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on China |
| By: | Xiaoming Li; Zheng Liu; Yuchao Peng; Zhiwei Xu |
| Abstract: | We present evidence that monetary policy easing reduces bank risk-taking but exacerbates capital misallocation in China after implementing the Basel III capital regulationsin2013. Thenewregulationstightenedbankcapitalrequirementsandintroduced a new risk-weighting approach to calculating the capital adequacy ratio (CAR). To meet tightened capital requirements, a bank can boost its effective CAR by raising capital or by increasing the share of lending to low-risk borrowers. Using confidential loan-level data from a large Chinese commercial bank, merged with firm-level data on a large set of manufacturing firms, we document robust evidence that a monetary policy expansion raises the share of new bank loans to state-owned enterprises (SOEs) after 2013, but not before, because SOE loans receive high credit ratings under government guarantees. Since SOEs are on average less productive than private firms, shifts in bank lending toward SOEs exacerbate capital misallocations, reducing aggregate productivity. We construct a two-sector general equilibrium model with bank portfolio choices and show that, under calibrated parameters, an expansionary monetary policy shock raises the share of bank lending to SOEs, leading to persistent declines in total factor productivity that partially offset the expansionary effects of monetary policy. |
| Keywords: | risk assessment; Monetary policy - China; risk management; china |
| JEL: | E52 G18 G21 O42 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:88498&r=all |
| By: | Wen Yao; Xiaodong Zhu |
| Abstract: | In developed countries, aggregate employment is strongly pro-cyclical and almost as volatile as output. In China, the correlation of aggregate employment and output is close to zero, and the volatility of aggregate employment is very low. We argue that the key to understanding the aggregate employment fluctuations in China is the labour reallocation between the agricultural and non-agricultural sectors, and that income effect plays an important role in determining the labour reallocation dynamics in both the long-run and short-run. |
| Keywords: | Structural Change, Income Effect, Labour Reallocation, Employment Fluctuations, China |
| JEL: | E24 E32 O41 |
| Date: | 2020–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-671&r=all |
| By: | Hui He; Lei Ning; Dongming Zhu |
| Abstract: | We study, both empirically and quantitatively, the role of savings and the labor supply in self-insurance channels over the life cycle when one faces not only idiosyncratic income risks, but also changes in longevity risk and pension benefits. We pick China as a case study since China has undergone a dramatic process of rapid aging and a tremendous reduction in social security benefits for the period 1995-2009. We find that both savings and the labor supply are quantitatively important self-insurance channels in responding to changes in longevity risk and pension benefits, and the responses via adjustment to savings and labor supply have significant macroeconomic implications. Applying the model to China, we find that the pension reform and rapid aging together contribute 55 percent of the increase in the household saving rate from 1995 to 2009, and they jointly capture about 64 percent of the drastic increase in the labor supply for the same period. |
| Keywords: | Pension reforms;Social security;Household survey data;Labor supply;Social welfare programs;Demographic Change,Pension Reform,Saving,Life Cycle,Heterogeneous Agent Model,household save rate,rapid age,pension benefit,save rate |
| Date: | 2019–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/061&r=all |
| By: | Baptiste Souillard |
| Abstract: | This paper examines the effect of import competition on corporate tax avoidance. I exploit the rapid surge of China’s exports as a competition shock and balance sheets and income statements to measure tax avoidance of US-headquartered publicly listed manufacturing firms. The baseline results reveal that a 1 percentage point increase in the penetration ratio of US imports from China entails, on average, a 0.20 percentage point decrease in the effective tax rate. They are supported by a series of sensitivity tests and robust to using the US conferral of the Permanent Normal Trade Relations status on China in late 2000 as a quasi-natural experiment. Furthermore, the results are entirely driven by multinational firms. In response to the China shock, these firms invested in intangible assets, and these intangibles allowed them to shift more profits towards low-tax countries. These findings shed light on the determinants of corporate tax avoidance. More generally, they help understand the decline in the average effective tax rate of US publicly listed firms and the recent backlash against large firms and globalization. |
| Keywords: | Corporate tax avoidance; multinational firms; import competition; intangibles; profit shifting |
| JEL: | F14 F60 H25 H26 L60 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/309985&r=all |
| By: | Fuchs, Andreas; Kaplan, Lennart; Kis-Katos, Krisztina; Schmidt, Sebastian S.; Turbanisch, Felix; Wang, Feicheng |
| Abstract: | The COVID-19 outbreak has cut China's supply of and raised the world's demand for face masks, disinfectants, ventilators, and other critical medical goods. This article studies the economic and political factors that are associated with China's exports of medical equipment during the first two months of the global pandemic. Regression results show that-controlled for demand factors-countries with stronger past economic ties with China import more critical medical goods from China at both the national level and the level of Chinese provinces. Friendly political relations, such as the twinning of provinces, appear to work as a substitute for pre-existing economic ties at the provincial level. These findings imply that, to secure access to medical equipment in crises, countries are well advised to either diversify their sources or to develop closer relations with Beijing and China's provinces. |
