nep-cna New Economics Papers
on China
Issue of 2023‒09‒25
ten papers chosen by
Zheng Fang, Ohio State University

  1. Housing Unaffordability and Adolescent Academic Achievement in Urban China By Nie, Peng; Li, Qiaoge; Ding, Lanlin; Sousa-Poza, Alfonso
  2. Decode China's Economic Engagement in Africa: Evolving Policies, Investment and Trade Trends, and Implications By Zhang, Yuhan; Mekonnen, Shimelse
  3. A Big Push of Panda from the Ground: Land Subsidy and Structural Transformation in China By Shawn Xiaoguang Chen; Yudan Cheng; Liutang Gong; Wenjia Tian
  4. Time to Say Goodbye? The Impact of Environmental Regulation on Foreign Divestment By Mao, Haiou; Görg, Holger; Fang, Guopei
  5. The Inheritance of Historical Trauma: Intergenerational Effects of Early-Life Exposure to Famine on Mental Health By Zhang, Zihan; Kim, Jun Hyung
  6. Political Turnover and Firm Innovation in China: The Moderating Role of Innovation and Entrepreneurship Environment By Xing Shi; Ya Zhang; Yanrui Wu; Huaqing Wu
  7. International Trade and Job Polarization: Evidence at the Worker Level By Keller, Wolfgang; Utar, Hale
  8. Large Language Models at Work in China's Labor Market By Qin Chen; Jinfeng Ge; Huaqing Xie; Xingcheng Xu; Yanqing Yang
  9. Young Women in Cities By Koh, Yumi; Li, Jing; Wu, Yifan; Yi, Junjian; Zhang, Hanzhe
  10. Parental Health Penalty on Adult Children's Employment: Gender Difference and Long-Term Consequence By Jiayi Wen; Haili Huang

  1. By: Nie, Peng (Xi’an Jiaotong University); Li, Qiaoge (Xi’an Jiaotong University); Ding, Lanlin (Peking University); Sousa-Poza, Alfonso (University of Hohenheim)
    Abstract: Rising housing prices in China have placed significant financial strain on many households, pushing them into the quagmire of housing unaffordability. Such economic pressures may have repercussions beyond just shelter, potentially impacting the cognitive development of children. Our study, based on longitudinal data from the 2010-2018 China Family Panel Studies, analyses the effect of housing unaffordability on the academic achievements of Chinese adolescents aged 10-15. To address the inherent endogeneity issues associated with housing unaffordability, we employed a fixed effects instrumental variable approach. Our findings reveal that housing unaffordability leads to a decline in academic performance for these adolescents by an average of 12%. This negative effect is more pronounced for specific groups: rural-to-urban migrant families, girls who have male siblings, families who rent, older adolescents (aged 13 to 18), and those residing in less developed regions. Moreover, the results suggest that housing unaffordability adversely affects academic performance indirectly by diminishing household expenditures in critical areas. When housing becomes unaffordable, families have less to spend on food, social capital, and education, further exacerbating the challenges faced by their adolescent children in the academic arena.
    Keywords: housing unaffordability, academic achievement, adolescents, China
    JEL: I20 I31 R20
    Date: 2023–08
  2. By: Zhang, Yuhan; Mekonnen, Shimelse
    Abstract: This working paper systematically analyzes the dynamic commercial relationship between China and Africa. Utilizing Natural Language Processing and content analysis of meticulously collected policy documents, this study finds that the Belt and Road Initiative (BRI) and other proposals by President Xi have shaped the policy direction of China-Africa collaborations, highlighting areas like industrial evolution, infrastructure synergies, agricultural modernization, and sustainable development. By exploring historical economic data, this study also finds that the BRI has significantly influenced Chinese financial commitments to Africa, with investment benefiting 30 distinct African countries, spanning sectors beyond natural resources, and involving both state-owned and private entities. Trade data suggests emerging signs of diversification and reveals China's consistent trade surpluses with Africa, influenced by significant Chinese capital outflows. While Africa's emerging signs of diversification are encouraging, it needs to further diversify into manufacturing and services to avoid mirroring past trade patterns with the West. Our machine learning analysis anticipates China-Africa trade to surpass $300 billion by 2025-6. In light of evolving policies and economic trajectories, this study identifies burgeoning opportunities in sectors like e-commerce, fintech, and agritech, underlying the immense potential of China-Africa commercial ties. However, it is important to acknowledge that China-Africa commercial cooperation is not without challenges. Disparities in trade balances, concerns about debt sustainability, and local economic impacts have sometimes strained relations, which require continuing attention and further research.
