nep-cna New Economics Papers
on China
Issue of 2020‒04‒06
fourteen papers chosen by
Zheng Fang
Ohio State University

  1. From Workers to Capitalists in Less Than Two Generations: A Study of Chinese Urban Elite Transformation Between 1988 and 2013 By , Stone Center; Yang, Li; Novokmet, Filip; Milanovic, Branko
  2. Fundamentals and the volatility of real estate prices in China: A sequential modelling strategy By Yongheng Deng; Eric Girardin; Roselyne Joyeux
  3. New Evidence on the Soft Budget Constraint: Chinese Envronmental Policy Effectiveness in Private versus SOEs By Mathilde Maurel; Thomas Pernet
  4. Provincial Trade, Financial Friction and Misallocation in China By Kwon, Ohyun; Fleisher, Belton M.; McGuire, William H.; Zhao, Min Qiang
  5. Female Small Business Owners in China: discouraged, not discriminated By Mustafa Caglayan; Oleksandr Talavera; Lin Xiong
  6. Induced Innovation: Evidence from China's Secondary Industry By Fleisher, Belton M.; McGuire, William H.; Wang, Xiaojun; Zhao, Min Qiang
  7. The Impact of Economic Institutions on Finance Sector:Evidence from China By Li, Zhao
  8. Feverish Stock Price Reactions to COVID-19 By Stefano Ramelli; Alexander F. Wagner
  9. Gender Bias and Intergenerational Educational Mobility: Theory and Evidence from China and India By Emran, M. Shahe; Jiang, Hanchen; Shilpi, Forhad
  10. Reforming Inefficient Energy Pricing: Evidence from China By Koichiro Ito; Shuang Zhang
  11. Financial literacy and self-control in FinTech: Evidence from a field experiment on online consumer borrowing By Bu, Di; Hanspal, Tobin; Liao, Yin; Liu, Yong
  12. A Poisson autoregressive model to understand COVID-19 contagion dynamics By Arianna Agosto; Paolo Giudici
  13. The Second Worldwide Wave of Interest in Coronavirus since the COVID-19 Outbreaks in South Korea, Italy and Iran: A Google Trends Study By Artur Strzelecki
  14. The Covid-19/SARS CoV-2 pandemic outbreak and the risk of institutional failures By Marcello Basili; Antonio Nicita

  1. By: , Stone Center (The Graduate Center/CUNY); Yang, Li; Novokmet, Filip; Milanovic, Branko
    Abstract: Economic and social transformation of China during the past 40 years is without precedent in human history. While the economic transformation was extensively studied, social transformation was not. In this paper, we use for the first time harmonized household surveys covering the period 1988-2013 to study the changes in the characteristics the richest 5 percent of China’s urban population. We find that the elite changed from being composed of high government officials, clerical staff, and workers in 1988 to professionals and small and large business owners in 2013. The educational level of the elite increased substantially. Membership in CCP has a positive (albeit small) effect on one’s income but is particularly valuable to large business owners. (Stone Center on Socio-Economic Inequality Working Paper)
    Date: 2020–03–09
  2. By: Yongheng Deng (NUS - National University of Singapore); Eric Girardin (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Roselyne Joyeux (Macquarie University)
    Abstract: In a similar way to the stock market, the housing market in China has often been portrayed as highly speculative, giving rise to "bubble" concerns. Over the last decade, residential prices increased every year on average by double digits in Beijing or Shanghai. However many observers and researchers argue that fundamentals of the housing sector, both sector-specific and macroeconomic, may have been the driving force behind housing price volatility. While existing empirical work exclusively relies on the government housing prices which may suffer from the well-documented downward bias, this paper uses original high frequency unit price as well as transaction series for the residential resale housing markets of Beijing and Shanghai between January 2005 and December 2010 to test alternative hypotheses about housing prices volatility.
    Date: 2018–04
  3. By: Mathilde Maurel (CNRS - Centre d'Economie de la Sorbonne - Université Paris 1 panthéon-Sorbonne;; Thomas Pernet (Centre d'Economie de la Sorbonne;
    Abstract: This paper analyses the efficiency of a set of environmental measures introduced by the 11th FYP (Five Years Plan) in China 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 coinced 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
    JEL: Q53 Q56 P2 R11
    Date: 2020–02
  4. By: Kwon, Ohyun (Drexel University); Fleisher, Belton M. (Ohio State University); McGuire, William H. (University of Washington Tacoma); Zhao, Min Qiang (Xiamen University)
    Abstract: We study the implications of financial-market imperfections on labor and capital misallocation in China. Financial friction stems from private sectors' credit constraints that limit the efficient use of capital relative to state firms. Our model can jointly explain labor flows out of and capital flows into the Chinese provinces with high capital market distortion. To formally test this hypothesis, we propose a measure of regional financial friction based on our model. We show that the underlying financial friction can be inferred by differences-in-differences in the market shares of private and state sectors and their marginal rental rates of capital. Our regression results show that our measure of financial friction has robust explanatory power regarding interprovincial capital and labor flows. Our structural analysis shows that improving financial friction in China can lead to 3.9% welfare gain in China.
