nep-cna New Economics Papers
on China
Issue of 2020‒02‒24
fifteen papers chosen by
Zheng Fang
Ohio State University

  1. The State of Mental Health Among the Elderly Chinese By Yi Chen; Hanming Fang
  2. Progress and Challenges of Upper Secondary Education in China By Chen,Dandan; Fu,Ning - HEAED; Pan,Yilin
  3. New Evidence on the Soft Budget Constraint: Chinese Environmental Policy Effectiveness in Private versus SOEs By Mathilde Maurel; Thomas Pernet-Coudrier
  4. The cost of weak institutions for innovation in China By Andrés Rodríguez-Pose; Min Zhang
  5. The College Admissions Contribution to the Labor Market Beauty Premium By Ong, David; Xie, Man; Zhang, Junsen
  6. Prenatal Sunshine Exposure and Birth Outcomes in China By Zhang, Xin; Wang, Yixuan; Chen, Xi; Zhang, Xun
  7. After-School Tutoring, Household Substitution and Student Achievement: Experimental Evidence from Rural China By Jere R. Behrman; C. Simon Fan; Xiangdong Wei; Hongliang Zhang; Junsen Zhang
  8. The Wage Premium of Communist Party Membership: Evidence from China By Wang, Hongjian; Nikolov, Plamen; Acker, Kevin
  9. Going Green in China: Firms’ Responses to Stricter Environmental Regulations By Fan, Haichao; Graff Zivin, Joshua; Kou, Zonglai; Liu, Xueyue; Wang, Huanhuan
  10. Who Pays the Tax on Imports from China? By Michael Nattinger; Matthew Higgins; Thomas Klitgaard
  11. The Causal Effects of Parents’ Schooling on Children’s Schooling in Urban China By Jere R. Behrman; Yuan Hu; Junsen Zhang
  12. The Financial Costs of the U.S.-China Trade Tensions : Evidence from East Asian Stock Markets By De Nicola,Francesca; Kessler,Martin Dov Alfred; Nguyen,Ha Minh
  13. Win-Win? Assessing the global impact of the Chinese economy By Herrala, Risto; Orlandi, Fabrice
  14. Shooting Oneself in the Foot? Trade War and Global Value Chains By Cecilia Bellora; Lionel Fontagné
  15. A New Robust Inference for Asset Return Predictability Via Quantile Regression By Zongwu Cai; Haiqiang Chen; Xiaosai Liao

  1. By: Yi Chen; Hanming Fang
    Abstract: China introduced its stringent family planning policies from the early 1970s, known as the "Later, Longer, Fewer" policies, and followed it with the One-Child Policy from 1979. The number of children born to Chinese parents significantly decreased from 5.7 in late 1960s to 2.5 in 1988. In Chen and Fang (2019), we show that family planning policies have drastically different effects on elderly parents' physical and mental well-beings. Whereas parents more exposed to the family planning policies consume more and enjoy slightly better physical health status, they report more severe depression symptoms. In this paper, we present a more complete picture of the difference in mental health among residents in rural and urban areas, between males and females, between different education groups, between those with one child and those with more than one children, and between widowed and non-widowed. We highlight the role of family support (from children and spouse) for the mental health status among the elderly Chinese.
    JEL: H31 I15 I18 J13
    Date: 2020–01
  2. By: Chen,Dandan; Fu,Ning - HEAED; Pan,Yilin
    Abstract: Over the past decade, China's transition rate from lower secondary education to higher secondary education has increased significantly, from 80.5 to 93.7 percent. In light of this impressive progress, the Chinese government aimed at raising the gross enrollment rate in senior high schools to above 90 percent by 2020. Quality and relevance in vocational and academic high school education could be a key bottleneck in further expansion. The way tracking operates between academic and vocational streams could itself be a distortion for the sector's further expansion. Looking ahead, reforms in upper secondary education are imperative, given increasing demand for a highly skilled labor force and China's fast demographic change as the young population cohorts decline. The paper examines the sector's key constraints in access, financing, tracking, and informed decisions and recommends how the quality of the general and vocational education tracks can be further improved.