    Keywords: Machine Learning, Economic Policy, China, Africa, Belt and Road Initiative (BRI), Investment, Trade, Commercial Opportunities
    JEL: A1 A12
    Date: 2023
  3. By: Shawn Xiaoguang Chen (Business School, The University of Western Australia); Yudan Cheng (School of Statistics and Mathematics, Central University of Finance and Economics); Liutang Gong (Guanghua School of Management, Peking University and School of International Economics and Management, Beijing Technology and Business University); Wenjia Tian (School of Statistics and Mathematics, Central University of Finance and Economics)
    Abstract: This paper examines the role of land policies in China’s structural transformation, focusing on industrial land subsidies and their impacts on the industrial sector’s share of GDP. Drawing on the "big push" theory, we argue that these subsidies address the fixed costs of industrialization and trigger structural transformation. Additionally, we show that land subsidies may not necessarily boost industrialization due to their potential to misallocate resources and lower aggregate productivity. Using a calibrated model, our counterfactual analysis shows that China’s land subsidies contribute to a 40% difference in industrial GDP share between China and the rest of the world.
    Keywords: Structural transformation, Industrialization, Industrial land subsidy, Big push
    JEL: O14 L52 R52 H2
    Date: 2023
  4. By: Mao, Haiou (Huazhong University); Görg, Holger (Kiel Institute for the World Economy); Fang, Guopei (Huazhong University)
    Abstract: We look at divestments by foreign firms – a topic that has received comparatively little attention in the literature – and investigate how changes in the regulatory environment in the host country may impact on such divestment decisions. We use the implementation of China's Two Control Zone (TCZ) policy as a "quasi-natural experiment", using detailed firm level combined with city level data for the empirical analysis. Our results show that the implementation of TCZ policy has led to higher probabilities of divestments by foreign firms in targeted TCZ cities and industries. The mechanism behind this seems to be a TCZ-induced increase in discharge fees and efforts to reduce SO2 emissions. Allowing for heterogeneity of effects, we find that the effect is particularly strong for firms from source countries with less stringent environmental regulation, and those using less advanced technology. We furthermore show that firms using intermediates from polluting industries also experience a higher probability of divestment.
    Keywords: foreign divestment, environmental regulation, Two Control Zone Policy, China
    JEL: F23 Q58
    Date: 2023–08
  5. By: Zhang, Zihan (Jinan University); Kim, Jun Hyung (Korea Advanced Institute of Science and Technology)
    Abstract: Can the effects of early childhood trauma persist across generations, impacting the long-run outcomes of their children? To answer this question, we exploit the geographic variation in the intensity of the Great Famine in China and distinguish the effects of exposures during four stages of childhood cognitive development between ages 0 to 15 as defined in the child development theory of Jean Piaget. We find that exposure to famine in childhood, especially in ages 0—2 and 3—7, negatively impacts the adult mental health of the survivors' children. We also find negative effects on parent's mental health and parent-child interaction frequency, consistent with the role of childhood home environments as transmission channels. Our findings show that the determinants of mental health problems can be traced back across a generation and demonstrate the persistent damage of early childhood trauma on the survivors and their children.
