nep-cna New Economics Papers
on China
Issue of 2023‒08‒28
six papers chosen by
Zheng Fang, Ohio State University

  1. Air Pollution and Education Investment By Cheng, Zhiming; Guo, Liwen; Tani, Massimiliano; Cook, Sarah
  2. Environmental Policy and Gender Health Gap By Guo, Liwen; Cheng, Zhiming; Tani, Massimiliano; Cook, Sarah
  3. Air Pollution and Green Innovation By Guo, Liwen; Cheng, Zhiming; Tani, Massimiliano; Cook, Sarah
  4. Housing, Household Debt, and the Business Cycle: An Application to China and Korea By Amir Sufi
  5. Entrepreneurship in China's Structural Transitions: Network Expansion and Overhang By Ruochen Dai; Dilip Mookherjee; Kaivan Munshi; Xiaobo Zhang
  6. The Quadrilateral Security Dialogue between Australia, India, Japan and the United States: More symptom than solution to the problem of growing instability in the Indo-Pacific By Heiduk, Felix; Wirth, Christian

  1. By: Cheng, Zhiming (University of New South Wales); Guo, Liwen (University of New South Wales); Tani, Massimiliano (University of New South Wales); Cook, Sarah (University of Nottingham)
    Abstract: Our study focuses on exploring the impact of air pollution on household investment in children's education in China. Air pollution poses a significant risk to some cities in northern China. We have used panel data from secondary schools in Shandong Province in 2017 and 2020 and discovered that a rise of one standard deviation of PM2.5 leads to a 9.6-44.6 percentage point decrease in the likelihood of parents spending on their children's education. The impact of air pollution on household education investment is mediated by parents' and children's educational expectations and household incomes. Our findings also indicate that high school students are more likely to receive higher education investment than middle school students, even at the same level of air pollution. The results of our study suggest that air pollution can lead to a decrease in human capital accumulation due to changes in parental behaviors induced by air pollution.
    Keywords: air pollution, education investment, China
    JEL: Q53 I20 D10
    Date: 2023–07
  2. By: Guo, Liwen (University of New South Wales); Cheng, Zhiming (University of New South Wales); Tani, Massimiliano (University of New South Wales); Cook, Sarah (University of Nottingham)
    Abstract: Utilizing a nationally representative panel data of middle-aged and elder individuals from China, we assess the health impact of environmental policies, with special attention paid to gender disparities within their effects. This study utilizes thermal inversions to address the endogeneity of air pollution and constructs a fixed effects model. Our findings highlight that the negative impact of air pollution on female health is significant, particularly for females in the middle of the health distribution. Notably, the implementation of environmental policies leads to health improvements in females and plays a key role in bridging the health gap between genders. These findings provide compelling evidence of the importance of environmental policy in promoting health equity.
    Keywords: environmental policy, gender health gap, China
    JEL: C21 I14 J71 Q53 Q58
    Date: 2023–07
  3. By: Guo, Liwen (University of New South Wales); Cheng, Zhiming (University of New South Wales); Tani, Massimiliano (University of New South Wales); Cook, Sarah (University of Nottingham)
    Abstract: With air pollution remaining a significant problem in many regions globally, an increasing number of environmentally conscious entrepreneurs have been taking initiatives to combat this issue, accompanied by a growing environmental awareness among the general public. To test the strength of this relationship, we use individual-level information from an enterprise survey in China in 2018 and conducted instrumental variable analyses to study the impact of air pollution on the green innovation behaviours of non-agricultural entrepreneurs. The results indicate that, on average, a one standard deviation increase in PM2.5 concentration is associated with a 4.3 percentage points increase in green innovation (or a 11.9 percentage points increase in green innovation intensity). Entrepreneurs' gambling preferences could potentially mediate the relationship between air pollution and green innovation, while expected firm income and actual firm income may act as suppressors. Specifically, entrepreneurs who launch their businesses following the implementation of environmental policies are more likely to adopt green innovation practices. This study provides insight into why there is a growing trend of environmentally-conscious entrepreneurs in regions with high levels of air pollution.
    Keywords: green innovation, air pollution, China
    JEL: J01 Q53 Q55
    Date: 2023–07
  4. By: Amir Sufi
    Abstract: China and South Korea both experienced substantial increases in household debt through 2021, and now both countries face a weakening economy. This essay gleans lessons from the “credit-driven household demand channel” (e.g., Mian and Sufi 2018) to explore how the two economies will fare in the years ahead. On the positive side, neither country is at risk of a severe financial crisis, and both countries have a strong current account position. On the negative side, consumer spending in both countries could be quite weak in the years ahead. For China, the biggest risk is that distortions in the production sector aimed at boosting the property market were a major driver of growth during the boom, and it is unclear how growth can continue to be sustained with the property market stumbling.
    JEL: E30 G01
    Date: 2023–07
  5. By: Ruochen Dai; Dilip Mookherjee; Kaivan Munshi; Xiaobo Zhang
    Abstract: This research examines the determinants of entrepreneurship in the initial transition from agriculture to industrial production and the subsequent transition to higher value exporting in China. Using data covering the universe of registered firms over the 1994-2009 period, we find that individuals born in rural counties with higher agricultural productivity and population density had a greater propensity to enter domestic production in the first transition, but that this association was reversed in the second transition to exporting. This is despite the fact that revenues (and productivity) were increasing more steeply over time for firms drawn from denser birth counties in both activities. The model that we develop to reconcile these facts incorporates a productivity enhancing role for hometown (birth county) networks. We provide causal evidence, using shift-share instruments, that these networks of firms were active and that more densely populated rural counties gave rise to networks that were more effective at increasing the revenues of their members, both in domestic production and exporting. While this generated faster transition in the first stage, the incumbent (more successful) domestic networks drawn from denser counties created a disincentive to subsequently enter exporting. Our analysis identifies a novel dynamic inefficiency that could arise in any developing economy where (overlapping) networks are active.
    JEL: O11 O12 O14
    Date: 2023–07
  6. By: Heiduk, Felix; Wirth, Christian
    Abstract: According to official statements, the main purpose of the Quadrilateral Security Dialogue ("Quad") is to intensify cooperation between the four partner countries - Australia, India, Japan and the United States - in tackling urgent challenges in the Indo-Pacific region. These include climate protection, health policy and maritime security. However, it is primarily the rise of China and the associated challenge to US hegemony in the region that brings together the four partners. In this context minilateral cooperation formats such as the Quad are gaining global importance. But more than 15 years after the start of formal meetings, and despite increased cooperation, the security dialogue between the four unequal partners appears more a symptom of regional instability than a remedy for it.
    Keywords: Quadrilateral Security Dialogue (Australia, India, Japan, United States), China, Russia, Ukraine, Indo-Pacific region, G7 Summit, climate change, critical and emerging technologies, cyber security, infrastructure, regional health security, maritime and space security, counter-terrorism, humanitarian and disaster relief, European Union (EU), ASEAN
    Date: 2023

This nep-cna issue is ©2023 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.