| Keywords: | COVID-19,crisis management,medical equipment,face masks,strategic exports,disaster aid |
| JEL: | F14 F59 H12 H77 H84 P33 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:398&r=all |
| By: | M. Shahe Emran (Columbia University); Francisco Ferreira (London School of Economics); Yajing Jiang (Charles River Associates); Yan Sun (World Bank) |
| Abstract: | This paper extends the Becker-Tomes model of intergenerational educational mobility to a rural economy characterized by farm-nonfarm occupational dualism and provides a comparative analysis of rural China and rural India. The model builds a micro-foundation for the widely used linear-in-levels estimating equation. Returns to education for parents and productivity of financial investment in children’s education determine relative mobility, as measured by the slope, while the intercept depends, among other factors, on the degree of persistence in nonfarm occupations. Unlike many existing studies based on coresident samples, our estimates of intergenerational mobility do not suffer from truncation bias. The sons in rural India faced lower educational mobility compared with the sons in rural China in the 1970s to 1990s. To understand the role of genetic inheritance, Altonji et al. (2005) biprobit sensitivity analysis is combined with the evidence on intergenerational correlation in cognitive ability in economics and behavioral genetics literature. The observed persistence can be due solely to genetic correlations in China, but not in India. Father’s nonfarm occupation was complementary to his education in determining a sons’ schooling in India, but separable in China. There is evidence of emerging complementarity for the younger cohorts in rural China. Structural change in favor of the nonfarm sector contributed to educational inequality in rural India. Evidence from supplementary data on economic mechanisms suggests that the model provides plausible explanations for the contrasting roles of occupational dualism in intergenerational educational mobility in rural India and rural China. |
| Keywords: | Educational Mobility, Rural Economy, Occupational Dualism, Farm-Nonfarm, Complementarity, Coresidency Bias, China, India. |
| JEL: | O12 J62 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2020-555&r=all |
| By: | Nora Lustig (Stone Center for Latin American Studies, Department of Economics, Tulane University, Commitment to Equity Institute (CEQ).); Yang Wang (Institute of Economics and Finance, Nanjing Audit University, China) |
| Abstract: | China is characterized by high prefiscal overall, urban-rural and regional inequality. Applying standard fiscal incidence analysis, we estimate the redistributive effect of taxes and social spending on income distribution and poverty. In particular, we estimate the effect of direct and indirect taxes, direct cash transfers, contributory pensions, indirect subsidies, and in-kind transfers (education and health) on overall inequality and poverty, the urban-rural income gap, and income inequality between regions. The results show that the fiscal system is inequality- reducing overall and between regions. However, the urban-rural gap rises and the postfiscal headcount ratio is higher than prefiscal poverty in rural areas. Both are undesirable outcomes given that rural residents are poorer. They are largely explained by the considerably lower contributory pensions received by rural residents. |
| Keywords: | Poverty and Inequality in China, Urban-Rural Gap, Regional Disparity, Taxes, Transfers, Incidence Analysis |
| JEL: | D31 H22 I38 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:tul:ceqwps:93&r=all |
| By: | Ru, Hong; Yang, Endong; Zou, Kunru |
| Abstract: | This paper documents a strong delayed response to COVID-19, which is caused by the SARS-CoV2 virus in countries that did not encounter the SARS disease in 2003. The SARS outbreak was caused by a similar virus, SARS-CoV-1. Individuals in countries that developed SARS infections in 2003 search more intensively for COVID-19-related information on Google during the first outbreak of COVID-19 in Wuhan, China, in late January 2020. Governments in countries that have not experienced SARS respond significantly slower in implementing containment measures to combat COVID-19 than countries that have experienced SARS. Furthermore, the timely responses of individuals and governments are more pronounced in countries that reported deaths caused by SARS, which left deeper imprints. Consequently, COVID-19 case numbers and mortalities have been substantially higher in countries that did not experience SARS deaths. Our findings suggest that the imprint of the early experience of similar viruses is a fundamental mechanism underlying timely responses to COVID-19. |
| JEL: | D83 H12 I10 |
| Date: | 2020–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2020_015&r=all |
| By: | John Knight |
| Abstract: | The paper compares the economic progress of two countries, South Africa and China, in relation to the Lewis model. These economies are chosen because they have interesting similarities and also interesting differences. At the start of economic reform in China and with the advent of democracy in South Africa, both countries had surplus labour: they were at the first, labour-surplus, stage of the Lewis model. It is shown that, since then, South Africa has continued to experience surplus labour: the unemployment rate has risen. By contrast, China’s labour market is shown to have tightened, and there is evidence that China has entered the second, labour-scarce, stage of the Lewis model. The difference lies in their growth rates. There are sections explaining why the South African economy has grown slowly and why the Chinese economy has grown rapidly, in relation to the growth of their labour forces. The Lewis model provides an enlightening framework for explaining how widely the fruits of economic development can be shared. |
| Keywords: | south Africa China economic growth Migration lewis model |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2020-06&r=all |