nep-cna New Economics Papers
on China
Issue of 2020‒10‒12
twelve papers chosen by
Zheng Fang
Ohio State University

  1. Intergenerational Transmission of Educational Attainment in China By Jiaxin Fan; Bei Li; Ishita Chatterjee
  2. Regional resilience in China: The response of the provinces to the growth slowdown By Anping Chen; Nicolaas Groenewold
  3. China’s mobility barriers and employment allocations By Ngai, L Rachel; Pissarides, Christopher A; Wang, Jin
  4. The Relationship between Product Complexity and Exchange Rate Elasticities: Evidence from the People's Republic of China's Manufacturing Industries By Willem THORBECKE; CHEN Chen; Nimesh SALIKE
  5. Do Capabilities Reside in Firms or in Regions? Analysis of Related Diversification in Chinese Knowledge Production By Yiou Zhang; David L. Rigby;
  6. Heterogeneous effects of Internet use and adoption of sustainable production practices on rural incomes: Evidence from China By Ma, Wanglin
  7. Act Early to Prevent Infections and Save Lives: Causal Impact of Diagnostic Efficiency on the COVID-19 Pandemic By Chen, Simiao; Jin, Zhangfeng; Bloom, David E.
  8. Covid-19 shocking global value chains By Eppinger, Peter S.; Felbermayr, Gabriel; Krebs, Oliver; Kukharskyy, Bohdan
  9. Competitive effects of IPOs: evidence from Chinese listing suspensions By Frank Packer; Mark M Spiegel
  10. A Bit of Salt a Trace of Life - Gender Norms and The Impact of a Salt Iodization Program on Human Capital Formation of School Aged Children By Zichen Deng; Maarten Lindeboom
  11. Fintech and big tech credit: a new database By Giulio Cornelli; Jon Frost; Leonardo Gambacorta; Raghavendra Rau; Robert Wardrop; Tania Ziegler
  12. The Impact of Taxes and Transfers on Income Inequality, Poverty, and the Urban-Rural and Regional Income Gaps in China By Nora Lustig; Yang Wang

  1. By: Jiaxin Fan (Economics Discipline, Business School, University of Western Australia); Bei Li (Economics Discipline, Business School, University of Western Australia); Ishita Chatterjee (Economics Discipline, Business School, University of Western Australia)
    Abstract: This paper aims to examine the intergenerational effect of parental education on children’s educational attainments in China and further explores the patterns of intergenerational education transmission across different dimensions using the 2013 Chinese Health and Retirement Longitudinal Study. We find that, as expected, parental education is positively correlated with the educational attainment of the subsequent generation; however, rural parents generally have greater marginal associations with children’s education as compared to their urban counterparts. Further, though daughter’s educational attainment is more sensitive to their mother’s rather than father’s education, the intergenerational transmission coefficient is higher between child’s schooling and father’s schooling, compared to corresponding mothers. This same pattern emerged for both urban and rural population. Moreover, a closer comparison between sons and daughters also reveal a noticeable gender discrepancy, as girls in general are more sensitive and elastic to family resources. In order to determine the causal impact of parental education, we next use an instrumental variable approach. The Cultural Revolution that occurred between 1966 and 1976 was a large-scale political upheaval that significantly disrupted education for a generation of youth. The school disruption that happened during the Cultural Revolution can thus be treated as an exogenous variation uncorrelated to parental abilities. The restricted sample contains children whose parents either were direct victims of the Cultural Revolution in terms of education disruption or had no direct educational impact yet experienced this political episode. In general, we observe a positively significant educational relationship across all parent-child pairs. Particularly, parents who encountered the Cultural Revolution had adversely impacted the educational attainments of their offspring. Although after controlling for an augmented set of explanatory variables, the significance of parental education effect diminished when estimated with the instrumental variable approach. This potentially implies parental transmission of education is predominantly due to heterogeneity in other alternative environmental factors and little causal educational interpretation can be generated from the yielded results.
