lower probabilities relative to that of their boy counterparts that school age girls will migrate with their parents—a difference that is absent for children of preschool age. We also find that (1) boys are more likely to migrate following the reduction in the number of rural primary schools, (2) migrant households with multiple children tend to take their sons to migrate more than they take their daughters, and (3) the fact that parents of boy students spend more on their children’s education can be largely explained by the extra costs of schooling for migrant households. Finally, we show that the parents of rural children have higher expectations for boys than they do for girls. Our results suggest that son preference is detrimental to the human capital investment in girls in contemporary China when institutional arrangements result in high costs of schooling for migrants.
    Keywords: Rural-urban migration,China,Children,Son preference,Human capital
    JEL: J13 J16 J61 J24
    Date: 2018
  9. By: Tang, L.; Zhou, J.; Liu, Q.
    Abstract: Farmers perceptions of climate risk reflect their subjective probability weighting bias, which are the prerequisite for their adaptation decisions and thus shape their actions. As an adaptation strategy, farmers prioritized the technological measures of chemical input as the most simple and convenient for climate risks. However, this is little evidence of empirical work on the mechanism between farmers perceptions and chemical use behavior. Based on cross-sectional data from a survey of farmers in China, this study develops a theoretical framework that considers adaptation decisions of heterogonous farmers within a perception-decision-action (PDA) analytical framework, and further estimates the effects of farmers perceptions on chemical use behavior by utilizing endogenous switching regression model. The results indicate that under ceteris paribus, the key variables perception of climate risk of farmers have significant effect on their claim of increase in the quantity of chemical use. We find evidence of crowding-in of farmers perceptions on chemical use?which in turn will have negative effect on environment and food quality. The paper concludes by offering some policy implications for the presented results. Acknowledgement : Acknowledgements We are grateful for support from the Key Project of National Natural Science Foundation of China (No.71633002), the National Natural Science Foundation of China (No. 71273234), the Key project of the Ministry of Education (No.16JJD63007), The Key Project of National Social Science Foundation (No. 13AZD079), and The Key Soft Science Project of Science Technology Department of Zhejiang Province (No. 2017C35G2100255).
    Keywords: Environmental Economics and Policy
    Date: 2018–07
  10. By: Ma, X.; Zhou, Y.; Heerink, N.; Shi, X.; Liu, H.
    Abstract: In the developing countries rental transactions between partners with close social relations that use informal contracts are still widespread and this may reduce the potential of the land rental market to enhance productivity and equity. Based on household data collected in Jiangxi and Liaoning provinces in China in 2015, this paper examines the relationship between land tenure security, social relations and land rental contract choices, using a nested logit framework. The empirical results show that landlords are more likely to rent out land to tenants who live in the same village, rather than to relatives or strangers, and that insecure land tenure encourages landlords to select informal contracts. Our findings suggest that these decisions (of partner-type and contract-type) are made simultaneously, and that they are made on the basis of a landlord s perceived security of his land rights and the priority he gives to establishing a flexible rental relationship. Key Words: land rental market; contract choice; tenure security, social relations Acknowledgement : Financial support for our research is provided by the National Natural Science Foundation of China (71773054; 71373127; 71503174) and by the Programme Strategic Scientific Alliances of the Royal Netherlands Academy of Arts and Sciences (KNAW) and the Ministry of Science and Technologies of P.R. China (SURE+ project, 2016YFE0103100).
    Keywords: Land Economics/Use
    Date: 2018–07
  11. By: Cheng, Y.
    Abstract: It is widely accepted that China's agrarian economy is experiencing a profound capitalization/modernization transformation. Peasants in Houjiaying village, where I conducted my field research,however, have been excluded from this great transition and instead are experiencing unstable development. At the same time, peasants in Jingerzhuang village, only two kilometers away, are getting rich by planting vegetables and have successfully achieved the transition from "old farming" to "new agriculture." Why are people who live only two kilometers apart experiencing totally different development paths? This article intended to answer the above question and explore the formation and development process of China's "new agriculture"(both labor and capital intensive) based on the micro experiences of four villages since 1936 until 2015 in eastern Hebei Province (North China). In addition to the Manchuria Railway Materials of North China (1936-1941), local archives (including soil and water records) and statistics since 1949 are used. By using grounded theory analysis and process tracking methods, and the GIS software, we draw the conclusion that the changing natural environmental constraints (soil types and irrigation condition) and village governance structure were playing an important role during this great transition. Acknowledgement : This article has benefited the detailed comments and critique of Philip Huang, to whom I express my sincerest thanks. I also thank Zhang Jiayan for his detailed comments and advice. I deeply appreciate the assistance and support of the staff of the Nijingzhen government and township statistics station. I would also like to acknowledge my debt to Richard Gunde for his help in improving my English.
