nep-cna New Economics Papers
on China
Issue of 2019‒04‒15
six papers chosen by
Zheng Fang
Ohio State University

  1. Language Premium Myth or Fact: Evidence from Migrant Workers of Guangdong, China By Wei, Xiahai; Fang, Tony; Jiao, Yang; Li, Jiahui
  2. Global innovation networks for Chinese high tech small and medium enterprises: the supportive role of highly skilled migrants and returnees By Lin, Jingyi; Plechero, Monica
  3. Human Capital and the Economic Convergence Mechanism: Evidence from China By Zhang, Xiaobei; Li, Haizheng; Wang, Xiaojun; Fleisher, Belton M.
  4. Tax Policy and Toxic Housing Bubbles in China. By King Yoong Lim; Pengfei Jia
  5. "An Institutional Analysis of China's Reform of their Monetary Policy Framework" By He Zengping; Jia Genliang
  6. Social Security Coverage around the World: The Case of China and Mexico By Francisco Perez-Arce; Maria Prados; Erik Meijer; Jinkook Lee

  1. By: Wei, Xiahai (Huaqiao University); Fang, Tony (Memorial University of Newfoundland); Jiao, Yang (Fort Hays State University); Li, Jiahui (Peking University)
    Abstract: Using unique matched employer-employee data from China, we discover that migrant workers in the manufacturing industry who are proficient in the local dialect earn lower wages than those who are not. We also find that workers with better dialect skills are more likely to settle for lower wages in exchange for social insurance. We hypothesize that they are doing so in the hope of obtaining permanent residency and household registration status (hukou) in the host city where they work. Further tests show that the phenomenon of "exchanging wages for social insurance participation" is more pronounced among workers employed in smaller enterprises. Moreover, migrant workers with better language skills have a stronger desire to stay in the host city. Our conclusions are robust to different specifications, even after addressing the endogeneity issue for language acquisition. The present study provides a new perspective on the impact of language fluency on social integration among migrants, one of the most disadvantaged groups in developing countries.
    Keywords: wages, language ability, dialect, social insurance, migrants, China
    JEL: J32 J61 R23
    Date: 2019–03
  2. By: Lin, Jingyi (Lund University); Plechero, Monica (University of Florence)
    Abstract: Literature investigating highly skilled Chinese migrants has so far focused on their role as drivers of new entrepreneurship as well as innovation in firms and regions, although their role in supporting small and medium enterprises (SMEs) engagement in global innovation networks (GINs) is still underexplored. The participation in GINs is key for high tech SMEs, which rely on sophisticated knowledge but may not have the same absorptive capacity of large firms and multinational corporations. Based on primary data from a case study on 19 SMEs in the IT and new media industry in Beijing, this paper investigates the role of returnees and highly skilled migrants in supporting the engagement of Chinese high-tech SMEs in GINs. The results reveal the important role of those individuals in bringing SMEs in former international knowledge networks and establishing new linkages for sourcing key knowledge.
    Keywords: lobal innovation networks; GIN; knowledge sourcing; small and medium enterprises; SMEs; Beijing; China; highly skilled migrants; returnees; IT and new media industry
    JEL: F20 O30
    Date: 2019–04–04
  3. By: Zhang, Xiaobei (Zhejiang University); Li, Haizheng (Georgia Tech); Wang, Xiaojun (University of Hawaii at Manoa); Fleisher, Belton M. (Ohio State University)
    Abstract: We examine the mechanism by which human capital affects economic growth and convergence, using provincial level panel data from China. We specify alternative measures of human capital and apply them to an enhanced growth model which we estimate parametrically, nonparametrically, and with a threshold model. Our results show that economic convergence is pronouncedly conditional on human capital across all our measures of human capital. The positive "benefit of being backward" due to lower initial income is almost trumped by the negative impact of low levels of human capital among the poorest areas.
    Keywords: human capital, economic convergence, regional economic development
    JEL: R11 O47 C33
    Date: 2019–03
  4. By: King Yoong Lim; Pengfei Jia
    Abstract: This paper explores the effects of a government tax policy in a growth model with economic transition and toxic housing bubbles applied to China. Such a policy combines taxing entrepreneurs with a one-time redistribution to workers in the same period. Under the tax policy, we find that the welfare improvement for workers is non-monotonic. In particular, there exists an optimal tax at which social welfare is maximized. Moreover, we consider the welfare effects of setting the tax at its optimum. We show that the tax policy can be welfare-enhancing, compare to the case without active policies. The optimal tax may also yield a higher level of welfare than the case even without housing bubbles. Finally, we calibrate the model to China. Our quantitative results show that the optimal tax rate is about 23 percent, and social welfare is signicantly improved with such a tax policy.
    Keywords: China, Economic Transition, Housing Bubbles, Welfare.
    JEL: O18 P31 R21 R28
    Date: 2018–09
  5. By: He Zengping; Jia Genliang
    Abstract: This paper traces the history of China's reform of its monetary policy framework and analyzes its success and problems. In the context of financial marketization and the failure of the quantity-targeting framework, the People's Bank of China transformed its monetary policy framework toward one that targets interest rates. The reform includes two important institutional changes: establishing an interest rate corridor and decreasing the difficulty the Open Market Operations room faces in estimating the market demand for reserves. The new monetary policy framework successfully stabilizes the interbank offered rate. However, this does not mean that the new framework is sufficient. One important problem remaining to be solved is how to manage the effects of fiscal activities on monetary policy operations. This paper analyzes the fiscal effects on reserves in China's Treasury Single Account system. The missing role of the Treasury in monetary policy operations increases the difficulty for the central bank to achieve its interest rate target. A further reform is therefore needed to provide a coordination mechanism between the Treasury and the People's Bank of China.
    Keywords: China; Monetary Policy Framework; Interest Rate Target; Fiscal Effects on Reserves
    JEL: E42 E52 E58 P24
    Date: 2019–04
  6. By: Francisco Perez-Arce (University of Southern California); Maria Prados (University of Southern California); Erik Meijer (University of Southern California); Jinkook Lee (University of Southern California)
    Abstract: We describe the current state and recent trends in the landscape of social security programs in China, Mexico, and India. A common thread across these countries is the introduction and recent expansion of old-age pension programs with noncontributory components. We use surveys from the HRS-family to analyze trends in the levels and correlates of social security coverage in Mexico and China. The most notable development is the increase in public pension coverage for the elderly population. In China, coverage rates for the population 70 and older grew from 33 percent in 2011 to 68 percent in 2015; and in Mexico from 32 percent to 55 percent in the 10 years following 2002. The new programs also caused significant changes on the determinants of coverage in ways that share similarities across countries. Variables such as educational attainment, urban status, and an employment history in the formal sector, were strong predictors of public pension receipt in the earlier survey-waves, but not in the most recent ones for China and Mexico. However, a strong relationship remains, and is unchanged across time, between those same characteristics and the average income pension amount. Likewise, there are no significant changes between them and receipt of benefits from other social programs. Based on these results, we conduct simulations that show, for example, that even rapid transformation of the labor market or education levels of the population would not radically change the proportion covered by pension programs but would largely increase average pension amounts.
    Date: 2018–09

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