    Keywords: Educational Sciences,Secondary Education,Vocational Education&Technical Training,Rural Labor Markets,Labor Markets
    Date: 2019–10–15
  3. By: Mathilde Maurel (CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Panthéon-Sorbonne); Thomas Pernet-Coudrier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Panthéon-Sorbonne)
    Abstract: This paper analyses the efficiency of a set of environmental measures introduced by the 11th FYP (Five Years Plan) in China in 2006, using a rich and unique dataset borrowed from the Ministry of Environmental Protection (MEP) and from the State Environmental Protection Agency (SEPA). The objective is to provide new evidence of the Soft Budget Constraint (SBC), which is a key concept coined by Janos Kornai. The main finding is that TCZ (Two Control Zone) cities are successful in bringing down the emission of SO2, and more importantly that this success is driven by the private sector. Sectors dominated by State-Owned Enterprises (SOEs) are less sensitive to the environmental target-based evaluation system, by a factor of 42%. We also find that one channel, through which this adjustment takes place, is Total Factor Productivity (TFP), but not in the case of SOEs. We interpret these results as pointing to the evidence of a still ongoing SBC surrounding Chinese SOEs.
    Keywords: Environmental regulation,China Kornai,Soft Budget Constraint
    Date: 2020–02
  4. By: Andrés Rodríguez-Pose; Min Zhang
    Abstract: Does the variation in the quality of local government institutions affect the capacity of firms to innovate? This paper uses a unique dataset that combines the specific features of 2,700 firms with the institutional and socioeconomic characteristics of the 25 cities in China where they operate, in order to assess the extent to which institutional quality – measured across four dimensions: rule of law, government effectiveness, corruption, and regulatory quality – affects both the innovation probability and intensity of firms. The results of the econometric analysis show that poor institutional quality in urban China is an important barrier for firm-level innovation. In particular, a deficient rule of law, high corruption, and a weak regulatory quality strongly undermine firm-level innovation. The role of these factors is far more limited in the case of innovation intensity. Better institutions also reduce the amount of time firms spend dealing with government regulations in order to facilitate innovation. The results also indicate that the cost of weak institutions for innovation is higher for private than for state-owned firms, at least in the early stages of innovation. In general, differences in institutional quality generate local urban ecosystems that impinge on the propensity of firms to innovate.
    Keywords: innovation, institutions, government quality, firms, cities, China
    JEL: H1 O3 O31
    Date: 2020–02
  5. By: Ong, David; Xie, Man; Zhang, Junsen
    Abstract: Beautiful people earn more. Surprisingly, this premium is larger for men than for women and is independent of the degree of customer contact. Overlooked is the possibility that beauty can influence college admissions. We explore this academic contributor to the labor market beauty earnings premium by sampling 1,800 social media profiles of students from universities ranked from 1 to 200 in China and the US. Chinese universities use only standardized test scores for admissions. In contrast, US universities use also grades and extracurricular activities, which are not necessarily beauty-blind. Consistent with beauty-blind admissions, student’s beauty is uncorrelated with the rank of their college in China. In the US, White men from higher ranked colleges are better-looking. As expected, the correlation is insignificant for White men who attended tech colleges and is highest for those who attended private colleges. We also find that White women and minorities of either gender are not better-looking at higher ranked colleges. Our evidence indicates a college admissions contribution to the labor market beauty premium for US White men, but not for students in China of either gender, White women, or minorities of either gender in the US, or for White men who attended technology colleges.
    Keywords: beauty premium, labor market discrimination, college admissions, college athletics
    JEL: I24 I26 J7
    Date: 2020–01–31
  6. By: Zhang, Xin (Beijing Normal University); Wang, Yixuan (Beijing Normal University); Chen, Xi (Yale University); Zhang, Xun (Beijing Normal University)
    Abstract: This paper is one of the first to examine the associations between prenatal sunshine exposure and birth outcomes, specifically the incidence of low birth weight (LBW) and small for gestational age (SGA), based on a nationally representative birth record dataset in China. During the sample period in the 1990s, migration was limited in rural China, allowing us to address the identification challenges, like residential sorting and avoidance behaviors. We found a nonlinear relationship between the length of sunlight and birth outcomes. In particular, prenatal exposure to increasing sunshine was associated with a reduction in the incidence of LBW and SGA, especially in the second trimester during pregnancy. This finding was consistent with the clinical evidence suggesting positive effects of sunshine on birth outcomes via obtaining vitamin D or relieving maternal stress.
