nep-cna New Economics Papers
on China
Issue of 2020‒05‒25
six papers chosen by
Zheng Fang
Ohio State University

  1. Did COVID-19 Improve Air Quality Near Hubei? By Douglas Almond; Xinming Du; Shuang Zhang
  2. Mercury-related health benefits from retrofitting coal-fired power plants in China By Jiashuo Li; Sili Zhou; Wendong Wei; Jianchuan Qi; Yumeng Li; Bin Chen; Ning Zhang; Dabo Guan; Haoqi Qian; Xiaohui Wu; Jiawen Miao; Long Chen; Sai Liang; Kuishuang Feng
  3. Trade Induced Technological Change: Did Chinese Competition Really Increase European Innovation? By Douglas L. Campbell; Karsten Mau
  4. The Effect of the U.S.-China Trade War on U.S. Investment By Mary Amiti; Sang Hoon Kong; David Weinstein
  5. Tournament incentives, age diversity and firm performance By Oleksandr Talavera; Shuxing Yin; Mao Zhang
  6. A Spatial Analysis of Inward FDI and Rural-Urban Wage Inequality: Evidence from China By Hao Wang; Jan Fidrmuc; Qi Luo

  1. By: Douglas Almond; Xinming Du; Shuang Zhang
    Abstract: Ambient pollution is a byproduct of economic activity. It has been widely reported that COVID-19 and associated lockdowns have generated large improvements in air quality worldwide, including to China's notoriously-poor air quality. We analyze China's official pollution monitor data and account for the large, recurrent improvement in air quality following Lunar New Year (LNY), which essentially coincided with lockdowns in 2020. With the important exception of NO2, China's air quality improvements in 2020 are smaller than we should expect near the pandemic's epicenter: Hubei province. Compared with LNY improvements experienced in 2018 and 2019 in Hubei, we see smaller improvements in SO2 while ozone concentrations increased in both relative and absolute terms (roughly doubling). Similar patterns are found for the six provinces neighboring Hubei. We conclude that whether COVID-19 actually decreased pollution in China depends on the pollutant and reference period considered.
    JEL: I1 Q53 Q56 Z18
    Date: 2020–05
  2. By: Jiashuo Li; Sili Zhou; Wendong Wei; Jianchuan Qi; Yumeng Li; Bin Chen; Ning Zhang; Dabo Guan; Haoqi Qian; Xiaohui Wu; Jiawen Miao; Long Chen; Sai Liang; Kuishuang Feng
    Abstract: China has implemented retrofitting measures in coal-fired power plants (CFPPs) to reduce air pollution through small unit shutdown (SUS), the installation of air pollution control devices (APCDs) and power generation efficiency (PGE) improvement. The reductions in highly toxic Hg emissions and their related health impacts by these measures have not been well studied. To refine mitigation options, we evaluated the health benefits of reduced Hg emissions via retrofitting measures during China's 12th Five-Year Plan by combining plant-level Hg emission inventories with the China Hg Risk Source-Tracking Model. We found that the measures reduced Hg emissions by 23.5 tons (approximately 1/5 of that from CFPPs in 2010), preventing 0.0021 points of per-foetus intelligence quotient (IQ) decrements and 114 deaths from fatal heart attacks. These benefits were dominated by CFPP shutdowns and APCD installations. Provincial health benefits were largely attributable to Hg reductions in other regions. We also demonstrated the necessity of considering human health impacts, rather than just Hg emission reductions, in selecting Hg control devices. This study also suggests that Hg control strategies should consider various factors, such as CFPP locations, population densities and trade-offs between reductions of total Hg (THg) and Hg2+.
    Date: 2020–05
  3. By: Douglas L. Campbell (New Economic School); Karsten Mau (School of Business and Economics, Maastricht University)
    Abstract: Bloom, Draca, and Van Reenen (2016) find that Chinese competition induced a rise in patenting, IT adoption, and TFP by up to 30% of the total increase in Europe in the early 2000s. Yet average patents per firm fell by 94% for the most China-competing firms in their sample, but also by 94% for non-competing firms. Their findings for patents appear to be driven by the decision to normalize patents by adding one (i.e., patents+1). Since China-competing firms had fewer patents to begin with, adding one induces bias, making it appear as though patents declined by a smaller percentage in the China-competing sectors. When we estimate a negative binomial regression using patents as the dependent variable, correcting several coding errors, we find no (or even negative) correlation between Chinese competition and patent growth.
    Keywords: Patents, China, Europe, Textiles, Trade Shocks, Manufacturing
    JEL: F14 F13 L25 L60
  4. By: Mary Amiti; Sang Hoon Kong; David Weinstein
    Abstract: We develop a new method of quantifying the impact of policy announcements on investment rates that makes use of stock market data. By estimating the effect of U.S.-China tariff announcements on aggregate returns and the differential returns of firms exposed to China, we identify their effect on treated and untreated firms. We show theoretically and empirically that estimates of policy-induced stock-market declines imply lower returns to capital, which lowers investment rates. We estimate that the tariff actions through 2018 and 2019 will lower the investment growth rate of listed U.S. companies by 1.9 percentage points by the end of 2020.
    JEL: E22 F13 F14
    Date: 2020–05
  5. By: Oleksandr Talavera (University of Birmingham); Shuxing Yin (University of Sheffield); Mao Zhang (University of St Andrews)
    Abstract: This study introduces a new dimension, age diversity of non-CEO executives, which moderates the relationship between promotion-based tournament incentives, measured as the pay gap between the CEO and non-CEO executives, and firm performance. For a sample of Chinese listed firms from 2005 to 2015, we find that the tournament incentives for non-CEO executives relate positively to firm performance. This relationship is weaker when non-CEO executives are from different age cohorts, whereas the tournament effect is enhanced when non-CEO executives are from the same age cohort. The negative moderation effect of age diversity is more pronounced in state firms and in the Northern China Plain cultural region. The negative moderation effect disappears in firms with CEOs who have overseas experience. We reason that the peer pressure among the similar-aged non-CEO executives enhances the tournament competition and that age hierarchy reduces incentives for younger executives to compete. Our findings have important implications for firms not only in China, but also in countries and regions where seniority is highly valued when setting executive compensation and optimizing organizational structure.
    Keywords: Executive compensation; Tournament effect; Non-CEO executives; Age diversity; Seniority
    JEL: G30 J10 J33
    Date: 2020–05
  6. By: Hao Wang; Jan Fidrmuc; Qi Luo
    Abstract: When investigating the relationship between inward FDI and rural-urban inequality, previous studies overlook the inter-regional interactions. Building on the literature that highlights the significant role of rural-urban migration in inequality, this article investigates spatial spillover effect of inward FDI on the rural-urban wage inequality by utilizing the Spatial Durbin Model (SDM) both in the short run and long run. In particular, we carefully consider the heterogeneity of inward FDI and categorize it with respect to entry modes and sectoral distribution. On the basis of a panel dataset covering 30 provinces in China from 2000 to 2016, our results show that overall the inward FDI should not be blamed for the exacerbation of rural-urban wage inequality. We do not find significant relationship between inward FDI in secondary and tertiary sector while the FDI in primary sector has a slight negative effect. When we separate the FDI according to entry modes, we find that WFE is shown to have a negative effect on the rural-urban wage inequality and this effect is more pronounced in the long run when we conduct a period average estimation. This change also similarly applies to the equity joint ventures.
    Keywords: spatial spillovers, foreign direct investment, rural-urban wage inequality, SDM
    JEL: C21 F21 O19
    Date: 2020

This nep-cna issue is ©2020 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.