    Keywords: Cultural Revolution; intergenerational education transmission; school disruption
    JEL: I25 J13 O12
    Date: 2020
  2. By: Anping Chen (School of Economics, Jinan University); Nicolaas Groenewold (Economics Discipline, Business School, University of Western Australia)
    Abstract: Since 2007 China’s real GDP growth rate has slowed from a level of over 10% per annum to below 7%. Given China’s regional diversity, an important aspect of the slowdown is the possible spatial variation in its experience. This is the issue we consider in this paper and we analyse this question in the context of the regional economic resilience framework. We proceed in two stages. In the first we analyse a measure of provincial slowdown (a sensitivity index) and of the variability of the slowdown based just on growth rates and examine the correlation of these measure with a number of commonly-used provincial characteristics. In the second stage we decompose regional growth rates into national and province-specific components using a VAR model and argue that since resilience concerns the response of provinces to a national shock, it is properly analysed using just the national component of the growth rate rather than the growth rate as such. We therefore analyse a sensitivity index and a variability index based just on the national component of growth and find that this extension is important both for ranking provinces according to resilience and for correlations of resilience with determinants capturing provincial characteristics. Generally we find that provinces close to the coast with new- rather than old-industry structures are less resilient and tended to suffered greater variability in growth during the slowdown.
    Keywords: China, growth, provincial growth, provincial response, regional resilience
    JEL: E37 O47 O53 R12 R15
    Date: 2020
  3. By: Ngai, L Rachel; Pissarides, Christopher A; Wang, Jin
    Abstract: China’s hukou system imposes two main barriers to population movements. Agricultural workers get land to cultivate but are unable to trade it in a frictionless market. Social transfers (education, health, etc.) are conditional on holding a local hukou. We show that the land policy leads to over-employment in agriculture and it is the more important barrier to industrialization. Effective land tenure guarantees and a competitive rental market would correct this inefficiency. The local restrictions on social transfers also act as disincentives to migration with bigger impact on urban migrations than to job moves to rural enterprises.
    Keywords: Chinese immigration; Chinese land policy; imperfect rental market; mobility barriers; hukou registration; social transfers
    JEL: J61 O18 R23
    Date: 2019–10–01
  4. By: Willem THORBECKE; CHEN Chen; Nimesh SALIKE
    Abstract: More complex products are less substitutable in international trade and may therefore have lower price elasticities. We investigate this issue using 960 types of Chinese manufactured exports to 190 partner countries disaggregated at the Harmonized System 4-digit level. We measure complexity using Hausmann and Hidalgo's (2009) product complexity index. We find that price elasticities are lower for more complex goods. These results imply that the People's Republic of China can reduce its exporters' exposure to tariffs, trade wars, and exchange rate volatility by upgrading its export basket.
    Date: 2020–09
  5. By: Yiou Zhang; David L. Rigby;
    Abstract: Do capabilities reside in firms, in regions, or in both? Most models of related diversification, building on the early work of Hidalgo et al. (2007), examine how the structure of economic activity within a region conditions the trajectory of diversification. Inter-regional flows are sometimes added to these models. The logic here is that capabilities are largely built-up within regions and sometimes shared between them. We challenge that logic, exploring whether capabilities are more likely to be built within the firm and to flow across spatial boundaries than they are to be built within the region flowing across firm boundaries. Analysis focuses on Chinese patent data spanning 286 cities over the period 1991 to 2015. We develop standard models of related diversification before examining how the branches of multi-locational firms diversify their knowledge portfolios. Evidence shows that the knowledge structure of firms is more important than the knowledge structure of regions in shaping branch diversification. We show that the influence of the firm and the region on diversification vary significantly between headquarters (HQ) branches and non-HQ branches of firms, and between the non-HQ branches of firms that are located in core and peripheral cities of China.
    Keywords: Related diversification; Patents; Capabilities; China
    Date: 2020–09
  6. By: Ma, Wanglin
    Abstract: Relatively little is known about the association between Internet use and agricultural innovation adoption. To fill this void, this study examines the impact of Internet use on the adoption of sustainable agricultural practices (SAPs) and their heterogeneous effects on farm income and household income. Unlike previous studies that analyse the dichotomous decision of agricultural innovation adoption, this study captures the number of SAPs adopted. We apply both endogenous-treatment Poisson regression model and unconditional quantile regression model to analyse unique farm-level data collected from China. The empirical results show that Internet use exerts a positive and statistically significant impact on the number of SAPs adopted, and the joint effects of Internet use and SAP adoption on farm income and household income are heterogeneous. In particular, we show that households with lower farm income tend to benefit more from SAP adoption, while those with higher household income appear to benefit more from Internet use.
