nep-cna New Economics Papers
on China
Issue of 2022‒09‒05
seven papers chosen by
Zheng Fang
Ohio State University

  1. Group-Specific Redistribution, Inequality, and Subjective Well-Being in China By Peihua Deng; Ronnie Schöb
  2. Experience of the COVID-19 pandemic in Wuhan leads to a lasting increase in social distancing By Darija Barak; Edoardo Gallo; Ke Rong; Ke Tang; Wei Du
  3. China's Skill-Biased Imports By Li, Hongbin; Li, Lei; Ma, Hong
  4. Tertiarization Like China By Xilu Chen; Guangyu Pei; Zheng Michael Song; Fabrizio Zilibotti
  5. Revitalising the Silk Road: Evidence from Railway Infrastructure Investments in Northwest China By Yu, Lamont Bo; Tran, Trang My; Lee, Wang-Sheng
  6. Export-Led Takeoff in a Schumpeterian Economy By Chu, Angus C.; Peretto, Pietro; Xu, Rongxin
  7. China’s global value chain linkage and logistics performances in emerging ASEAN economies By Taguchi, Hiroyuki; Zhao, Jun

  1. By: Peihua Deng; Ronnie Schöb
    Abstract: Using survey data from the China Family Panel Studies (CFPS) from 2010 to 2018, this paper analyzes the relationship between income inequality, group-specific income redistribution, and subjective well-being among China’s urban, rural, and migrant populations. Using narrowly defined reference groups, our findings suggest that within-group inequality does not significantly impact Chinese people. By contrast, a larger income gap between urban and rural residents is positively correlated with the rural residents’ subjective well-being, which we interpret as a tunnel effect, i.e. a positive signal concerning their own future income. Compared to migrants, however, our results hint at a negative status effect for the rural residents. More importantly, the group-specific redistribution inherent in the Hukou system that widens the income gap between urban and rural residents makes rural residents worse off. The existing Hukou system thus fails to lend support to the ‘harmonious society’ development strategy of the Chinese government.
    Keywords: income inequality, income redistribution, subjective well-being
    JEL: D31 D63 I31
    Date: 2022
  2. By: Darija Barak; Edoardo Gallo; Ke Rong; Ke Tang; Wei Du
    Abstract: On 11th Jan 2020, the first COVID-19 related death was confirmed in Wuhan, Hubei. The Chinese government responded to the outbreak with a lockdown that impacted most residents of Hubei province and lasted for almost three months. At the time, the lockdown was the strictest both within China and worldwide. Using an interactive web-based experiment conducted half a year after the lockdown with participants from 11 Chinese provinces, we investigate the behavioral effects of this `shock' event experienced by the population of Hubei. We find that both one's place of residence and the strictness of lockdown measures in their province are robust predictors of individual social distancing behavior. Further, we observe that informational messages are effective at increasing compliance with social distancing throughout China, whereas fines for noncompliance work better within Hubei province relative to the rest of the country. We also report that residents of Hubei increase their propensity to social distance when exposed to social environments characterized by the presence of a superspreader, while the effect is not present outside of the province. Our results appear to be specific to the context of COVID-19, and are not explained by general differences in risk attitudes and social preferences.
    Date: 2022–08
  3. By: Li, Hongbin (Stanford University); Li, Lei (University of Mannheim); Ma, Hong (Tsinghua University)
    Abstract: China has witnessed rapid increases in the skill premium over the last few decades. In this paper, we study the short-run effect of capital goods imports on skill premium in China. The surge in capital goods imports, which embody advanced technology, can explain the rising demand for skills in China. We exploit regional variations in capital goods import exposure stemming from initial differences in import structure and instrument for the capital goods import growth using exchange rate movements. A city at the 75th percentile of the distribution of capital goods imports growth has a higher skill premium by 5 percentage points (0.38 standard deviation) over the one at the 25th percentile. To explore the underlying mechanism, we provide firm-level evidence and show that imported capital goods are skill-complementary.
    Keywords: imported capital goods, skill-biased technological change, skill premium
    JEL: F16 J20 J31 O33
    Date: 2022–07
