Trade-Policy Dynamics: Evidence from 60 Years of US-China Trade George Alessandria, Shafaat Khan, Armen Khederlarian, Kim Ruhl, Joseph Steinberg, May 04, 2022
Trade-Policy Dynamics: Evidence from 60 Years of US-China Trade George Alessandria, Shafaat Khan, Armen Khederlarian, Kim Ruhl, Joseph Steinberg, May 04, 2022 International trade depends on the effects of past trade policy and expectations of future trade policy. Disentangling these two forces is difficult, but the US-China trade relationship is ideally suited for study. A large, and largely unexpected, trade liberalization in 1980 kicked off a long, gradual expansion of Chinese exports to the United States. Until China’s accession to the World Trade Organization (WTO) in 2001, these low tariff rates were relatively easy to revoke, generating time-varying uncertainty over their future values.
Currency Carry Trade by Trucks: The Curious Case of China’s Massive Imports from Itself Xuepeng Liu, Heiwai Tang, Zhi Wang, Shang-Jin Wei, Apr 13, 2022 Capital controls are common in many developing countries. With capital controls, the standard financial market transactions needed for currency carry trade are hard to implement. Yet, as long as there is a big difference between domestic and foreign interest rates, the incentive to engage in currency carry trade is present.
Does Spatial Misallocation in China’s Housing and Land Markets Drive Up Housing Prices? Yongheng Deng, Yang Tang, Ping Wang, Jing Wu, Mar 23, 2022 We documented pervasive spatial misallocations in the housing and land markets in China. We find larger cities with more competitive land markets and strict land supply restrictions have fewer subsidies in housing sales, and consequently a higher housing price compared to its frictionless benchmark. Removing frictions brings welfare gain because more individuals live in larger cities.
China’s New Goal for Income Distribution: What Does it Mean and are There Tradeoffs? Martin Ravallion, Shaohua Chen, Mar 16, 2022 China’s political leadership recently committed to expanding the proportion of middle-income groups to create a less polarised, and more ‘olive-shaped’, distribution of wealth. This column considers the potential trade-offs between reducing income polarisation and other goals, including poverty reduction.
Superstition Everywhere Jinfan Zhang, Huancheng Du, Mar 09, 2022 In Chinese culture, digit 8 (4) is taken as lucky (unlucky). We find that the numerological superstition has a profound impact across China’s stock, bond and foreign exchange markets, affecting asset prices in both the primary and secondary markets. The superstition effect, i.e., the probability of asset price ending with a lucky (unlucky) digit far exceeds (falls short of) what would be expected by chance, is everywhere.
Innovation versus imitation: Where all that Chinese R&D is going Michael König, Zheng (Michael) Song, Kjetil Storesletten, Fabrizio Zilibotti, Jan 26, 2022 China is aiming to become a technological innovation powerhouse by 2050, with Premier Li Keqiang recently announcing an increase in R&D investments by 7% for the next five years. But greater R&D investment is no guarantee of success. This column examines the effects of R&D investments by Chinese firms on aggregate productivity and growth.
Throwing Good Money after Bad: Zombie Lending and the Supply Chain Contagion of Firm Exit Yun Dai, Xuchao Li, Dinghua Liu, Jiankun Lu, Jan 19, 2022 Zombie lending to downstream firms does not reduce the exit likelihood of upstream firms. Worse, it distorts efficiency-based firm exit in upstream industries. The exit distortion effect works through the trade credit chain and is more profound in industries with stricter financial constraints and tighter supply chain connections
Do Chinese Cultures Spawn Family Businesses? Joseph P. H. Fan, Qiankun Gu, Xin Yu, Jan 12, 2022 Using a sample of Chinese private-sector firms that went public, we find that founders from the country’s regions with stronger collectivist cultures engage more family members as managers, retain more firm ownership within the family, and share the controlling ownership with more family members. Our study suggests that the collectivist culture boosts the formation of family businesses because the collectivist culture reduces information asymmetry, shirking problems, and associated monitoring costs among family members.
Misallocation, Selection, and Productivity: A Quantitative Analysis with Panel Data from China Tasso Adamopoulos, Loren Brandt, Jessica Leight, Diego Restuccia, Jan 05, 2022 We examine the distorting effects of China’s land institutions on aggregate agricultural productivity and other outcomes. We argue these distortions affect two key margins: (1) the allocation of resources across farmers (misallocation); and (2) the type of farmers who operate in agriculture (selection).
Chinese Infrastructure Projects Help Spread Economic Activity in the Global South Richard Bluhm, Axel Dreher, Andreas Fuchs, Bradley C. Parks, Austin M. Strange, Michael J. Tierney, Dec 29, 2021 Using our recently published geolocated dataset on Chinese government-financed transport infrastructure investments from 2000 to 2014, we show that these investments lead to a decentralization of economic activity within the subnational jurisdictions where they are located. Our analysis documents that this decentralization shifts activity toward suburban and peri-urban areas in low-income countries. We find no evidence suggesting that these projects systematically alter the distribution of activity across subnational jurisdictions.