    Keywords: Environmental Economics and Policy
    Date: 2018–07
  12. By: Yao Amber Li (Institute of Emerging Market Studies, Hong Kong University of Science and Technology); Valérie Smeets (Aarhus University); Frédéric Warzynski (Aarhus University)
    Abstract: In this paper, we use a detailed production survey in the Chinese manufacturing industry to estimate both revenue and physical productivity and relate our measurements to firms' trade activity. We find that Chinese exporters for largely export oriented products like leather shoes or shirts appear to be less efficient than firms only involved on the domestic market based on the standard revenue productivity measure. However, we show strong positive export premium when we instead consider physical productivity. The simple and intuitive explanation of our results is that exporters charge on average lower prices. We focus more particularly on the role of processing trade and find that price differences are especially large for firms involved in this type of contractual arrangements. We suggest three reasons to explain this result. First, lower prices may simply be due to a mechanical effect as processing trade products are not subject to tariffs nor have to pay VAT. Second, some types of processing trade activities entail that the processing trade firm receives the inputs for free from the contracting firm, therefore artificially depressing the values of inputs or materials used for the firm's production. Third, lower prices may also be a consequence of transfer pricing, as multinationals involved in FDI in China may alter the price charged for inter-company transactions to shift funds within the organization.
    Date: 2018–11
  13. By: Yu, L.; Huang, W.
    Abstract: Although the role of farmer cooperatives as a social unit can have impact on their performance, empirical analysis on how societal output and social value relevant variables affect the cooperatives performance is sparse. The objective of this paper is to provide an economic framework and operational model for performance measurement of farmer cooperative associated with societal impact. A multi-output translog production function considering social output represented by the number of beneficiary farmers using data from surveys 164 cooperatives in Fujian province, China, is estimated. The average technical efficiency of cooperatives is estimated to be 0.747, implying that cooperatives can be increased by 25.30% without any additional resources given the current production input level. It is interesting to find that cooperatives efficiency scores and their rankings are significantly different with and without taking societal output into account, which indicates that social output created by the number of beneficial farmers cannot be ignored when evaluating cooperative s performance. The societal value relevant variables for technical inefficiency factors represented by extent of providing members service, namely training members and selling products are also found negatively affecting technical efficiency of cooperatives. The findings indicate the evaluation of cooperatives performance should consider their non-economic social contribution. Acknowledgement : The authors gratefully acknowledge financial support from Fujian Agriculture and Forestry University FAFU university: 2016 project (social science category) for supporting outstanding young scientific researchers: (NO: xjq201632).We also acknowledge the kind help from Professor Jerker Nilsson.
    Keywords: Agribusiness
    Date: 2018–07
  14. By: Lin, S.; Han, H.
    Abstract: Using panel data of 31 provinces during 1997-2014 in China, this paper fills the void of examining the determinants of capital flows across regions within China specific attention is given to the role of government size in capital flows across Shanhai Pass. Based on the fixed-effect model, the impactors of classical capital flows are tested. While government size is the main hinder impeding capital flows, capital return, institutional quality, human capital is conducive to capital inflow. However, when the components of the aggregate government expenditures is divided into two parts of productive expenditures on physical infrastructure and on education, it is proved that productive expenditures on physical infrastructure negatively correlate with capital inflows. In particular, there is strong impact of Lucas paradox that is the negative correlation of TFP and GDP growth with capital inflows; more importantly, lagged saving rate has a significantly positive impact on capital inflows namely the Feldstein-Horioka puzzle indicates the severe capital market segmentation. Overall, the main findings are that oversized government, especially government expenditures on physical infrastructure are major impediments to china s capital inflows among regions. Therefore, it is urgent to let market play a fundamental role in resource allocation, especially capital allocation. Acknowledgement : This research was supported by the Major Program of the National Social Science Foundation of China (Grant No.14 ZDA070) and by the Fundamental Research Funds for the Central Universities 2017.
    Keywords: Agricultural and Food Policy
    Date: 2018–07

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