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This paper explores the impact of the political hierarchies of cities in China from different perspectives. First, we examine the economic disparities between prefectural cities and municipalities. Furthermore, this paper draws upon a quasi‐ experiment to analyze the impact of upgrading Chongqing to a municipality in 1997 using the synthetic control method. The city‐upgrading policy significantly increased Chongqing's gross domestic product (GDP) in the following 4 years. Finally, we find that the policy increased GDP in treated cities within 1200 km of Chongqing by about 10%–13% relative to the control cities. [ABSTRACT FROM AUTHOR]

Population aging is widely assumed to have detrimental effects on economic development, especially through an increased social security burden. This paper starts with the potential problems of the pension system in China. We investigate how local governments respond to population aging and the impact of population aging on the firm pension contributions using administrative data from the period 2008–2015. We present three findings. First, population aging increases the pension contributions of firms. Second, fiscal pressure is the channel through which population aging affects pension enforcement. Last, the pension administration system could affect the net impact of population aging. [ABSTRACT FROM AUTHOR]

This paper studies the transmission mechanisms that underlie China's house price fluctuations using a dynamic stochastic general equilibrium (DSGE) model. The model is estimated with Bayesian methods, which accounts well for business cycle properties of the housing market. Results show that shocks to housing productivity and the government land supply to housing developers are the primary contributors to house price volatility, accounting for 37% of house price volatility in the short run and 32% in the long run. The importance of housing valuation shocks and shocks to migration only increases in models without the supply side of the housing market. [ABSTRACT FROM AUTHOR]

This paper examines the impacts of a government‐led e‐commerce expansion project on household income. We find that the project has led to increases in rural household income. The positive impacts are more prominent for lower‐income rural households. The income‐increasing effects are driven by the reduction in information search costs and transportation costs. The provision of complementary interventions for e‐commerce, such as promoting the internet‐related skills of farmers and the expansion of formal financial credit support is also important for the program's success. The results provide policy implications for the design and implementation of government‐led e‐commerce policies in developing economies. [ABSTRACT FROM AUTHOR]

This paper examines the relationship between trade liberalization and the probability of state‐owned enterprises (SOEs) being decentralized. We find that tariff cuts for inputs significantly lower the probability of a SOE being decentralized, whereas tariff cuts for outputs raise this probability. We also find that as the distance from a SOE to its overseeing government increases, the effects of input and output tariff cuts on the probability of SOEs decentralization become stronger. Our empirical results are consistent with a simple model in which local governments try to balance the costs of supervising SOEs against the profits extracted from SOEs. [ABSTRACT FROM AUTHOR]

This paper analyzes China's rising family income inequality since the early 1990s when the urban labor market started its transformation from a centrally controlled to a market‐driven one. We document the trends in income inequality over the period of 1992–2009 using the Urban Household Survey data, and adopt the approach recently proposed by Eika et al. (2014) to decompose changes in income inequality. We find that labor market factors accounted for about three‐quarters of the overall increases in income inequality while falling marriage rate contributed the other quarter. Changes in human capital levels and marital assortativeness have not contributed to the rising inequality. [ABSTRACT FROM AUTHOR]

This paper investigates the return to university education in Singapore using a new estimation strategy related to Chinese traditions where children born in the Year of the Dragon are believed to be superior. Because parents might time the arrival of their offspring on a Dragon year, this causes the Dragon cohort to be larger and university entry to be more competitive. First, we find evidence of a negative 'Dragon effect' on university educational attainment. Then, using it as an estimation strategy, we find that university education has a ceteris paribus effect of raising earnings by at least 50% on average. ( JEL I21, C26, J30) [ABSTRACT FROM AUTHOR]

This paper builds on and extends the literature on the linkage between firm productivity and their export destinations to study the productivity of Chinese firms and their sales destinations in other provinces within China. Moving the study from international markets to domestic markets conveniently avoids the hard to control heterogeneity across different destination markets in international trade, as provincial markets within China are less heterogeneous than international markets but segmented by Chinese provincial borders. The paper explicitly controls the fact that many firms only sell in their home provinces by using the zero-inflated negative binomial method. It finds that firms with higher productivity tend to sell in other provincial markets, and more productive firms enter more provincial markets. The results are robust. ( JEL F15, D21, D24) [ABSTRACT FROM AUTHOR]

