The Price of Growing Like China: Higher Income Risks and Less Consumption Insurance

Raül Santaeulàlia-Llopis, Yu Zheng, Jun 20, 2018

Widening income inequality in China has prompted President Xi Jinping to shift focus and to emphasize the fostering of balanced, high-quality development. But how exactly did income inequality evolve over China’s growth process and what was its impact on consumption and welfare? Using a long panel of income and consumption data from thousands of rural and urban households, we document that the increasing income inequality in China mainly reflects increasing permanent income risk, against which it became harder and harder to insure consumption, over the period of rapid income growth from 1989 to 2009. In other words, as household income grew, so did income fluctuations. These income fluctuations had an increasingly direct impact on consumption. For rural households, the welfare cost from increasing income risk and increasing exposure of consumption to income risk can almost cancel out the welfare gain from accelerated income growth over those twenty years.

Carry Trade with Chinese Characteristics

Yi Huang, Ugo Panizza, Richard Portes, Jun 13, 2018

International borrowing by Chinese nationals has increased rapidly over the past 10 years. Some of this borrowing seems to be motivated by carry trade activities. Regulatory arbitrage may have played a role in this trend.

Is the Wife A Risk Mitigator? Evidence from Family Firms in China

Yue Pan, Jinli Xiao, Vincent W. Yao, Jian Zhang, Jun 06, 2018

Firm-level decisions are largely made by corporate executives whose preferences and attitudes can be shaped by historical traits and what is happening inside their households. We investigate how the involvement of a founder’s wife through marital ownership influences the family firm’s level of risk-taking and explore the underlying mechanisms.

Industrial Policy in China: Some Intended or Unintended Consequences?

Jing Cai, Ann E. Harrison, May 30, 2018

We explore the consequences of a 2004 tax change in China that reduced the value-added tax (VAT) on equipment investment. While the goal was to encourage technology upgrades, we find little evidence that the reform achieved its intended results. Although firms shifted the composition of investment toward machinery, actual investment rates were unaffected. Firms replaced labor with machinery, leading employment to fall significantly in the treated provinces and sectors. Our results suggest that the primary impact of the policy was to induce labor-saving investment.


How the Internet Changed Chinese Exports before Ali Baba Came

Ana M. Fernandes, Aaditya Mattoo, Huy Nguyen, Marc Schiffbauer, May 16, 2018 

Evaluating the Burden of a U.S.-China Trade War

Meixin Guo, Lin Lu, Liugang Sheng, Miaojie Yu, Apr 25, 2018 

E-Commerce Integration and Economic Development: Evidence from China

Victor Couture, Benjamin Faber, Yizhen Gu, Lizhi Liu, Apr 11, 2018 

The Role of Punctuation in the P2P Lending Market

Xiao Chen, Bihong Huang, Dezhu Ye, Apr 04, 2018 

The 2009 Monetary Stimulus in China

Kaiji Chen, Patrick Higgins, Daniel F. Waggoner, Tao Zha, Mar 21, 2018