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| 1 |
ID:
192370
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| Summary/Abstract |
Using China's 2008 corporate tax reform as a quasi-natural experiment, we construct a difference-in-differences setting to study firms' asymmetric tax compliance. Compared to firms whose taxes were unaffected by the reform, firms whose tax rate increased reported significantly lower profit margins to avoid paying more taxes. However, firms facing a tax cut did not behave differently from the unaffected firms. The asymmetric behavior is valid for private firms, but not for state-owned firms that have softer budget constraints. Such tax avoidance is done through the manipulation of the costs of goods sold and other expenses, rather than managing net receivables.
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| 2 |
ID:
192347
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| Summary/Abstract |
While it is well known that there are systematic birth order effects on life cycle outcomes, there is less consensus about underlying channels and mechanisms of birth order effects. We find negative birth order effects among Chinese adolescents, favoring earlier-born children within household in academic achievement, cognitive skill measures, and in parenting behaviors including harsh parenting and parental investment. We highlight harsh parenting as a novel channel of birth order effects, in which earlier-born children are less likely to be physically punished by their parents. Heterogeneity analysis results are consistent with parents reinforcing academic advantage of better-performing earlier-born children, but do not support resource dilution, son preference, or reputation concerns as primary mechanisms underlying birth order effects. Our findings are in contrast to positive birth order effects found among earlier generations of Chinese siblings reported in the literature.
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| 3 |
ID:
192356
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| Summary/Abstract |
This study explores the relationship between chief executive officer (CEO) narcissism and corporate performance in China. Based on the Chinese institutional and cultural background, we introduce organizational innovation as a mediating variable and CEO power as a moderating variable. We find that CEO narcissism is positively related to corporate performance based on 275 companies listed on the growth enterprise market (GEM) from 2012 to 2020. Furthermore, organizational innovation plays a partially mediating role in the relationship between CEO narcissism and corporate performance, and the moderating role of CEO power is partially supported.
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| 4 |
ID:
192363
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| Summary/Abstract |
By examining the period 2013–2018, this paper follows up a previous one which analysed the increase in the inequality of China's wealth per capita over the period 2002–2013. It finds that the Gini coefficient, having risen rapidly over the earlier period, continued to grow but did so more slowly in the later period, at the national level and in both urban and rural China. Counterfactual analysis identifies the lower rate of house price inflation as an important reason for the slowdown. Policies and policy options are examined, both directly on wealth inequality and indirectly through control of house price inflation. Nevertheless, the rising inequality of wealth per capita among households does indeed pose a challenge to the achievement of ‘common prosperity’ in China. It deserves more policy attention.
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| 5 |
ID:
192351
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| Summary/Abstract |
In this paper, we investigate the impact of peer effects on cognitive ability formation at two different levels – class peers and close friends simultaneously. We use random class assignments in the China Education Panel Survey (CEPS) to deal with ability sorting and self-selection into classroom when estimating class peer effects. To identify close friend peer effects, we include initial human capital to control for time-invariant unobservables, as stable friendship implies that unobserved preference based on which students make friends is likely to stay unchanged, especially within the one-year frame of the data. We find significant positive peer effects on students' cognitive ability formation at both levels. Peer effects are heterogeneous across student ability. Peer effects work through two channels – peer conformity and peer complementarity. We find both channels generate positive peer effects and jointly determine the size of overall estimated peer effects.
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| 6 |
ID:
192379
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| Summary/Abstract |
In this editorial, we reviewed the articles collected in the special issue “Economics of Pandemic Disease” along with other relevant literature. We found that the pandemic has had a devastating impact on the economy as a whole and on small and medium-sized enterprises (SMEs) and private firms in particular, which may have deepened the economic inequality and impeded poverty reduction in China. The pandemic also resulted in substantial damage to the mental health and well-being of the Chinese population, with a disproportionate impact on minorities, including the female and the illiterate. We also examined the available evidence regarding the effectiveness of China's policy response to the COVID pandemic, which suggested that China's zero-Covid policy succeeded in stabilizing its economy and maintaining a safe environment in earlier phases of the pandemic, but hardly achieved a balance between disease control and economic growth in the later stage when less fatal but more transmissive coronavirus variants emerged. Lastly, we discussed policy options that China may take to protect the health of its people and avoid a potentially substantial loss of lives during the transition toward the post-pandemic new normal, which include prioritizing the timely administration of effective vaccines among the elderly and vulnerable populations, improving public communications regarding when and how to seek medical help, and strengthening the surge capacity of the healthcare systems, especially in less developed regions.