    Keywords: small for gestational age, low birth weight, sunshine duration, China
    JEL: I12 J13 I18 Q51
    Date: 2019–12
  7. By: Jere R. Behrman (University of Pennsylvania); C. Simon Fan (Lingnan University); Xiangdong Wei (Lingnan University); Hongliang Zhang (Hong Kong Baptist University); Junsen Zhang (The Chinese University of Hong Kong)
    Abstract: Worldwide children’s access to after-school learning activities is highly depen-dent on family backgrounds. Concern over the implications of such activities for child development and educational inequality has led to a global rise of public provision of after-school learning support. However little is known about inter-actions of public after-school activities and household investments in children’s learning. This paper contributes to the literature on the e?ects of public inputs on household inputs and student achievement in after-school settings. We build a model that integrates public and private inputs to produce student achievement through two competing mechanisms – diminishing returns to total inputs and complementarity between public and private inputs. When diminishing returns dominate complementarity, the model predicts the substitution away of private inputs due to increases in public inputs for all households, although the extent of crowding-out is smaller and therefore the test score gains are larger for children from disadvantaged family backgrounds facing higher costs of private inputs. We implement a randomized controlled after-school tutoring experiment in rural China where many children are left-behind by both parents and cared for by grandparents. During the program, tutees living with parents reported large and significant reductions in the amount of tutoring received at home, whereas tutees living apart from both parents reported much smaller, and often insignificant, re-ductions. We find that tutees’ math scores improved significantly, and more for children living without parents, although there is no evidence for improvement in tutees’ endline reading scores.Length: 50 pages
    Keywords: inequality of educational opportunity; after-school tutoring; home tutoring
    JEL: F63 I24 I25
    Date: 2020–01–20
  8. By: Wang, Hongjian (State University of New York); Nikolov, Plamen (State University of New York); Acker, Kevin (The Johns Hopkins University School of Advanced International Studies and The Hopkins-Nanjing Center)
    Abstract: Social status and political connections may confer large economic benefits on an individual. Previous studies focused on China have examined the relationship between Communist Party membership and earnings and found a positive correlation. However, the correlation could be partly or totally spurious. Using data from three surveys spanning three decades, we estimate the causal effect of Chinese Communist Party membership on monthly earnings in China. We find that, on average, membership in the Communist Party of China increases monthly earnings and the wage premium has grown in recent years. We explore potential causes and discover evidence that improvements in social networks and social rank, acquisition of job-related qualifications, and greater life satisfaction likely play important roles in increased earnings.
    Keywords: wage premium, political status, China, Communist Party
    JEL: D31 J31 P2
    Date: 2019–12
  9. By: Fan, Haichao; Graff Zivin, Joshua; Kou, Zonglai; Liu, Xueyue; Wang, Huanhuan
    Date: 2019–12–01
  10. By: Michael Nattinger; Matthew Higgins (National Bureau of Economic Research; Georgia Institute of Technology; Federal Reserve Bank of New York; College of Management); Thomas Klitgaard
    Abstract: Tariffs are a form of taxation. Indeed, before the 1920s, tariffs (or customs duties) were typically the largest source of funding for the U.S. government. Of little interest for decades, tariffs are again becoming relevant, given the substantial increase in the rates charged on imports from China. U.S. businesses and consumers are shielded from the higher tariffs to the extent that Chinese firms lower the dollar prices they charge. U.S. import price data, however, indicate that prices on goods from China have so far not fallen. As a result, U.S. wholesalers, retailers, manufacturers, and consumers are left paying the tax.
