nep-cna New Economics Papers
on China
Issue of 2024‒02‒26
three papers chosen by
Zheng Fang, Ohio State University

  1. Convergence of Inequality Dimensions in China: Income, Consumption, and Wealth from 1988 to 2018 By Wan, Haiyuan; Gustafsson, Björn Anders; Wang, Yingfei
  2. Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States By David Autor; Anne Beck; David Dorn; Gordon H. Hanson
  3. Import competition, trade credit and financial frictions in general equilibrium By Esposito, Federico; Hassan, Fadi

  1. By: Wan, Haiyuan (Beijing Normal University); Gustafsson, Björn Anders (Göteborg University); Wang, Yingfei (Peking University)
    Abstract: Using household data from 1988 to 2018, we confirm that the increase in income inequality in China has come to a halt in recent years but show that inequality in wealth and consumption continues to increase. We report a clear convergence of inequality across the different dimensions of income, consumption, and wealth. Households at the top of one dimension are increasingly located at the top of the other two dimensions. The mechanisms for such convergence across dimensions are analysed, and the savings rate links income and consumption, while capital accumulation is the central mechanism linking income and wealth. In addition, the wealth and income structure contribute to intensifying the convergence trend. We argue that the relatively high level of inequality in China may continue since income, consumption and wealth are increasingly reinforcing each other.
    Keywords: return rate of capital, property income, savings rate, economic inequality, convergence mechanism
    JEL: D31 I31 P52
    Date: 2024–01
  2. By: David Autor; Anne Beck; David Dorn; Gordon H. Hanson
    Abstract: We study the economic and political consequences of the 2018-2019 trade war between the United States, China and other US trade partners at the detailed geographic level, exploiting measures of local exposure to US import tariffs, foreign retaliatory tariffs, and US compensation programs. The trade-war has not to date provided economic help to the US heartland: import tariffs on foreign goods neither raised nor lowered US employment in newly-protected sectors; retaliatory tariffs had clear negative employment impacts, primarily in agriculture; and these harms were only partly mitigated by compensatory US agricultural subsidies. Consistent with expressive views of politics, the tariff war appears nevertheless to have been a political success for the governing Republican party. Residents of regions more exposed to import tariffs became less likely to identify as Democrats, more likely to vote to reelect Donald Trump in 2020, and more likely to elect Republicans to Congress. Foreign retaliatory tariffs only modestly weakened that support.
    JEL: D72 F14 F16 J23
    Date: 2024–01
  3. By: Esposito, Federico; Hassan, Fadi
    Abstract: We analyze the role of trade credit and financial frictions in the propagation of international trade shocks along the supply chain. First, we show empirically that exposure to import competition from China increased the use of trade credit in the U.S. Then, we use a multi-country input-output trade model with borrowing constraints, trade credit, and endogenous employment to quantify the general equilibrium effects of such increase, characterizing the different channels at work. Borrowing constraints amplify the negative consequences of the China shock on employment, but introducing trade credit reduces these losses by 8%-27%, depending on the tightness of the constraints.
    Keywords: trade credit; trade shocks; financial frictions; borrowing constraints; employment
    JEL: E10 E44 F14 F15 F16 G20
    Date: 2023–02–09

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