nep-cna New Economics Papers
on China
Issue of 2023‒02‒06
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Opposing Firm Level Responses to the China Shock: Output Competition versus Input Supply By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc Melitz; Thomas Zuber
  2. Women's Education and Fertility in China By Zhang, Zheyuan; Zhao, Zhong
  3. Child Gender and Subjective Well-being of Older Parents in China By Lei, Lei; Wu, Fengyu; Xia, Yiming
  4. How Does GVCS Participation Influence Manufacturing Productivity? The Case of China By Ping Hua
  5. International Spillover Effects of Air Pollution: Evidence from Mortality and Health Data By Seonmin Will Heo; Koichiro Ito; Rao Kotamarthi
  6. Identifying the depreciation rate of durables from marginal spending responses By Jin Cao; Chao Cui; Valeriya Dinger; Martin B. Holm; Shulong Kang
  7. FDI and sustainable development in the EU-China investment treaty: Neither high nor low, just realistic expectations By Chaisse, Julien
  8. Is Capital Account Convertibility Required for the Renminbi to Acquire Reserve Currency Status? By Barry Eichengreen; Camille Macaire; Arnaud Mehl; Eric Monnet; Alain Naef
  9. The macroeconomic effects of global supply chain disruptions By Finck, David; Tillmann, Peter
  10. Tariff Wars, Unemployment, and Income Distribution By Elias Dinopoulos; Gunnar Heins; Bulent Unel
  11. Reducing Bullying: Evidence from a Parental Involvement Program on Empathy Education By Flavio Cunha; Qinyou Hu; Yiming Xia; Naibao Zhao

  1. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc Melitz; Thomas Zuber
    Abstract: We decompose the “China shock” into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the output shock is detrimental to firms' sales, employment, and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the input supply shock on firms' sales, employment and innovation.
    Keywords: Competition Shock, Patent, Firms, Import
    JEL: F14 O19 O31 O33 O34
    Date: 2022
  2. By: Zhang, Zheyuan (Renmin University of China); Zhao, Zhong (Renmin University of China)
    Abstract: Using data from the China Family Panel Studies, this paper exploits the Compulsory Education Law of China implemented in the 1980s to empirically examine the causal impact of women's education on fertility in rural China by difference-in-differences methods. The results show that an additional year of schooling lowered the number of children a woman would have by approximately 0.09 children, postponed the age of first childbirth by 0.7 years, and reduced the probability of having a second child or more children by 0.18 among those mothers whose first child was a girl. In addition to the income effect, these results are also partly explained by more educated women preferring quality to quantity of children, placing a greater value on leisure and no longer perceiving children as the sole focus in their lives.
    Keywords: women's education, fertility, demographic transition, compulsory education law, quality and quantity of children
    JEL: I25 J11 J13
    Date: 2023–01
  3. By: Lei, Lei; Wu, Fengyu; Xia, Yiming
    Abstract: In many societies, parents prefer sons over daughters, but the well-being effects of child gender, especially in later life, are less studied. Using the latest two waves of the China Health and Retirement Longitudinal Study (CHARLS), this paper evaluates the impacts of having daughters on older parents' subjective well-being (SWB) in China, which has a rapidly aging population and the traditional preference for sons. Studying the cohort of parents whose child gender is as good as random, we find that having more daughters promotes older parents' SWB, especially overall life satisfaction, satisfaction with health, and satisfaction with children. Our results suggest that the increase in SWB is achieved through better health, more financial support from daughters, more spending on leisure and a lower probability of working. The positive SWB effects of daughters are found to be more salient among more vulnerable groups, including those who are older, less educated, and with fewer children.
    Keywords: Subjective Well-being, Child Gender, Older Parents, China, Life Satisfaction, Domain Satisfaction
    JEL: I31 J14 J16
    Date: 2023
  4. By: Ping Hua (ECONOMIX)
    Abstract: The theoretical and empirical studies argue ambiguous effects of GVCs participation of developing countries on productivity. By using panel data of 15 Chinese manufacturing industries over the 2005-2014 period, we find that China's GVCs backward and forward linkages contributed to labor productivity growth of 6.41% and 1.97% per year on average respectively, via drawing out from low value added low labor cost backward linkages sectors, optimizing resource allocation towards more efficiency manufacturing sectors (rarely studied) and developing higher value added forward linkages. The resulting structural transformation along to the rise of labor costs diminished the risk for Chinese manufacturing industry to be trapped in low-profitability low productivity GVCs activities. However, the productivity contribution of moving out from backward linkages 3 times higher than that of forward linkages suggest that the future positive impact of GVCs on productivity may be much more difficult to realize in particular in a less favorable context (trade war between China and USA, reindustrialization of developed countries and trade protection related to Covid-19 etc.) than the studied period.
    Date: 2022–05–30
  5. By: Seonmin Will Heo; Koichiro Ito; Rao Kotamarthi
    Abstract: We study the international spillover effects of air pollution by developing a framework that integrates recent advances in atmospheric science into econometric estimation with microdata on mortality and health. Combining transboundary particle trajectory data with the universe of individual-level mortality and emergency room visit data in South Korea, we find that transboundary air pollution from China significantly increases mortality and morbidity in South Korea. Using these estimates, we show that a recent Chinese environmental policy “war on pollution” generated a substantial international spillover benefit. Finally, we examine China’s strategic pollution reductions and provide their implications for the potential Coasian bargaining.