    Keywords: United States; Thomas Klitgaard; tariffs; U.S. import prices; Michael Nattinger; Matthew Higgins; China; tax; trade policy
    JEL: E2 F1 F00
  11. By: Jere R. Behrman (University of Pennsylvania); Yuan Hu (Jinan University); Junsen Zhang (The Chinese University of Hong Kong)
    Abstract: Parental schooling is widely thought to improve child outcomes. But most studies on parental-child relations are associative, without control for estimation problems, such as unobserved intergenerationally-correlated endowments, if causality is of interest. The few exceptions are relatively recent studies that focus on high-income countries (HICs), with their much different contexts than the low- and middle-income countries (LMICs) in which the vast majority of children globally are growing up. This paper estimates the causal (conditional on the assumptions for the model) relationships between parents’ schooling and their children’s schooling in the most populous LMIC, using adult identical (monozygotic, MZ) twins data from urban China. Our ordinary least-squares estimates show that one-year increases in maternal and parental schooling are associated, respectively, with 0.4 and 0.5 more years of children’s schooling. However, if we control for genetic and other endowment effects by using within-MZ fixed effects, the results indicate that mothers’ and fathers’ schooling have no significant effects on children’s schooling. Our main results remain with various robustness checks, including controlling for measurement error. These results suggest that the positive associations between children’s and parents’ schooling in standard cross-sectional estimates in this major LMIC are mainly due to the correlation between parents’ unobserved endowments and their schooling and not the effects of their schooling per se.
    Keywords: parental schooling; children’s schooling; endowments; China; within-twins estimates
    JEL: I2
    Date: 2020–01–20
  12. By: De Nicola,Francesca; Kessler,Martin Dov Alfred; Nguyen,Ha Minh
    Abstract: This paper examines the impacts of U.S.-China trade tensions via the lens of East Asian stock markets. Studying 10 indices of the main East Asian stock markets, it finds that announcements of"trade war"escalation translated into 50 to 60 percent of the total declines in two major Chinese stock markets over the first eight months of 2018. In other words, in the absence of the"trade war"Asian stocks would have experienced half the decline, or they would have registered gains.
    Date: 2019–11–26
  13. By: Herrala, Risto; Orlandi, Fabrice
    Abstract: We study the global impact of the Chinese economy based on a novel indirect approach where the spillover effect is quantified from a forecast error model under relatively favorable identifying conditions. Findings from the real-time World Economic Outlook data over the period 2004 - 2015 indicate that an increase in economic growth in China had a negative impact on most other economies one to two years ahead. The estimations furthermore uncover evidence at the global level that spillover propagated by influencing prices, including global commodity prices, which tend to increase in reaction to accelerating economic growth in China.
    JEL: C2 F15 F44
    Date: 2020–02–12
  14. By: Cecilia Bellora (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Lionel Fontagné (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Since the beginning of 2018, the US administration has announced and implemented several measures limiting US trade, in particular with China. This has fueled retaliation and has escalated in high trade tensions at the global level. We address in this paper the effects of the current trade tensions on trade, sectoral value added and welfare, in General Equilibrium under imperfect competition. We rely on a set-up differentiating demand of goods according to their use, for final or intermediate consumption. This authorizes tracing the impact of protection, along the value chains, on prices, value added and factor income. Additional tariffs from official lists are averaged at the 6 digit level of the Harmonized System (HS6), before being aggregated at the sector level with a reference group weighted method. Negotiated quantities in Voluntary Export Restraints are also taken into account at the product level. Beyond the direct toll of sanctions, US exports to the world post a 7.5% decrease as a result of reduced competitiveness led by vertical linkages along the value chains. Because of the measures in place as of August 2019, three quarters of the sectors decrease their value added in the US, suggesting that with this tariff war the US are shooting themselves in the foot. The quantification of job destructions and creations in the different sectors is consistent with effects channeling through prices and demand along the value chains detrimental to downstream industries.
    Keywords: Trade War,Global Value Chains
    Date: 2019–12–30
  15. By: Zongwu Cai (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA); Haiqiang Chen (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China); Xiaosai Liao (Southwestern University of Finance and Economics, Chengdu, Sichuan 611130, China)
    Abstract: This paper studies asset return predictability via quantile regression for all types of persistent regressors. We propose to estimating a quantile regression with an auxiliary regressor and constructing a weighted estimator using the estimated coefficients of the original predictor and the auxiliary regressor, together with a novel test procedure. We show that it can reach the local power under the different optimal rates for nonstationary and stationary predictors, respectively. Our approach can be easily implemented to test the joint predictive ability of financial variables in multiple regression. The heterogenous predictability of US stock returns at different quantile levels is reexamined.
    Keywords: Auxiliary regressor; Highly persistent predictor; Multiple regression; Predictive quantile regression; Robust inference; Weighted estimator
    JEL: C22 C32 C58 G12 G14
    Date: 2020–02

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