The size of cities in China – and the effects of city size on productivity – are important topics for urban economists. This column argues that the data used in many previous studies of Chinese cities do not stand up to scrutiny because they do not take nearly enough workers into account. More comprehensive data on city employment from China’s 2010 census suggest that there are lots of inefficiently small cities.
John Gibson, Chao Li, 23 July 2015
Sourafel Girma, Yundan Gong, Holger Görg, Sandra Lancheros, Christiane Krieger-Boden, 24 July 2015
In the run-up to WTO accession in 2001, China considerably liberalised its policy towards FDI. This column argues that foreign acquisitions contributed significantly to raising export activities and R&D activities, though rather through joint ventures than whole acquisitions.
Johan Hombert, Adrien Matray, 11 July 2015
The rise of China has been identified as a major source of disruption for the manufacturing sector in high-income economies. This column argues that innovation helps firms to escape import competition from low-wage countries. It uses variation in R&D tax credits across years and US states to show that firms' R&D capital stock has a causal effect on their resilience to trade shocks.
Matthew Kahn, Cong Sun, Siqi Zheng, 08 July 2015
China’s cities suffer from extremely high levels of air pollution, and Chinese consumers spend more than $US100 million on anti-smog products per year. Using recent internet sales data, this column explores how investing in such self-protection products varies for consumers with different income brackets. The urban poor are shown to be less likely to engage in this health-improving strategy. This suggests that cross-sectional income comparisons understate lifetime inequality.
Bernard Hoekman, 24 June 2015
The world’s trade-to-GDP ratio climbed steadily for six decades. The rise slowed even before the Global Crisis and world trade growth has been anaemic since 2010. Recent data shows it declining, leading some to wonder whether global trade has peaked. This column introduces a new eBook that examines the issue from a wide range of perspectives. No consensus emerges but it is clear that this is not just a cyclical issue – something structural changed.
Ryuhei Wakasugi, 02 June 2015
The Chinese government significantly restructured and modernised its economy to gain WTO accession in December 2001. This column examines how WTO entry affected different types of firms. It finds that both private and State-owned firms became more productive after WTO entry yet these productivity gains did not translate into a higher propensity to export for State-owned enterprises.
Christopher Adam, Ugo Panizza, Andrea Presbitero , David Vines, 12 May 2015
World leaders are preparing for the third International Conference on Financing for Development in Addis. More money may help, but may also make things worse due to aid dependence, Dutch disease, and/or unsustainable debt. This column argues that the political discussion needs to be accompanied by more, and better data and research on how financing can support sustainable development.
Joshua Aizenman, Yothin Jinjarak, Huanhuan Zheng, 04 May 2015
China’s export-led growth has coincided with the country becoming one of the largest net global creditors. This column looks ahead to the next chapter of Chinese ‘outwards mercantilism’ – FDI investment in natural resources, commodities and mining bundled with access to finance and the export of Chinese capital products and labour services.
Peter Robertson, 30 March 2015
The Soviets matched the US only by spending up to 20% of GDP on the military during the Cold War. This column argues that, in stark contrast to this example, China has the potential to match the US in certain military spheres with similar burden on its economy. Using exchange rates comparisons significantly understates the Chinese military spending. A much more realistic assessment is obtained using PPP terms. If both countries spent the same fraction of their GDP on the military, the relative size of China’s military machine would be more than 90% of the US one.
John Whalley, Daqing Yao, 23 February 2015
Since September 2013 China has been operating a new form of free trade zone based in a small area of Shanghai. This column describes the implied new trade and investment policies in detail and concludes that the new special zone is likely to be a first step towards a floating exchange rate, free capital account and independent monetary policy.
Carlo Carraro, 07 February 2015
China and the US have recently agreed to reduce their greenhouse gas emissions. This column asks what quantifiable impact the new targets will have, whether they are any better than previous approaches, and if so, whether they are enough to avoid dangerous climate change. While insufficient for keeping temperature increase below the 2°C limit, the US and China’s bilateral commitments are a step in the right direction, and form the basis for a stronger international agreement in Paris later this year.