    Keywords: financial friction, regional capital flows, Chinese economy
    JEL: R12 H3 E5 O5 F4
    Date: 2020–03
  5. By: Mustafa Caglayan (Heriot-Watt University); Oleksandr Talavera (University of Birmingham); Lin Xiong (Robert Gordon University)
    Abstract: Using a unique small business loan application dataset from a peer-to-peer (P2P) digital loan platform in China, we show that lenders do not discriminate against female business owners. However, female entrepreneurs are more likely to be discouraged from applying for funds after a failed attempt compared to their male counterparts. We also find that borrower discouragement is prominent among those from less developed regions or those who need finance for working capital. Although, digitization of financial markets has made external funding more accessible to small business owners, provision of better information on application process would help those who may be discouraged from posting a new funding application.
    Keywords: Peer-to-peer (P2P) lending; Small business owners, Gender discrimination, Discouraged borrowers, Repeat rejections, Fintech, Digitization, China
    JEL: G14 G32 M10
    Date: 2020–03
  6. By: Fleisher, Belton M. (Ohio State University); McGuire, William H. (University of Washington Tacoma); Wang, Xiaojun (University of Hawaii at Manoa); Zhao, Min Qiang (Xiamen University)
    Abstract: We investigate the effect of rising labor costs on induced technological change in China's secondary industry. While previous studies have focused primarily on induced technology change in agriculture and in energy production/environmental protection, there has been little evidence relating to China's adjustments as rising labor costs affect its global competitiveness in the manufacturing sector. Building on insights developed in a rich literature, we propose a model linking changes in labor productivity to changes in labor costs, and the availability of physical capital. Importantly, we derive testable hypotheses to distinguish induced innovation from standard substitution of capital for labor under fixed technology. These hypotheses are tested using both firm- and provincial-level data. Our empirical results support the hypothesis that rising wages have induced labor-saving innovation in China, at least in the decade of the 1990s, but less so or not at all after the middle of the next decade.
    Keywords: induced innovation, labor productivity growth, China
    JEL: O30 D22 D24 D33
    Date: 2020–03
  7. By: Li, Zhao
    Abstract: This paper studies how economic institutions affect private firm sectors capital accumulation through finance sector and operation objectives of different ownership firms in socialist market economy with Chinese characteristics, which extended the neo-classical economic growth method. Based on above framework, this paper finds that economic institutions were the main factors affecting the efficiency of capital allocation between private sector and stated-owned sector. Compared with stated-owned sector, economic institutions lead private sector to a decrease in loans and government subsidies through finance sector, and an increase in its production costs. Our evidence suggests that private firms take efforts to improve economic institutions as a substitute for political capital.
    Keywords: Economic institutions, ownership discrimination, Capital allocation, Economic growth
    JEL: P3
    Date: 2019–11–09
  8. By: Stefano Ramelli (University of Zurich - Department of Banking and Finance); Alexander F. Wagner (University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute)
    Abstract: This paper studies how markets adjust to the sudden emergence of previously neglected risks. It does so by analyzing the stock price effects of the 2019 novel Coronavirus disease (COVID-19) pandemic. The telecom and health care industries did relatively well, while transportation and energy plummeted. Within industries, US firms reliant on Chinese inputs and those with a strong export orientation towards China suffered. Sophisticated investors appear to have started pricing in the effects of the virus already in the first part of January (the "Incubation" phase), that is, before managers or analysts started paying attention; the first earnings conference call that contained a discussion of "Coronavirus" took place on January 22. The "Outbreak" phase followed, during which China-oriented stocks and internationally oriented stocks more generally strongly underperformed. In the last week of February and early March (the "Fever" phase), the aggregate market first fell strongly and then entered a whipsaw pattern. But behind these feverish and seemingly behaviorally-driven price moves, some patterns emerge. In particular, investors became increasingly worried about corporate debt and liquidity, indicating widespread concerns that the health crisis may evolve into a financial crisis.
    Keywords: Behavioral finance, Corporate debt, Coronavirus, COVID-19, Earnings conference calls, Event study, Global Value Chains, Neglected risks, Pandemic, SARS-CoV-2, Supply Chains
    JEL: G01 G02 G14 G15 F15 F23 F36
    Date: 2020–03
  9. By: Emran, M. Shahe; Jiang, Hanchen; Shilpi, Forhad
    Abstract: We incorporate gender bias against girls in the family, the school and the labor market in a model of intergenerational persistence in schooling where parents self-finance children's education because of credit market imperfections. Parents may underestimate a girl's ability, expect lower returns, and assign lower weights to their welfare (``pure son preference''). The model delivers the widely-used linear conditional expectation function (CEF) under constant returns and separability, but generates an irrelevance theorem: parental bias does not affect relative mobility. With diminishing returns and complementarity, the CEF can be concave or convex, and gender bias affects both relative and absolute mobility. We test these predictions in India and China using data not subject to coresidency bias. The evidence rejects the linear CEF, both in rural and urban India, in favor of a concave relation. The girls face lower mobility irrespective of location in India when born to fathers with low schooling, but the gender gap closes when the fathers are college educated. In China, the CEF is convex for sons in urban areas, but linear in all other cases. The convexity for urban sons supports the complementarity hypothesis of Becker et al. (2018), and leads to gender divergence in relative mobility for the children of highly educated fathers. In urban China, and urban and rural India, the mechanisms are underestimation of ability of girls and unfavorable school environment. There is some evidence of pure son preference in rural India. The girls in rural China do not face bias in financial investment by parents, but they still face lower mobility when born to uneducated parents. Gender barriers in rural schools seem to be the primary mechanism, with no convincing evidence of parental bias.
