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on China |
| By: | Feng, Xunan (Shanghai University of Finance and Economics); Johansson, Anders C. (Stockholm China Economic Research Institute) |
| Abstract: | This study examines how state versus private ownership and political participation by private entrepreneurs affect access to financing through the corporate bond market in China. We find that state ownership is positively related to the likelihood that a firm issues bonds and that firms controlled by ultimate owners who participate in politics are significantly more likely to issue bonds. We also show that state ownership as well as political participation by the ultimate owner is positively associated with the amount firms raise in bond offerings. Moreover, state firms characterized by over-investment tend to increase their excess investments after a bond offering. For under-investing private firms, existing suboptimal investment levels are alleviated by bond offerings. In addition, we find that private firms significantly increase their R&D investments after a public bond offering, especially those controlled by owners who participate in politics. Finally, bond offerings are associated with a significant decline in market value for SOEs. For firms controlled by an owner who participates in politics, the opposite holds true. These findings highlight the need to improve the existing credit allocation via the bond market and the important role political capital plays for private firms in China. |
| Keywords: | corporate bonds; bond issuance; SOEs; private firms; political participation; political connections; access to finance; China |
| JEL: | G10 G30 G32 L33 P20 |
| Date: | 2018–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2018-050&r=all |
| By: | Wenjing Duan; Pedro S. Martins |
| Abstract: | Do firms in China share rents with their workers? We address this question by examining firm-level panel data covering virtually all manufacturing firms over the period 2000-2007, representing an average of 200,000 firms and 54 million workers per year. We find robust evidence of rent sharing (RS): workers that would move from low- to high-profit firms would see their wages increase by about 45%. The results are based on multiple instrumental variables, including firm-specific international trade shocks. We also present a number of complementary findings: RS is weaker in firms with more women and less educated workers; RS involves an element of risk sharing, as wages also decrease when profits fall; RS is lower in regions with more latent competition from rural workers; higher minimum wages tend to reduce RS; and, while employer labour market power reduces wages, it increases RS. Overall, despite its importance, RS in China is smaller than in developed economies, which reflects the weaker bargaining power of its workers and the different scope of its labour market institutions. |
| Keywords: | Wages, Bargaining, Monopsony |
| JEL: | J31 J41 J50 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:cgs:wpaper:96&r=all |
| By: | Liu, Huiling; Fei, Xing; Yakshtas, Kseniya; Li, Bo |
| Abstract: | This study investigates the impacts of Chinese high-tech enterprise certification policy on enterprise innovation by exploiting the unique data of listed companies and their affiliates from 2006 to 2015. The authors exclude firms certified after year 2009 from the sample, because they may have exhibited R&D manipulation. The results show that high-tech enterprise certification can promote Chinese enterprise innovation, especially the innovation captured by invention patents. The results of a rich set of robustness tests all support this conclusion. Regarding the underlying mechanism, high-tech enterprise certification can influence enterprise innovation through tangible and intangible channels. The heterogeneity analysis shows that private enterprises, enterprises in industries with more competition, and equity-inspired enterprises benefit most from high-tech enterprise certification. This paper helps to scientifically evaluate the validity of Chinese innovation policy and contributes to a more comprehensive understanding of enterprise innovation's driving forces as well as the inconclusive relationship between government support and enterprise innovation. |
| Keywords: | high-tech enterprise certification,innovation,R&D manipulation |
| JEL: | O31 O32 O38 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201885&r=all |
| By: | Gustav Fredriksson; Alexander Roth; Simone Tagliapietra; Reinhilde Veugelers |