    Keywords: collective trauma, famine, mental health, intergenerational effects
    JEL: I14 I18 J13
    Date: 2023–08
  6. By: Xing Shi (School of Economics, Hefei University of Technology, Hefei, China); Ya Zhang (School of Economics, Hefei University of Technology, Hefei, China); Yanrui Wu (Business School, The University of Western Australia); Huaqing Wu (School of Economics, Hefei University of Technology, Hefei, China)
    Abstract: The empirical work in this paper is based on an analysis of the data of China's listed companies, the innovation and entrepreneurship index, and local official turnover data at the city level. It shows that policy uncertainty caused by local political turnover in local governments significantly reduces firm innovation. However, improvement in local innovation and entrepreneurship environment can lessen this negative impact. This moderating effect is especially relevant among non-high-tech or financially constrained firms. The robustness of these findings is checked through a series of alternative analyses such as dealing with endogeneity, optional measures of the dependent variable and subsamples.
    Keywords: Political turnover, Policy uncertainty, Innovation and entrepreneurship environment, Firm innovation, China
    JEL: L25 O31
    Date: 2023
  7. By: Keller, Wolfgang (University of Colorado, Boulder); Utar, Hale (Grinnell College)
    Abstract: We employ employer-employee matched data from Denmark and utilize plausibly exogenous variation in the rise of import competition due to the dismantling of import quotas as China entered the World Trade Organization to show, first, that rising import competition has led to reduced employment in mid-wage occupations compensated by an increased likelihood of employment in both low-wage and high-wage occupations. Workers with higher education are more likely to move from mid- to high-wage occupations due to trade compared to moving from mid- to low-wage occupations. Employing task content information of detailed occupations, we also show that workers performing manual tasks are the ones most affected by import competition independently of the routine-task intensity of occupations. This implies that the effect of import competition is distinct from that of routine task-replacing technological change
    Keywords: job polarization, employer-employee matched data, import competition, job trajectories of individual workers, trade, technology, task, China, Denmark
    JEL: F14 F16 F66 J23 J24 J62
    Date: 2023–08
  8. By: Qin Chen; Jinfeng Ge; Huaqing Xie; Xingcheng Xu; Yanqing Yang
    Abstract: This paper explores the potential impacts of large language models (LLMs) on the Chinese labor market. We analyze occupational exposure to LLM capabilities by incorporating human expertise and LLM classifications, following Eloundou et al. (2023)'s methodology. We then aggregate occupation exposure to the industry level to obtain industry exposure scores. The results indicate a positive correlation between occupation exposure and wage levels/experience premiums, suggesting higher-paying and experience-intensive jobs may face greater displacement risks from LLM-powered software. The industry exposure scores align with expert assessments and economic intuitions. We also develop an economic growth model incorporating industry exposure to quantify the productivity-employment trade-off from AI adoption. Overall, this study provides an analytical basis for understanding the labor market impacts of increasingly capable AI systems in China. Key innovations include the occupation-level exposure analysis, industry aggregation approach, and economic modeling incorporating AI adoption and labor market effects. The findings will inform policymakers and businesses on strategies for maximizing the benefits of AI while mitigating adverse disruption risks.
    Date: 2023–08
  9. By: Koh, Yumi (University of Seoul); Li, Jing (Singapore Management University); Wu, Yifan (Shanghai University); Yi, Junjian (Peking University); Zhang, Hanzhe (Michigan State University)
    Abstract: Young women outnumber young men in cities in many countries during periods of economic growth and urbanization. This gender imbalance among young urbanites is more pronounced in larger cities. We use the gradual rollout of special economic zones across China as a quasi-experiment to establish the causes of this gender imbalance. Our analysis suggests that a key contributor is gender-differential incentives to migrate due to rural women's higher likelihood of marrying and marrying up in cities when urbanization creates more economic opportunities and an abundance of high-income marriage-age men.
    Keywords: urbanization, migration, gender imbalance, labor market, marriage market
    JEL: O15 J12
    Date: 2023–07
  10. By: Jiayi Wen; Haili Huang
    Abstract: This paper examines the long-term gender-specific impacts of parental health shocks on adult children's employment in China. We build up an inter-temporal cooperative framework to analyze household work decisions in response to parental health deterioration. Then employing an event-study approach, we establish a causal link between parental health shocks and a notable decline in female employment rates. Male employment, however, remains largely unaffected. This negative impact shows no abatement up to eight years that are observable by the sample. These findings indicate the consequence of "growing old before getting rich" for developing countries.
    Date: 2023–08

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