    Keywords: Gender Bias, Intergenerational Mobility, Education, Becker-Tomes Model, Complementarity, Son Preference, India, China, Coresidency Bias
    JEL: I25 J62 O1
    Date: 2020–03–15
  10. By: Koichiro Ito; Shuang Zhang
    Abstract: Inefficient energy pricing hinders economic development in many countries. We examine long-run effects of a recent heating reform in China that replaced a commonly-used fixed-payment system with individually-metered pricing. Using staggered policy rollouts and administrative data on household-level daily heating consumption, we find that the reform induced long-run reductions in heating usage and generated substantial welfare gains. Consumers gradually learned how to conserve heating effectively, making short-run evaluations underestimate the policy impacts. Our results suggest that energy price reform is an effective way to improve allocative efficiency and air quality in developing countries, where unmetered-inefficient pricing is still ubiquitous.
    JEL: L38 L51 L97 O1 O38 O44 Q4 Q41 Q5 Q53 Q56
    Date: 2020–03
  11. By: Bu, Di; Hanspal, Tobin; Liao, Yin; Liu, Yong
    Abstract: We report the results of a longitudinal intervention with students across five universities in China designed to reduce online consumer debt. Our research design allocates individuals to either a financial literacy treatment, a self-control training program, or a zero-touch control group. Financial education interventions improve test scores on general financial literacy but only marginally affect future online borrowing. Our self-control treatment features detailed tracking of spending and borrowing activity with a third-party app and introspection about individuals' consumption with a counselor. These sessions reduce future online borrowing, delinquency charges, and borrowing for entertainment reasons - and are driven by the male subjects in the sample. Our results suggest that self-regulation can affect financial behavior in e-commerce platforms.
    Keywords: Financial literacy,online borrowing,Consumer credit,Self-control,FinTech,China
    JEL: D14 D18 G23 G21
    Date: 2020
  12. By: Arianna Agosto (Università di Pavia); Paolo Giudici (Università di Pavia)
    Abstract: We present a statistical model which can be employed to understand the contagion dynamics of the COVID-19. The model is a Poisson autoregression, and can reveal whether contagion has a trend, and where is each country on that trend. Model results are presented from the observed series of China, Iran, Italy and South Korea.
    Date: 2020–03
  13. By: Artur Strzelecki
    Abstract: The recent emergence of a new coronavirus, COVID-19, has gained extensive coverage in public media and global news. As of 24 March 2020, the virus has caused viral pneumonia in tens of thousands of people in Wuhan, China, and thousands of cases in 184 other countries and territories. This study explores the potential use of Google Trends (GT) to monitor worldwide interest in this COVID-19 epidemic. GT was chosen as a source of reverse engineering data, given the interest in the topic. Current data on COVID-19 is retrieved from (GT) using one main search topic: Coronavirus. Geographical settings for GT are worldwide, China, South Korea, Italy and Iran. The reported period is 15 January 2020 to 24 March 2020. The results show that the highest worldwide peak in the first wave of demand for information was on 31 January 2020. After the first peak, the number of new cases reported daily rose for 6 days. A second wave started on 21 February 2020 after the outbreaks were reported in Italy, with the highest peak on 16 March 2020. The second wave is six times as big as the first wave. The number of new cases reported daily is rising day by day. This short communication gives a brief introduction to how the demand for information on coronavirus epidemic is reported through GT.
    Date: 2020–03
  14. By: Marcello Basili; Antonio Nicita
    Abstract: The new coronavirus CoVid-19 (SARS Cov-2) pandemic outbreak all around theWorld puts in evidence how institutional failures may end up in a catastrophic event. The precautionary principle (PP) has been proposed as the proper guide for the decision-making criteria to be adopted in the face of the new catastrophic risks that have arisen in the decades of this century. Unfortunately the political institutions at the national and supranational level, such as the European Union Commission, seem having neglected it opening the scenario of a lethal global pandemic that could cause millions of deaths, principally elderlies with chronic diseases, based on early evidence in China and Italy. According to scientists and health authorities human beings are facing the high probable nightmare of a very aggressive and mortal pandemy, worst than the Spanish flu (1918-1919) the most famous reconbined avian flu killed millions, without targeted therapeutics for treatment and vaccines.
    JEL: D81
    Date: 2020–03

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