| Abstract: | The automotive sector is currently at the centre of a global transformation, driven by four key trends - electrification, autonomous driving, sharing and connected cars. While each of these interconnected trends is already visible in daily life, their full deployment is not yet guaranteed, nor is the speed of take-up. This Policy Contribution investigates the position of the European automotive industry in a scenario in which electrification substantially progresses. The results are encouraging for Europe - EU companies entered the global electric vehicle race late, but on the basis of our analysis it is not yet too late for them to catch up and make the best of this change. European car manufacturers can rely on a large internal market, long experience in automotive manufacturing and a portfolio of research and development projects and patents that is diversified across various power-train technologies. But if Europe wants to succeed in the global electric vehicle race, its automotive industry will have to move into higher gear to meet the global – notably Chinese – competition. Nevertheless, industry needs the proper framework conditions as the basis for more ambitious investments in electrification – as examples such as Norway or China demonstrate. This Policy Contribution formulates a broad policy framework for deployment and production of electric vehicles in Europe, combining demand and supply-side instruments. Europe cannot follow China in the adoption of centrally-planned industrial policy measures. But it certainly can and should do more to stimulate the transformation of its automotive industry through more ambitious policies. On February 12, Bruegel is hosting an event on electric vehicles in European automotive industry, which will feature among others a presentation from the authors of this Policy Contribution. Click here to register. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:28892&r=all |
| By: | Tamas Csabafi (University of Missouri-St. Louis - Department of Economics); Max Gillman (University of Missouri-St. Louis; IEHAS, Budapest; CERGE-EI, Prague); Ruthira Naraidoo (Department of Economics - University of Pretoria, South Africa) |
| Abstract: | The paper extends a standard two-country international real business cycle model to include financial intermediation by banks of loans and government bonds. Taking in household deposits from home and abroad, the loans are produced by the bank in a Cobb-Douglas production approach such that a bank productivity shock can explain financial data moments. The paper contributes an explanation, for both the US relative to the Euro-area, and the US relative to China, of cross-country correlations of loan rates, deposit rates, and the loan premia. It provides a sense in which financial retrenchment resulted in the US following the 2008 bank crisis, and how the Euro-area and China reacted. The paper contributes evidence of how the Euro-area has been more financially integrated with the US, and China less financially integrated, with the Euro-area becoming more financially integrated after the 2008 crisis, and China becoming less so integrated. |
| Keywords: | International Real Business Cycles, Financial Intermediation, Credit Spread, Bank Productivity, 2008 Crisis |
| JEL: | E13 E32 E44 F41 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1830&r=all |
| By: | Shi Li; Terry Sicular; Finn Tarp |
| Abstract: | In this paper we describe the major trends in China’s income inequality over the past 40 years and explain them as the outcome of four interleaved stories. The first story is a standard development story characterized by structural change, market development, labour absorption, and the Kuznets inverted-U path of inequality. The second is the economic transition story, in which changes in income distribution result from the shift from plan to market. Third is incomplete transition, with opportunities for rent-seeking, corruption, and hidden income. Fourth is the story of government efforts to moderate inequality through social and welfare policies. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2018-174&r=all |
| By: | Shuaizhang Feng (Jinan University); Xiaoyu Xia (Chinese University of Hong Kong) |
| Abstract: | China’s college expansion program, which was implemented in 1999 significantly increased the share of college-educated workers in the urban labor force. We find that returns to education were not responsive to changes in local skill supply be- tween then and 2009. To explain the trend, we develop a model of endogenous technology adoption and predict that increasing the share of college-educated work- ers leads firms to adjust their use of production technology. We construct supply shocks in local labor markets based on policy-driven variations in the changes of college enrollment quotas across cities. Using panel data from over 20,000 large manufacturing firms, we find that an enlarged college-educated labor force causes skill-intensive firms to invest more in capital and R&D as well as employ more workers, evidence that supports the theory of endogenous technology adoption. |
| Keywords: | human capital, endogenous technology adoption, college education, Chinese economy |
| JEL: | J24 I28 O32 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-099&r=all |
| By: | Feng, Xunan (Shanghai University of Finance and Economics); Johansson , Anders C. (Stockholm China Economic Research Institute); Wang, Ying (Peking University) |
| Abstract: | We examine the nationalization of listed firms in China. Using a manually collected data set of 115 cases of ownership transfer from private to state control, we find that nationalization is positively associated with firm performance. When we analyze potential mechanisms through which nationalization may affect firm performance, we find a positive effect on benefits in the form of market power, government subsidies and bank financing. We also identify significant costs in the form of a higher tax burden, higher employment costs, and higher levels of corporate donations following nationalization. Finally, we show that weak local institutions exacerbate the influence nationalization has on firm performance and the benefits and costs tied to a shift to state control. These findings shed light on the effects when the government actively takes a more prominent role in the economy by becoming a controlling shareholder in large companies. |
