nep-cna New Economics Papers
on China
Issue of 2018‒12‒24
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Does Money Relieve Depression? Evidence from Social Pension Expansions in China By Chen, Xi; Wang, Tianyu; Busch, Susan H.
  2. Walled Cities and Urban Density in China By Du, Jun; Zhang, Junfu
  3. Elite School Designation and House Prices - Quasi-experimental Evidence from Beijing, China By Huang, Bin; He, Xiaoyan; Xu, Lei; Zhu, Yu
  4. China’s Monetary Policy Communication: Frameworks, Impact, and Recommendations By Michael McMahon; Alfred Schipke; Xiang Li
  5. Media Attention and Choice of Major: Evidence from Anti-Doctor Violence in China By Bo, Shiyu; Chen, Y. Joy; Song, Yan; Zhou, Sen
  6. Inter-regional spillover and intra-regional agglomeration effects among local labour markets in China By Xiaodong Gong; Jiti Gao; Xuan Liang; Xin Meng
  7. In the Shadows of the Government: Relationship Building During Political Turnovers By Hanming Fang; Zhe Li; Nianhang Xu; Hongjun Yan
  8. A multidisciplinary analysis of the Belt and Road Initiative By Natan Colombo
  9. Demographics and FDI: Lessons from China's one-child policy By Donaldson, John B.; Koulovatianos, Christos; Li, Jian; Mehra, Rajnish
  10. China’s Rebalancing: Recent Progress, Prospects and Policies By Rui Mano; Jiayi Zhang
  11. The Causal Link between Relative Age Effect and Entrepreneurship: Evidence from 17 Million Users across 49 Years on Taobao By Youwei Wang; Yuxin Chen; Yi Qian

  1. By: Chen, Xi; Wang, Tianyu; Busch, Susan H.
    Abstract: We estimate the impact of pension enrollment on mental well-being using China’s New Rural Pension Scheme (NRPS), the largest existing pension program in the world. Since its launch in 2009, more than 400 million Chinese have enrolled in the NRPS. We first describe plausible pathways through which pension may affect mental health. We then use the national sample of China Family Panel Studies (CFPS) to examine the effect of pension enrollment on mental health, as measured by CES-D and self-reported depressive symptoms. To overcome the endogeneity of pension enrollment or of income change on mental health, we exploit geographic variation in pension program implementation. Results indicate modest to large reductions in depressive symptoms due to pension enrollment; this effect is more pronounced among individuals eligible to claim pension income, among populations with more financial constraints, and among those with worse baseline mental health. Our findings hold for a rich set of robustness checks and falsification tests.
    Keywords: pension enrollment,pension income,depression,mental health,older populations
    JEL: H55 I18 I38 J14
    Date: 2018
  2. By: Du, Jun (Aston University); Zhang, Junfu (Clark University)
    Abstract: Throughout the imperial era, defensive walls surrounded Chinese cities. Although most city walls have vanished, the cities have survived. We analyze a sample of nearly 300 prefectural-level cities in China, among which about half historically had city walls. We document that cities that had walls in late imperial China have higher population and employment density today, despite the fact that their walls have long gone. Using data from various sources, we test several possible explanations of this fact, including (1) walled cities have a well-defined historical core that helps hold economic activity close to the city center today; (2) walled cities today tend to have different industry compositions that are less conducive to decentralization; (3) walled cities are situated in regions where the local geographies make it less desirable to build out; (4) walled cities have more compact shapes that facilitate high density development; and (5) walled cities are located in regions where rural land is more valuable today and discourages urban sprawl. We find that historically walled cities still have higher density after taking into account all of these factors, which we interpret as evidence of economic persistence.
    Keywords: urban density, city wall, persistence, China
    JEL: R11 R12 N95
    Date: 2018–11
  3. By: Huang, Bin; He, Xiaoyan; Xu, Lei; Zhu, Yu
    Abstract: We explore three recent comprehensive reforms which aim to equalize access to elite elementary schools in Beijing, to identify the causal effect of access to quality education on house prices. Using property transaction records from Beijing in 2013 and 2016, we construct a balanced panel of residential complexes, each of which linked to its designated primary school. Whereas the multi-school dicing reform involves randomly assigning previously ineligible pupils to key elementary schools through lotteries, the reform of school federation led by elite schools consolidates ordinary primary schools through alliance with elite schools. Moreover, an ordinary primary school can be promoted to key elementary school without involving neighbouring schools in surrounding residential complexes through a “pure” re-designation effect. We allow for systemic differences between the treated and non-treated residential complexes using the Matching Difference-in-Differences (MDID) approach. Our estimates indicate that the causal effect on house prices of being eligible to enrol in a municipal-level key primary school is about 5-7%, while the premium for being eligible for a less prestigious district-level key primary school is only about 1-3%.
    Keywords: quality school designation,house price premium,Matching DID,China
    JEL: R21 I28 H44
    Date: 2018
  4. By: Michael McMahon; Alfred Schipke; Xiang Li
    Abstract: Financial markets are eager for any signal of monetary policy from the People’s Bank of China (PBC). The importance of effective monetary policy communication will only increase as China continues to liberalize its financial system and open its economy. This paper discusses the country’s unique institutional setup and empirically analyzes the impact on financial markets of the PBC’s main communication channels, including a novel communication channel. The results suggest that there has been significant progress but that PBC communication is still evolving toward the level of other major economies. The paper recommends medium-term policy reforms and reforms that can be adopted quickly.