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| 7 |
ID:
192349
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| Summary/Abstract |
Unexpected health shocks may bring catastrophic consequences for households. This paper examines the effect of unexpected adverse health shocks on household members' physical and mental health, labor supply, household income and asset, and health behaviors in China by analyzing two nationally representative datasets and adopting a difference-in-differences method augmented with coarsened exact matching. We find that an unexpected health shock results in a discounted out-of-pocket medical expenditure of 16,943 RMB (US$ 2647) over five years for an average household, a reduction of household income per capita of 841 RMB per year (US$ 131, or 6.0% of household annual income per capita), and a loss of net household asset per capita of 13,635 RMB (US$ 2130, or 9.7% of household asset per capita). It raises the probability of an average household applying for public poverty relief allowance by 2.8 percentage points. In addition, we document a strong intra-household spillover effect of health shocks on mental health and health behaviors. A simple back-of-envelope calculation shows that the health shock induces a private cost of 34,966 RMB (US$ 5463) over 5 years for an average household, and incurs a social financial burden of 6066 RMB (US$ 948) in 5 years per household in medical reimbursement and social welfare transfers. At a national scale, the total social burden of health shocks from cardiovascular and cerebrovascular diseases amounts to 1.1 trillion RMB (US$ 172.1 billion) over 5 years.
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| 8 |
ID:
192352
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| Summary/Abstract |
Based on manually collected data from Chinese listed firms' key laboratories at the state and provincial levels, this study shows that key laboratories improve firms' innovation output. Corporations with key laboratories at the state or provincial level produce more patents and citations than their counterparts. A series of endogenous treatment effects, including the Heckman two-step sample selection model, instrumental variable estimation, policy shock analysis, and propensity score matching, indicate that this study's main conclusion is robust and consistent. We also observe that key laboratories' beneficial impact on innovation output becomes more prominent for firms belonging to high-tech industries, those led by an inventor or scientist CEO, and those located in cities that enforce the protection of intellectual property. Further, key laboratories foster innovation mainly by developing scientific research capacity, increasing human capital, and improving R&D subsidies. Our findings demonstrate that key laboratories can benefit firms, their stakeholders, and the public in an emerging market such as China.
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| 9 |
ID:
192377
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| Summary/Abstract |
Based on the Statistical Classification of the Digital Economy and Its Core Industries (2021) released by the National Bureau of Statistics of China and the information and communications technology products released by the United Nations Conference on Trade and Development to construct a digital product catalog manually, this paper analyzes the impact of digital product imports on Chinese firms' export product quality using a combined data set of the Annual Survey of Industrial Production and China Custom Records from 2000 to 2013. The results show that digital product imports have a significant positive effect on a firm's export product quality. To address potential endogeneity, this paper uses a series of instrumental variables (IVs) and constructs a multi-timing difference-in-differences model using the firm's first digital product import as exogenous shock, and finds strong supporting evidence. Digital product imports improve the quality of export products through three mechanisms: technology spillovers, productivity, and information-searching capabilities. Heterogeneity analysis reveals that digital product imports have greater impacts on foreign-owned and capital-intensive firms, and digital intermediate imports play a bigger role than do digital non-intermediate imports. The results of this paper have important implications for developing countries that wish to improve the quality of exports through digital trade.
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| 10 |
ID:
192353
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| Summary/Abstract |
Using China Family Panel Studies data, we analyze online and offline social interactions' influence on household entrepreneurial choice. We conclude that social interactions can positively influence household entrepreneurial choice, intensity and performance, and our findings are robust considering the possible endogeneity problem. The mechanisms of information acquisition, financing constraints relaxing and relative wealth concern are valid. In terms of heterogeneity analysis, for entrepreneurs of rural migrant backgrounds (those with agricultural hukou and urban permanent residence), the impact of online social interaction is more significant than it is for others. For households in the eastern regions, social interactions show significant positive impacts on entrepreneurship choices. We also find that the promotion effect of social interactions is more pronounced for households with a higher debt level than for those with a lower debt level.