    JEL: Q53
    Date: 2023–01
  6. By: Jin Cao; Chao Cui; Valeriya Dinger; Martin B. Holm; Shulong Kang
    Abstract: This paper presents a novel method to estimate the depreciation rate of durable goods using a combination of identified marginal and average spending shares. We apply our method to Chinese spending responses to disposable income changes induced by monetary policy in 2008-2009. The marginal spending response is 0.40. Durable goods make up about 45% of this marginal spending response. By combining this marginal spending share on durables with an average spending share of 14%, we estimate the annual depreciation rate of durables in China to be 0.16.
    Keywords: Consumption, Durables, Monetary Policy
    JEL: E21 E52
    Date: 2022–01
  7. By: Chaisse, Julien
    Abstract: The EU-China Comprehensive Agreement on Investment is China's first treaty with a section dedicated to sustainable development and labor regulations. It introduces major innovations such as ensuring corporate due diligence to end forced labor, among others. This significant development aims to promote sustainable economic growth and investment.
    Date: 2022
  8. By: Barry Eichengreen; Camille Macaire; Arnaud Mehl; Eric Monnet; Alain Naef
    Abstract: It is widely assumed that the renminbi (RMB) cannot acquire a meaningful place in central bank reserve portfolios without full liberalization of China’s capital account. We argue that the RMB can in fact develop into a consequential reserve currency in the absence of capital account convertibility. Trade and investment links can drive official use and accumulation despite limited access to Chinese financial markets. But this route to currency internationalization requires policy support. China must allow access to RMB through loans and People’s Bank of China (PBoC) currency swaps. It must ensure convertibility of RMB into US dollars on offshore markets. It must provide these RMB services at a stable and predictable price. Currency internationalization without full capital account liberalization thus requires the RMB to be backed by dollar reserves, which the PBoC consequently will continue to hold and use. Hence we do not foresee RMB internationalization as supplanting dollar dominance.
    Keywords: International Monetary System, Renminbi, International Reserve Currencies
    JEL: F31 F38 E58
    Date: 2022
  9. By: Finck, David; Tillmann, Peter
    Abstract: Highly interconnected global supply chains make countries vulnerable to supply chain disruptions. This paper estimates the macroeconomic effects of global supply chain shocks for the euro area. Our empirical model combines business cycle variables with data from international container trade. Using a novel identification scheme, we augment conventional sign restrictions on the impulse responses by narrative information about three episodes: the Tohoku earthquake in 2011, the Suez Canal obstruction in 2021, and the Shanghai backlog in 2022. We show that a global supply chain shock causes a drop in euro area real economic activity and a strong increase in consumer prices. Over a horizon of one year, the global supply chain shock explains about 30% of inflation dynamics. We also use regional data on supply chain pressure to isolate shocks originating in China. Our results show that supply chain disruptions originating in China are an important driver for unexpected movements in industrial production, while disruptions originating outside China are an especially important driver for the dynamics of consumer prices.
    Keywords: Container Trade, Supply Chain, Inflation, Narrative Identification, Sign Restrictions
    JEL: E32 F14 F62
    Date: 2023
  10. By: Elias Dinopoulos; Gunnar Heins; Bulent Unel
    Abstract: We propose a multi-country model with occupational choice, heterogeneous firms, unemployment, and revenue-generating tariffs to study the aggregate and distributional consequences of tariff wars in a unified framework. Motivated by the 2018 global tariff, we calibrate the model to fit a global economy with four countries, the United States, the European Union, China and the Rest of the World. If governments maximize aggregate welfare, the average optimal tariff and the average Nash-equilibrium tariff are about 16 percent. Multilateral trade negotiations lead to zero cooperative tariffs and free trade. No country can win a trade war. If governments adopt a political-economy perspective and maximize a weighted sum of entrepreneurial and worker interests with weights incorporating factual "autonomous rate" tariffs, then trade talks lead to positive cooperative tariffs in the range of 14 percent for the U.S. to 43 percent for China, and tend to increase unemployment and income inequality.
    Date: 2021–03
  11. By: Flavio Cunha; Qinyou Hu; Yiming Xia; Naibao Zhao
    Abstract: According to UNESCO, one-third of the world’s youths are victims of bullying, which deteriorates academic performance and mental health, and increases suicide ideation and the risk of committing suicide. This paper analyzes a four-month parent-directed intervention designed to foster empathy in middle schoolers in China. Our implementation and evaluation study enrolled 2, 246 seventh and eighth graders and their parents, whom we assigned, at the classroom level, to the control or intervention condition randomly. We measured, before and after the intervention, parental investments, children’s empathy, and self-reported bullying perpetration and victimization incidents. Our analyses show that the intervention increased investments and empathy and reduced bullying incidents. In addition, we measured costs and found that it costs $12.50 for our intervention to reduce one bullying incident. Our study offers a scalable and low-cost strategy that can inform public policy on bullying prevention in other similar settings.
    JEL: I10 I20 J24 O10
    Date: 2023–01

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