This paper applies Jones' test for the empirical validity of AK-type models to the Chinese economy over the period 1952-2006 (Jones C. I., Quarterly Journal of Economics, 110, 1995a, 495-525). We aim to establish whether large permanent movements in the physical investment rate cause permanent movements in output growth. The evidence indicates that the one-sector AK model cannot be rejected. We also find that augmenting the model to allow for transitional dynamics-via imbalances in factor endowments, structural transformation, and R&D-based technology transfer-does a better job in describing China's growth dynamics than the basic AK model. ( JEL C22, O41, O47) [ABSTRACT FROM AUTHOR]

We study the effect of domestic corporate tax on firms' outward direct investment (ODI) decisions. We exploit a tax unification reform in China that raises corporate income tax rates on foreign‐funded firms but reduces those on domestic Chinese firms. Using a difference‐in‐differences estimator that compares the ODI of foreign affiliates and joint ventures with private domestic firms before and after the reform, we find that a higher domestic corporate tax rate increased the ODI of foreign firms, particularly for joint ventures with Chinese majority shareholders. We show evidence that the increases in firm ODI reflect production relocation out of China. [ABSTRACT FROM AUTHOR]

We study how domestic firms adapt to increased import competition from China. Using a Danish employer‐employee matched dataset covering firms over the 1995–2007 period, we find that import competition significantly increases manufacturing firms' expansion of their business activities in the service industry (partial servitization); their probability of offshoring production activities abroad and of exiting the market. Import competition, however, does not induce firms to cease all of their involvement in manufacturing production by completely switching into service sector (complete servitization). These findings are confirmed using various robustness tests as well as an analogous analysis of a Portuguese employer‐employee matched dataset. [ABSTRACT FROM AUTHOR]

We provide evidence on the existence of short‐run trade diversion effects towards third countries as a consequence of tariff shocks. We exploit sudden policy changes in the context of the trade dispute between the United States and China in 2018. Based on a data set covering monthly product‐level information on US imports from 30 countries for the period 2016 until May 2019, we employ a difference‐in‐differences estimation framework. Doing so, we can show a strong negative direct effect of US tariffs on US imports from China, but do not find evidence for significant short‐run trade diversion effects towards third countries. [ABSTRACT FROM AUTHOR]

We examine how trade openness influences income inequality within countries. The sample includes 139 countries over the period 1970–2014. We employ predicted openness as instrument to deal with the endogeneity of trade openness. The effect of trade openness on income inequality differs across countries. Trade openness tends to disproportionately benefit the relative income shares of the very poor, but not necessarily all poor, in emerging and developing economies. In most advanced economies, trade openness increased income inequality, an effect that is driven by outliers. Our results suggest a strong effect of trade openness on inequality in China and transition countries. [ABSTRACT FROM AUTHOR]

Importing capital inputs has been recognized as a critical channel for technology transfer across countries. We examine whether and to what extent the productive impact of imported capital varies with firms' abilities to absorb new technologies using ordinary least squares, instrumental variable, and threshold regression estimators. We find that firms with higher absorptive capacity gain significantly more from importing foreign capital. Our results also suggest a threshold for such benefits. Furthermore, the productive contribution of skilled labor is significantly higher in firms that import foreign capital. Developing policies to augment absorptive capacity will help firms in developing countries to realize benefits associated with imported capital. [ABSTRACT FROM AUTHOR]

This study explores the heterogeneous effects of minimum wage on innovation of different types of firms. We develop an open‐economy R&D‐based growth model and obtain the following result: raising the minimum wage reduces innovation of firms that use domestic inputs but increases innovation of firms that import foreign inputs. We test this result using city‐level data on minimum wages and firm‐level patent data in China. In accordance with our theory, we find that raising the minimum wage is associated with more innovation by importing firms and less by non‐importing firms. This result survives a battery of robustness checks. [ABSTRACT FROM AUTHOR]

We utilize an unprecedented liberalization episode in China, namely its World Trade Organization accession, to estimate the impact of trade liberalization on firm markup and markup distribution. Using a panel data quantile regression, we show that the impact of tariff reduction on markup can be heterogeneous to different firms, resulting in an unevenly distributed markup change across firms. In particular, reduction in output tariff reduces markup and markup dispersion, while reduction in input tariff increases markup and markup dispersion. [ABSTRACT FROM AUTHOR]

Increased import competition from China has brought about a host of negative consequences for the most exposed industries and labor markets. Do social programs attenuate these harmful effects? We examine changes in import competition between 1990 and 2007, taking crime as our outcome of interest and unemployment insurance as our mitigating program. We find strong evidence that counties with access to more generous unemployment insurance experienced relatively smaller increases in trade‐induced property crime. This highlights a new and important positive externality of unemployment insurance. [ABSTRACT FROM AUTHOR]

