A Bridge on Economic Issues between China and the World
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Can Investment Incentives Crowd Out Innovation? Evidence from China
Shaowei Ke, Yao Lu, Xinzheng Shi, Yeqing Zhang, Nov 06, 2019The Chinese government has been using strong fiscal stimuli to encourage investment. While these fiscal policies, such as investment tax credits, often encourage firm investment, we find that investment tax incentives may generate an unintended reduction of firms’ innovation. Moreover, the crowding-out effect is non-monotonic in the level of financial constraints.
Industrial Policy in China: Some Intended or Unintended Consequences?
Jing Cai, Ann E. Harrison, May 30, 2018We 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.
Assessing and Addressing the Coronavirus-Induced Economic Crisis: Evidence from 1.5 Billion Sales Invoice
Zhuo Chen, Pengfei Li, Li Liao, Zhengwei Wang, Aug 31, 2022We probe the effects of the COVID-19 pandemic and the subsequent containment policies on business activities in China by exploiting big data on 1.5 billion sales invoices. The average drop in sales was between 23% and 35%, depending on firm size, for the 12-week period after the Wuhan lockdown.
Higher Education and Corporate Innovation
Dongmin Kong, Bohui Zhang, Jian Zhang, Jul 22, 2020This paper investigates the impact of higher education on corporate innovation using a difference-in-differences approach. We find that Chinese firms in skilled industries generate better innovation outcomes, especially firms headquartered in provinces with more science and engineering college graduates, young firms that are more likely to hire young graduates, and firms located near universities. Also, we show that technological innovation is a mechanism...
Misallocation of Managerial Talent in China’s Housing Boom
Yu Shi, Feb 20, 2019The housing boom in China has raised great concerns about capital and credit misallocation. Recent research by IMF Economist Yu Shi finds that China’s imperfect financial market and regulations in the land market have also led to a misallocation of managerial talent, dampening productivity and growth in the non-real estate sectors. Productive managers in other sectors moved to the real estate sector...