    Keywords: Research and Development/Tech Change/Emerging Technologies
    Date: 2020–09–16
  7. By: Chen, Simiao (Harvard School of Public Health); Jin, Zhangfeng (affiliation not available); Bloom, David E. (Harvard University)
    Abstract: This paper examines the impact of diagnostic efficiency on the COVID-19 pandemic. Using an exogenous policy on diagnostic confirmation, we show that a one- day decrease in the time taken to confirm the first case in a city publicly led to 9.4% and 12.7% reductions in COVID-19 prevalence and mortality over the subsequent six months, respectively. The impact is larger for cities that are farther from the COVID-19 epicenter, are exposed to less migration, and have more responsive public health systems. Social distancing and a less burdened health system are likely the underlying mechanisms, while the latter also explains the more profound impact on reducing deaths than reducing infections.
    Keywords: diagnostic efficiency, information disclosure, social distancing, COVID-19, China, instrumental variable
    JEL: D83 H75 I12 I18 J61
    Date: 2020–09
  8. By: Eppinger, Peter S.; Felbermayr, Gabriel; Krebs, Oliver; Kukharskyy, Bohdan
    Abstract: In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmittingthe shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects aremagnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
    Keywords: Covid-19,quantitative trade model,input-output linkages,global value chains,supply chain contagion,shock transmission
    JEL: F11 F12 F14 F17 F62
    Date: 2020
  9. By: Frank Packer; Mark M Spiegel
    Abstract: Theory suggests that initial public offerings (IPOs) can adversely impact listed firms, both directly by increasing intra-industry competition, and indirectly by completing related asset market spaces. However, the endogeneity of individual IPO activity hinders testing these channels. This paper examines listing suspensions in China in a panel specification that accounts for macroeconomic and financial conditions, isolating the firm-level IPO impact. We measure the competitive impact of listing suspensions through the value share of postponed firms in the IPO queue in their industry, and asset-space competition by firms’ historical covariance with a synthetic portfolio of listed firms with the IPO queue industry mix at the time of suspension. Our results support the predicted IPO effects through both channels. We also document heterogeneity in IPO effects. Stronger firms–measured through a variety of proxies–benefit less from the suspension news. These results are robust to a battery of sensitivity tests.
    Keywords: initial public offerings, China, competition, asset space
    Date: 2020–09
  10. By: Zichen Deng (Norwegian School of Economics); Maarten Lindeboom (Vrije Universiteit Amsterdam)
    Abstract: This paper examines the effects of a massive salt iodization program on human capital formation of school-aged children in China. Exploiting province and time variation, we find a strong positive impact on cognition for girls and no effects for boys. For non-cognitive skills, we find the opposite. We show in a simple model of parental investment that gender preferences can explain our findings. Analyses exploiting within the province, village-level variation in gender attitudes confirm the importance of parental gender preferences. Consequently, large scale programs can have positive (and possibly) unintended effects on gender equality in societies with son preference.
    Keywords: Iodine, parental investments, gender attitudes, cognitive skills, non-cognitive skills
    JEL: I15 J16 J24 O15
    Date: 2020–09–29
  11. By: Giulio Cornelli; Jon Frost; Leonardo Gambacorta; Raghavendra Rau; Robert Wardrop; Tania Ziegler
    Abstract: Fintech and big tech platforms have expanded their lending around the world. We estimate that the flow of these new forms of credit reached USD 223 billion and USD 572 billion in 2019, respectively. China, the United States and the United Kingdom are the largest markets for fintech credit. Big tech credit is growing fast in China, Japan, Korea, Southeast Asia and some countries in Africa and Latin America. Cross-country panel regressions show that such lending is more developed in countries with higher GDP per capita (at a declining rate), where banking sector mark-ups are higher and where banking regulation is less stringent. Fintech credit is larger where there are fewer bank branches per capita. We also find that fintech and big tech credit are more developed where the ease of doing business is greater, and investor protection disclosure and the efficiency of the judicial system are more advanced, the bank creditto- deposit ratio is lower and where bond and equity markets are more developed. Overall, alternative credit seems to complement other forms of credit, rather than substitute for them.
    Keywords: fintech, big tech, credit, data, technology, digital innovation
    Date: 2020–09
  12. By: Nora Lustig (Tulane Economics); Yang Wang (Nanjing Audit University)
    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

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