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| 11 |
ID:
192365
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| Summary/Abstract |
This paper investigates the impact of export liberalization on the geographic concentration of water pollution. Data shows that water pollution emissions are unevenly distributed across regions in China. Using China's accession to the World Trade Organization (WTO) as the exogenous shock, we identify a negative causal effect of export liberalization on the agglomeration of water pollution across regions in China. It suggests that relatively more water pollution is discharged in those previously low-pollution regions after export liberalization. We confirm this with data on regional relative pollution emissions. Further decomposition shows that it is the intensive margin (average pollution emission) rather than the extensive margin (number of polluting firms) that drives the deglomeration of water pollution emissions within the liberalized industry.
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| 12 |
ID:
192355
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| Summary/Abstract |
Drawing on data from the China Household Finance Survey and China's Urban Business Environment Index, this study examines the effects of the business environment on entrepreneurial behavior in China. The identification uses the instrumental variables approach to address possible endogeneity. The empirical results show that improving the business environment can create more employment opportunities, optimize the structure of employment, and promote entrepreneurship; in terms of different dimensions of the business environment, improvements in public services, the market environment, and the legal environment play a stronger role in promoting entrepreneurship; from the entrepreneurial process perspective, improving the business environment can significantly enhance entrepreneurial willingness, boost the “metabolism” of entrepreneurial groups, and increase individual entrepreneurial identity. Further analyses on the mechanism indicate that improving the business environment is conducive to individual entrepreneurship through the following four channels: (1) creating more entrepreneurial opportunities, (2) reducing operating costs, (3) reducing financing costs, and (4) improving contract enforcement.
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| 13 |
ID:
192354
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| Summary/Abstract |
We examine the long-run impact of land reform experience in childhood and adolescence on entrepreneurship later in life. To do so, we take advantage of village-level variation in the Household Responsibility System (HRS) reform in China that transformed land property rights from a communal system into an individualized tenure system. We find that early-life exposure to land reform increases the probability of becoming an entrepreneur in adulthood. This positive association is mainly driven by exposure to the HRS increasing the propensity for solo and necessity entrepreneurship. We also find considerable heterogeneity in the long-run impact of early-life HRS reform exposure across subsamples. Females, individuals from low-income families, individuals with less-educated parents and individuals in the central region are more likely to become entreprenuers following early-life exposure to land reform. Overall, while previous research has found that land titling reform in China significantly increased business creation in rural areas, our findings imply that the positive impact of land reform on entrepreneurial ventures is likely to be understated if its long-run impact on those exposed to land reform early in life on the likelihood of their becoming entrepreneurs later in life is not considered.
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| 14 |
ID:
192360
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| Summary/Abstract |
This paper investigates the effect of air pollution on employees' earnings in China. Using both instrument variable (IV) and regression discontinuity design (RDD), we find that air pollution reduces employees' yearly earnings. A one μg/m3 increase in yearly PM2.5 decreases employees' yearly earnings by 175.4 CNY. The total loss in earnings for all employees working for our sample firms amounts to about 268.59 million CNY. Our estimations are not sensitive to a battery of different robustness checks. We also find that the effect of air pollution differs based on several factors including labor intensity, ownership types and firm size. Our mechanism tests indicate that air pollution can reduce employees' earnings by lowering their unit wage and reducing their working time. The resulting increase in firms' labor costs further undermines their operating status. Notably, air pollution exerts a non-linear negative effect on employees' earnings. Overall, our findings suggest that air pollution can significantly lower employees' benefits by reducing their earnings. Our paper also provides powerful support for formulating environmental regulations in the future.
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| 15 |
ID:
192368
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| Summary/Abstract |
We study how temperature exposure affects mental health in a developing country using data from China Family Panel Studies (CFPS). We find that exposure to high temperatures leads to worse mental health. Specifically, one additional day above 27 °C during the past week would increase individuals' total CESD 8 score by 1.5%, and the likelihood of having severe mental illness by 6.2% relative to a day in the reference temperature bin. We further estimate the potential mitigating effects of air conditioning on the relationship between temperature and mental health. We find that the identified relationship is mitigated by installing air conditioning. We also test some mechanisms through which temperature might impact mental health, including physical health status and sleep. We further discuss the overall health expenditure burden associated with climate change.