In China, joint ventures (JVs) between foreign investors and Chinese local firms were the most popular form of foreign affiliates before 2001. Over time, with policy space to operate as foreign wholly owned (WOs), many foreign investors in JVs chose to consolidate ownership and turned JVs into their WOs. Here, we examine how institution quality affects foreign investors' JV‐to‐WO ownership consolidation odds. For each province‐year, we construct an institution quality index from the business and judicial quality indicators, and further compute a relative quality index to highlight provincial variations. Using more than 43,000 JVs operating in China's 30 provinces over 1998–2007, we find that increases in institution quality decrease the odds of foreign investors to divorce their Chinese local partners. The odds for foreign investors in JVs to consolidate ownerships are significantly higher if they operate in provinces with relatively weaker institution quality. The odds of foreign investors' JV‐to‐WO decision vary with JVs' local firms being state‐owned enterprises (SOEs) and non‐SOEs, with foreign investors' origins from Hong Kong, Macao, and Taiwan (HMT) and other regions (Foreign), and with foreign investors' initial equity positions. Our results are not driven by foreign direct investment policy shocks, and are robust to alternative measures of institution quality. [ABSTRACT FROM AUTHOR]

This study investigates changes in household consumption at retirement based on a comprehensive, diary-based household survey from China. We focus on disentangling price changes from quantity changes at retirement. The mandatory retirement policy in China provides a quasi-experimental setting for nonparametric identification of the true causal effects of fully anticipated retirement. Using a regression discontinuity design, we find that food expenditure declines at retirement, particularly among the less-educated group. We further show that this decline is driven by a reduction in prices rather than quantities. These findings, along with a documented increase in shopping time for food upon retirement among the less-educated households, are consistent with a time allocation model in which education enhances the value of leisure. ( JEL J26, C21) [ABSTRACT FROM AUTHOR]

We examine various factors that influence the effects of government-subsidized research and development (R&D) programs on firm productivity. Based on a panel dataset of Chinese firms, we find the effects of the Innovation Fund for Small and Medium Technology Based Firms (Innofund) are dynamic over time and are heterogeneous depending on funding forms and the level of marketization and economic development across regions. In general, Innfound has significant and positive effects on firm productivity in both the short and long run. However, the short-term effects of Innofund are stronger than the long-term ones. Additionally, the positive effects of Innofund are stronger for firms backed by interest-free bank loans than those supported by appropriation. Meanwhile, Innofund has stronger positive effects in provinces that are less market-oriented or less developed economically. Finally, the short-term effects of Innofund stay stronger than the long-term ones even after we control the funding forms and the market conditions across regions. Identification and selection concerns are addressed through the propensity score matching approach and two-stage estimation. ( JEL G28 O38 H76) [ABSTRACT FROM AUTHOR]

This article investigates how government intervention in land market affects China's urban development, using data from prefecture-level cities between 2000 and 2010. We find that government intervention enlarges the impact of positive productivity shocks on housing price appreciation, through mainly the government control over residential land supply. However, we find no significant evidence that high government intervention constrains population growth and leads to wage increase. Such patterns of urban dynamics can be explained by the fact that migrant workers are the driving force behind China's urbanization, but they have limited housing demand and are not well compensated. ( JEL P52, R12, H11) [ABSTRACT FROM AUTHOR]

Visible expenditures which convey higher socioeconomic status may help individuals differentiate themselves in the marriage market when there is competition for partners and imperfect information. We examine a unique dataset of automobile purchasers in China to investigate the extent to which skewed sex ratios influence expenditure decisions for this highly visible commodity. Using a triple difference approach, we show that unmarried male consumers who face an unfavorable sex ratio purchase more expensive, luxury vehicles than their married peers. Lower income borrowers and those residing in regions with the worst sex ratios exhibit the largest relative degree of conspicuous consumption. In addition to the direct cost of consumption signaling, we demonstrate that this behavior generates negative externalities in the form of lower average fuel economy and higher average vehicle weight. As it has worsened sex ratios, status competition and the associated negative repercussions we identify represent unintended consequences of China's one child policy. ( JEL O12, E21, J12) [ABSTRACT FROM AUTHOR]

We show that the U.S. in-bond system of imports may be used by firms to illegally avoid trade barriers, a practice known as in-bond diversion. The illicit scheme involves declaring Chinese exports bound for Mexico but diverting them to the U.S. market while in transit, thus creating a gap between Chinese and Mexican reports. Using the phaseout and removal of U.S. quotas at the end of the Multifiber Agreement as a policy experiment, as well as variation in quota bindingness across products, we show that quota-bound products were associated with larger trade gaps which shrunk following the quota removals. ( JEL F13, O17, O19) [ABSTRACT FROM AUTHOR]