  4. By: Xilu Chen; Guangyu Pei; Zheng Michael Song; Fabrizio Zilibotti
    Abstract: We document a process of rapid tertiarization of the Chinese economy since 2005. The employment and value-added shares of the service sector have increased significantly. Moreover, total factor productivity growth has increased faster in the service sector than in the manufacturing sector. Measures of dynamism at the firm level confirm the growing importance of tertiarization. The boom is not limited to services that are used as inputs to industrial production. Consumer services have also grown significantly in terms of both value-added share and productivity. The results are robust to different growth accounting methodologies, including the recent method proposed by Fan, Peters, and Zilibotti (2022) that gets around potentially problematic official price indexes.
    JEL: O11 O14 O47 O53
    Date: 2022–07
  5. By: Yu, Lamont Bo (University of Macau); Tran, Trang My (Monash University); Lee, Wang-Sheng (Monash University)
    Abstract: China’s Belt and Road Initiative was introduced in 2013 to revitalise the Silk Road and promote economic development and integration. This paper investigates the economic effects of the opening of the only high-speed rail (HSR) line in northwest China which connects China’s northwestern provinces along this Silk Road land route. We use a recently developed machine-learning extended nightlight data series from 2000 to 2019 and employ the ridge augmented synthetic control method (Ben-Michael et al., 2021) to assess the effects of the HSR line connection on economic activity along this Silk Road land route. We further propose an algorithm that helps automate the donor pool selection process while ensuring optimal pre-treatment fitness. Our results show that there are winners and losers from the opening of the Lanzhou–Urumqi HSR line. While there is some indication of the role that HSR can help play in making progress towards breaking through the Hu Huanyong Line, a geographical demarcation in China that is of vast economic significance, not all counties benefited from the opening of the HSR line.
    Keywords: high-speed railway, augmented synthetic control, Hu Huanyong Line
    JEL: O22 R11 R58
    Date: 2022–07
  6. By: Chu, Angus C.; Peretto, Pietro; Xu, Rongxin
    Abstract: This study develops an open-economy Schumpeterian growth model with endogenous takeoff to explore the effects of exports on the transition of an economy from stagnation to innovation-driven growth. We find that a higher export demand raises the level of employment, which causes a larger market size and an earlier takeoff along with a higher transitional growth rate of domestic output per capita but has no effect on long-run economic growth. These theoretical results are consistent with empirical evidence that we document using cross-country panel data in which the positive effect of exports on economic growth becomes smaller, as countries become more developed, and eventually disappears. We also calibrate the model to data in China and find that its export share increasing from 4.6% in 1978 to 36% in 2006 causes a rapid growth acceleration, but the fall in exports after 2007 causes a growth deceleration that continues until recent times.
    Keywords: international trade; innovation; endogenous takeoff
    JEL: F43 O3 O4
    Date: 2022–07
  7. By: Taguchi, Hiroyuki; Zhao, Jun
    Abstract: This paper aims to evaluate the extent of China’s forward linkage of global value chains (GVCs) with emerging market economies of the Association of Southeast Asian Nations (ASEAN) compared to those with the US and Japan, and also to examine the nexus of China’s forward GVC linkage with logistics performances in emerging ASEAN economies as China’s trade partners. This study uses the UNCTAD-Eora Database and applies a structural gravity trade model for the empirical analysis. The statistical observations identified the major position of China’s GVC, which has transformed from a backward linkage to a forward linkage since the mid-2000s. The empirical estimation verified there is less linkage in China’s forward GVC with emerging ASEAN economies than with the US and Japan, and demonstrated that the lack of logistics performances in emerging ASEAN economies has been a significant factor in explaining the less linkage in China’s forward GVC with them.
    Keywords: Global Value Chains; Forward Linkage; Logistics Performances; China; Emerging ASEAN Economies
    JEL: F12 F14 O53
    Date: 2022–07

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