    Keywords: Financial markets;Central banks and their policies;Asia and Pacific;Monetary policy;People’s Bank of China, Communication, Central Bank, Monetary Policy Transmission, People’s Bank of China, Monetary Policy (Targets, Instruments, and Effects), General
    Date: 2018–11–16
  5. By: Bo, Shiyu; Chen, Y. Joy; Song, Yan; Zhou, Sen
    Abstract: We study the relationship between media attention and major choices by evaluating how newspaper reports on violence against doctors in China deter students from choosing medicine as their college majors. We collect relevant articles from over 1,200 newspapers and combine them with an administrative dataset including the universe of students admitted to Chinese colleges from 2005 to 2011. An additional article on violence against doctors leads to a 0.5 percent decrease in the number of students choosing medicine majors, especially those training physicians and nurses. This effect doubles when we focus on sub-disciplines training physicians and nurses. Students attending elite colleges and with above-median test scores are more responsive to media attention. Moreover, our analysis reveals that exposure to relevant articles significantly reduce the quality of students choosing medicine majors. Consequently, it significantly reduces the quality of admitted medical students, measured by their entrance exam performance.
    Keywords: Media attention,College majors,Occupational choice,Health care
    Date: 2018
  6. By: Xiaodong Gong; Jiti Gao; Xuan Liang; Xin Meng
    Abstract: In this paper, we study intra-city agglomeration externality and inter-city spillover effects on productivity of 185 Chinese cities at and above the prefectural level for the years between 1995 and 2009. In particular, we investigate how a shock may be amplified or weakened by these externality effects and how productivity in a city varies with and affects that of other cities in the economy. We estimate the impacts of population size on productivity in 185 Chinese cities using spatial fixed-effect panel data models. Both the endogenous and exogenous spatial dependence are allowed for. The direct and indirect effects of the factors are calculated and compared for various city groups. We find that a significant positive effect of urban population on the real wage levels, which confirms the existence of agglomeration economy within regions. We also find significant differences in both the direct and indirect effect of factors such as FDI between more and less population dense areas. This seems to suggest that agglomeration economy may also exist among regions. Disparity between regions in economic growth and productivity could be explained by the statistically significant regional variations in the direct and indirect effects.
    JEL: C23 R12 R23
    Date: 2018
  7. By: Hanming Fang; Zhe Li; Nianhang Xu; Hongjun Yan
    Abstract: We document that following a turnover of the Party Secretary or mayor of a city in China, firms (especially private firms) headquartered in that city significantly increase their “perk spending.” Both the instrumental-variable-based results and heterogeneity analysis are consistent with the interpretation that the perk spending is used to build relations with local governments. Moreover, local political turnover in a city tends to be followed by changes of Chairmen or CEOs of state-owned firms that are controlled by the local government. However, the Chairmen or CEOs who have connections with local government officials are less likely to be replaced.
    JEL: G30 G38
    Date: 2018–11
  8. By: Natan Colombo
    Abstract: The paper sheds light on and critically analyses the Belt and Road Initiative, the most ambitious financial and infrastructural plan China is promoting, inter alia, to reinforce its geopolitical role in the new global governance. After an introductive section on the evolution of the Chinese economy in the past decades, section 2 describes the background of the Initiative, with a focus on infrastructural connectivity, promotion of industrialisation in the involved areas, and collection of the capitals to be allocated for its projects. Section 3 deals with the main challenges and emerging problems, emphasising the geopolitical reactions of China's neighbouring countries to the Initiative, the delicate issues of its financial sustainability in the long term, the connected macroeconomic policies, and the evolution path of the Renminbi toward a wider internationalisation, in addition to comments on the infrastructural development. Several conclusive remarks end the work.
    Date: 2018–12
  9. By: Donaldson, John B.; Koulovatianos, Christos; Li, Jian; Mehra, Rajnish
    Abstract: Following the introduction of the one-child policy in China, the capital-labor (K/L) ratio of China increased relative to that of India, and, simultaneously, FDI inflows relative to GDP for China versus India declined. These observations are explained in the context of a simple neoclassical OLG paradigm. The adjustment mechanism works as follows: the reduction in the growth rate of the (urban) labor force due to the one-child policy permanently increases the capital per worker inherited from the previous generation. The resulting increase in China's (domestic K)/L thus "crowds out" the need for FDI in China relative to India. Our paper is a contribution to the nascent literature exploring demographic transitions and their effects on FDI flows.
    Keywords: Lucas paradox,capital-labor ratio,FDI-intensity,one-child policy
    JEL: F11 F21 J11 O11 E13
    Date: 2018
  10. By: Rui Mano; Jiayi Zhang
    Abstract: While China’s growth gathered momentum in 2017, rebalancing was uneven and decelerated along many dimensions reflecting the temporary factors behind the growth pickup. Going forward, rebalancing is expected to proceed as these temporary factors recede, but elevated income inequality and leverage will remain a challenge. The authorities are already pursuing several pro-rebalancing policies which could be expanded to support each dimension of rebalancing while reducing trade-offs between them.
    Date: 2018–11–12
  11. By: Youwei Wang; Yuxin Chen; Yi Qian
    Abstract: We use an extensive panel of 17 million individuals born between 1947 and 1995 from China’s largest online marketplace, Taobao, to study the impact of RAE on the propensity to become an entrepreneur. Using events surrounding the Cultural Revolution and the issuance of the Compulsory Education Law whereby COD policies varied, we conceptualize a natural experiment to identify the RAE effects. The youngest students are 5.4% less likely to become an entrepreneur compared to the oldest within the cohort, translating to approximate 43.7 thousand additional sellers born in September with an estimated USD 1.29 billion in additional annual sales.
    JEL: I24 I38 J21 J24
    Date: 2018–11

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