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| 16 |
ID:
192357
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| Summary/Abstract |
This work sheds some light on the influence that entrepreneurs' previous work experiences exerted on the growth performance of Chinese private firms after the privatization reform in the early 2000s. Focusing on a representative and large sample of private firms, the analysis finds evidence of an inferior performance of the companies run by entrepreneurs with past top management experience in state-owned companies, while the superior performance of the companies run by entrepreneurs with prior technical experience. The study investigates specific theory-driven mechanisms through which different experiences impact firm performance, including time allocation and R&D management strategy. Upper echelon theory and imprinting effects appear relevant, and local institutions, political and economic uncertainty, and entrepreneurs' self-perception act as moderating factors. We deal with potential endogeneity issues with propensity score matching and two-stage least squares regression. These findings provide novel evidence on underexplored aspects of the ongoing privatization process in China and other economies in transition.
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| 17 |
ID:
192348
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| Summary/Abstract |
Drug overuse and high drug expenditures have long been of concern in China. In 2012, the Chinese government implemented the drug price zero-markup policy (ZMP) to contend with these problems. This paper investigates the impact of the ZMP on the hospitalization expenses and health outcomes of inpatients, using administrative data from Beijing. The findings show that the ZMP reduces inpatients' medicine expenses by an average of 20.4%, while total hospitalization expenses do not change significantly. The findings also show that the average length of hospital stay increases by 0.588 days. The results jointly indicate that hospitals adopt substitution behavior to make up for the drug revenue loss. The paper finds no evidence that the ZMP has a negative impact on patients' probability of death or readmission.
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| 18 |
ID:
192346
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| Summary/Abstract |
We investigate the impact of Big Tech lending on non-bank traditional lenders, which have a more overlapping clientele with Big Tech lenders than traditional banks. Our empirical methodology exploits geographical differences in Big Tech penetration ratios and adopts the instrumental variable (IV) approach using the FinTech payment adoption ratio and the distance to the Big Tech's headquarter. We find that the competition from Big Tech worsens the performance of branches facing stronger Big Tech competition by reducing the number of borrowers and the amount of loans. Moreover, branches in cities highly penetrated by Big Tech lending tighten the lending standard by reducing loan-to-value (LTV) ratios, measured as the approved loan amount per unit collateral value, while keeping the average collateral requirement unchanged. Our findings are consistent with the cream-skimming hypothesis that Big Techs possess better screening technology and reduce the quality of borrowers applying for traditional loans. Our results document novel changes in and responses of the non-bank traditional lending business in the Big Tech era.
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| 19 |
ID:
192361
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| Summary/Abstract |
Understanding the mechanism of labor reallocation during the implementation of environmental regulations is important for countries to stabilize employment. Using city-level data and listed firm-level data from 2005 to 2019, we investigated the labor reallocation entailed by the Clean Air Action (CAA) from 2013 to 2017 in China, and found that the CAA substantially reduced labor demand in regulated cities and listed firms. Notably, the CAA has entailed different levels of job destruction and job creation across time, industries, and firm types, boosting labor reallocation. Firstly, the effect of the CAA on labor demand was time-varying, as labor demand first decreased and then recovered from 2013 to 2019. Secondly, the CAA generated a greater job destruction in polluting industries and their downstream industries, and job creation in clean industries. Lastly, thanks to the CAA firms have increased the hiring of highly skilled workers, although equipment upgrades have reduced labor demand, especially in polluting firms.
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| 20 |
ID:
192372
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| Summary/Abstract |
Reducing urban-rural gaps in child health is one of the most difficult challenges faced by many countries. This paper evaluates the impact of a large-scale school meal program in rural China on the health and nutritional status of students aged 6–16 in compulsory education. We use data from the China Health and Nutrition Survey corresponding to four pre-treatment years (2004, 2006, 2009, and 2011) and one post-treatment year (2015) and find that program participation is, on average, associated with a higher child height-for-age. The impacts are larger among students in a better health condition but small or not significant among the most disadvantaged. We do not observe heterogeneous effects across several individual and household characteristics. We also find positive but not significant effects on Body Mass Index-for-age and weight-for-age. The results suggest that NIP partially improved students' health over the first years of implementation, but more support is needed to achieve broader impacts that effectively reach all vulnerable students.
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