We use a Chinese firm-director panel dataset to examine the matching of heterogeneous firms and politicians. On the basis of 36,308 detailed biographies, we identify individuals who previously held bureaucratic positions and classify the rank of each position in the Chinese political hierarchy. Using this direct measure of political capital, we examine how firms with heterogeneous productivity match politicians with different political strength. Our results indicate a positive assortative matching in the political capital market. More productive firms are paired with more powerful politicians. Furthermore, the preference for political capital relative to conventional human capital increases in firms' dependence on external financing and the inefficiency of local governments. Conditional on the endogenous matching, new hires with political capital receive more compensation than their co-workers in the same cohort. The marginal effect of a one-step rise on the political ladder significantly exceeds the marginal effect of raising education attainment from, for example, high school to college. ( JEL D21, D73, J24, J31, O12) [ABSTRACT FROM AUTHOR]

This article presents a model of endogenous growth, in which a firm's technology and a country's human capital stock are complementary in the production of output. Production technologies are created by costly research and development (R&D) and are owned by firms that can freely choose where in the world to produce. Both production and R&D have a positive effect on a country's human capital stock. While all countries typically grow at the same rate in the long run, they differ in their levels of human capital, per capita output, and the quality of the technologies that are used in production. A country's relative position in terms of productivity is history dependent. Countries that start out with a lower human capital stock or industrialize later end up with a lower per capita GDP in long-term equilibrium. [ABSTRACT FROM AUTHOR]

Although industrialization first occurred in England, it is thought that China, not England, may have been the world leader in technology at the time. Yet, China did not industrialize until 150 yr after England and nearly a century after less advanced European countries. This represents a puzzle because two-sector neoclassical growth models, such as Hansen and Prescott (2002) , that accurately match industrialization, require that more technologically advanced countries industrialize at an earlier date. I find that a model that accounts for cross-country heterogeneities in population density accurately predicts the timing of industrialization in China. ( JEL F43, N10, N30, O11, O14, O41) [ABSTRACT FROM AUTHOR]

This article extends a standard Beckerian model of fertility behavior to formulate the effect of house price (HP) on fertility. The simple model predicts a negative effect of HP on the number of children for a representative household not only through the income effect but also through the compensated substitution effect. The prediction is confirmed by a cointegration analysis applied to the annual data at the aggregate level covering the period from 1971 to 2005 in Hong Kong. It is found that a 1% increase in HP is significantly related to a 0.45% decrease in total fertility rates (TFRs), which is robust in sensitivity tests with an alternative model specification and alternative measures of TFRs. This implies that high HP inflation can account for about 65% of the fertility decrease in Hong Kong in the past four decades. ( JEL J13, J11, C32) [ABSTRACT FROM AUTHOR]

This article examines the determinants of the entrepreneur's political participation by employing a unique matched firm-institution data set from China. We find that the likelihood of an entrepreneur's participation can be explained by the underdevelopment of markets and market-supporting institutions. According to our estimates, the probability of entering politics decreases by 8–20% from the mean when the institutional indices improve by one standard deviation. Our findings support the view that the institutional environment shapes the private entrepreneur's motivation to participate in politics; they also provide an example of how private entrepreneurs respond to state/market failure in developing and transition countries. [ABSTRACT FROM AUTHOR]

This article shows that the allocation of resources among enterprises of different types of ownership is important to economic growth. The data on 30 Chinese provinces indicate that the investment share of state enterprises is negatively related to the growth rate of per-capita GDP, while the investment share of private enterprises is positively related to the growth rate. Meanwhile, the effect of total investment on the growth rate of per-capita GDP appears to be insignificant. The share of trade in GDP was positively related to economic growth. Also, the illiteracy rate of employees was negatively related to economic growth. (JEL O11, 053, P2, P52) [ABSTRACT FROM AUTHOR]

The market for resident domestic helpers offers a rare opportunity where the surplus from employment relationship can be quantitatively measured for each individual employee. Using the difference between employer's cost of time and employee's wage as a measure of rent, it is found that wages for domestic helpers are positively related to rent. However the apparent sharing of rent is better explained by matching than by efficiency wage models. Rent sharing is observed even in households where monitoring or turnover costs are low. Rent sharing is not observed among newly arrived foreign domestic helpers, whose ability remains to be revealed. (JEL J41) [ABSTRACT FROM AUTHOR]