| Keywords: | Nationalization; Political economy; Firm performance; Local institutions; China |
| JEL: | G32 G34 H11 P26 P31 |
| Date: | 2018–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2018-051&r=all |
| By: | Kerola, Eeva |
| Abstract: | China’s official real GDP growth has held surprisingly stable in recent years. As national GDP figures influence both policy analysis and political decisions, the GDP growth rate of the massive Chinese economy has also great international implications. Taking the nominal GDP growth and price index data as given and experimenting with alternative deflators, this paper attempts to track missing fluctuations in real GDP growth in recent years. Based on the constructed growth series, real GDP growth decreased during 2015–2016 and picked up in 2017. Growth has been again decelerating this year. Furthermore, the constructed growth rate seems to be well below the recent official figures. |
| JEL: | C38 E01 E3 P2 |
| Date: | 2018–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2018_023&r=all |
| By: | Brunt, Liam (Dept. of Economics, Norwegian School of Economics and Business Administration); Fidalgo, Antonio (Fresenius University of Applied Sciences) |
| Abstract: | We use modern econometric methods to analyze a recently-released sample of 3 000 Chinese grain yields. We find significant variation across provinces and persistent increases in yields over time – albeit slow compared to Europe and the New World. Growth rates for rice (the primary southern crop) and dry land crops (the primary northern crops) were similar. We show that provinces were more extensively farmed when yields and population pressure were high, and that extending production put downward pressure on yields. Overall, Chinese farmers avoided the problem of agricultural involution by efficiently boosting output at the extensive margin, not the intensive margin. |
| Keywords: | Agricultural involution; productivity; growth |
| JEL: | N55 O13 O47 |
| Date: | 2018–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2018_027&r=all |
| By: | Zou, Wei (Asian Development Bank Institute); Chen, Liangheng (Asian Development Bank Institute); Xiong, Junke (Asian Development Bank Institute) |
| Abstract: | We establish a general equilibrium trade model and adopt the “market access” approach to measure the impact of the high-speed railway (HSR) network on the economic growth of 110 of the main prefecture-level cities of the People’s Republic of China, for which we manually collect the pairwise travel distances and railway speeds to calculate market access. The empirical results show that the launch of the HSR exerts significant positive effects on growth. Specifically, a 1% increase in market access leads to an increase in real income of 0.123% (controlling the region fixed effect) or 0.121% (controlling the province fixed effect). Counterfactual econometric analysis indicates that, if all the HSR were removed in 2015, the market access would fall by an average of 76.2% and the aggregate real income would decline by up to 9.4%. The growth effect of the HSR varies across cities, and the HSR has a more prominent impact on services than on manufacturing. The conclusion remains valid after a series of robustness tests. |
| Keywords: | high-speed railway; transport infrastructure; market access; economic growth; PRC |
| JEL: | F14 R11 R42 |
| Date: | 2018–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0852&r=all |
| By: | Xue, Melanie Meng |
| Abstract: | This paper studies a unique historical experiment: the cotton revolution and its impact on the emergence of gender-equitable beliefs. The cotton revolution led to a prolonged phase (1300-1840 AD) of high productivity for women. I hypothesize that a substantial, long-standing increase in relative female income eroded a highly resilient cultural belief: women are less capable than men. I examine a period when economic gains from the cotton revolution faded. Using variation across 1,489 counties in cotton spinning and weaving, I find that the cotton revolution reduces sex selection. This result is supported by survey evidence on gender equitable beliefs. I instrument cotton weaving with the range of relative humidity within which cotton yarn can be smoothly woven into cloth. I document an initial impact of the cotton revolution on widow suicides. To isolate the cultural channel, I examine the effects of the cotton revolution under post-1949 state socialism, where both genders had similar economic opportunities, political and legal rights, and show that pre-1840 cotton weaving predicts a higher probability for the wife to head the household. I document the distinctive role of high-value work in the perception of women. Low-value work performed by women, such as cotton cultivation, does not correct prenatal sex selection. |
| Keywords: | Culture, relative female income, gender-equitable beliefs |
| JEL: | I1 J16 N0 N35 Z1 |
| Date: | 2018–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:91100&r=all |