Alex Cukierman, 07 January 2015
The Global Crisis has increased the importance of the renminbi as an international currency. This column describes how the status of the renminbi has changed relative to that of the dollar and the euro. It also discusses what their future as future currencies would be. The author suggests that within 10 years, the renminbi would be at least at par with the dollar as a regional trade settlement currency in East Asia. It is also likely to become a close second to the euro as a world reserve currency.
James Wang, 30 December 2014
Many lenders hire loan officers to screen soft information that may otherwise be ignored by credit scoring. However, in addition to their compensation costs, loan officers may have characteristics, such as being overly cautious, that could distort their decisions. This column documents the performance of loan officers using data from a Chinese lender. Despite the distortions, the loan officers contribute three times their pay in annual profits above what the lender could have earned by itself, even with the benefit of hindsight.
Samuel Marden, 28 December 2014
It is often argued that for poor countries, increases in agricultural productivity result in higher non-agricultural output, but the theory is ambiguous and the empirical evidence is limited. This column presents evidence from a natural experiment provided by China’s early 1980s agricultural reforms. Higher agricultural output induced by the reforms led to quantitatively important growth in non-agricultural output. This growth appears to be primarily due to rural savings increasing the supply of capital to the non-agricultural sector.
Corrado Giulietti, Jackline Wahba, Yves Zenou, 21 December 2014
Migration is heavily influenced by social networks. Nonetheless, little is known about the underlying mechanisms. This column uses a new dataset from China to disentangle the effects of strong and weak ties on the migration decision. The findings indicate that strong and weak ties act as complements. Having many weak ties with an urban area amplifies the positive impact of having a strong tie in the same area.
Willem Thorbecke, 06 November 2014
Foreign reserve accumulation by China and other east Asian countries has been a controversial way to boost exports. This column argues that it is not even in their own national interests. The policy has been ineffective in maintaining China’s ordinary trade surplus, while its processing trade surplus continues to rely on devaluation in countries further up the supply chain. Foreign reserve divestment would increase purchasing power in east Asian countries, free up government revenue, and be innocuous to export competition if properly coordinated.
Zheng Song, Kjetil Storesletten, Fabrizio Zilibotti, Yikai Wang, 19 October 2014
The design of the pension system is a hot policy issue in China, given its fast-ageing population. This column discusses how different pension systems could allow different generations to share the benefits of high growth. The authors argue that a reform of the current system is necessary to achieve financial sustainability. However, delaying its implementation is advisable on the grounds of its effect on income inequality.
Florian Mayneris, Sandra Poncet, 13 October 2014
Minimum wage laws are often shown to have little impact on employment as the labour price rise can be offset by lower turnover, lower markups, and heightened efficiency, or ‘cleansing’ effects. This column shows that in a fast-growing economy like China, there is a ‘cleansing’ effect of labour market standards. Minimum wage growth allows more productive firms to replace the least productive ones and forces incumbent firms to become more competitive. Both mechanisms boost the aggregate efficiency of the economy.
Daron Acemoglu, David Autor, David Dorn, Gordon Hanson, Brendan Price, 28 September 2014
Manufacturing in the US has rebounded after the Great Recession, but employment levels have not recovered from their steep decline in the decade before the recession. This column examines to what extent the sector’s fall is a result of the rise of China. The authors estimate direct effects of import competition from China, as well as labour market and buyer-seller indirect effects that operate at the local level. China’s impact has been strong, and employment in US manufacturing is unlikely to recover.
Heiwai Tang, Wenjie Chen, 22 September 2014
Using a new, unique, and comprehensive data set that covers close to 19,000 Chinese ODI deals from 1998 to 2011, we find that in contrast to the common perception, over half of the ODI deals are in service sectors, with many of them appearing to be related to export promotion. Ex ante larger, more productive, and more export-intensive firms are more likely to start investing abroad. Ex post, ODI appears to enhance firm performance (i.e., total factor productivity, employment, export intensity, and product innovation). Empirical analysis based on firms’ trade transaction data shows a significantly positive effect of ODI on firms’ trade performance, but little technology transfer.