A Bridge on Economic Issues between China and the World
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Do Richer Households Exit Agriculture? Positive Income Shocks in Rural China
Jessica Leight, Jul 18, 2018Rural households in China have experienced a steadily increasing rise in their real income over the last twenty years as economic reforms have revitalized this sector. Analyzing an unusual natural experiment generated by an increase in prices paid for mandatory grain procurement in China post-1993, I seek to provide evidence around how an increase in permanent income affects households’ production portfolio. Evidence suggests that households experiencing positive income shocks substitute away from agricultural production and are more likely to migrate and to invest in non-agricultural production. They also increase their observed levels of borrowing and non-staple consumption.
Has COVID-19 permanently changed the nature of economic shocks on the Chinese economy?
Kaiji Chen, Patrick Higgins, Tao Zha, Apr 10, 2024In latest study, Kaiji Chen and his colleagues at Emory University investigated the impact of COVID-19 on the Chinese economy. Through the construction of a GDP expenditure dataset and the application of SVAR modeling, they found that the constrained consumption shock during the pandemic significantly affected China's economy and may potentially alter its economic shock nature permanently.
Employment Protection and Corporate Cash Holdings: Evidence from China’s Labor Contract Law
Chenyu Cui, Kose John, Jiaren Pang, Haibin Wu, Oct 13, 2021We examine whether and how employment protection influences corporate cash holdings using Chinese firm-level data. Our empirical results show that labor-intensive firms in China significantly increased their cash holdings following the enactment of China’s Labor Contract Law. Further analyses suggest that the results are generally consistent with a “labor adjustment costs” channel: employment protection...
Overpricing in Municipal Bond Markets and the Unintended Consequences of Regulatory Measures: Evidence from China
Laura Xiaolei Liu, Qiao Liu, Xiaoyu Liu, Ni Zhu, Dec 03, 2024Chinese municipal bonds are considerably overpriced in the primary market, leading regulators to set a lower bound on the issuance yield spread. This paper investigates the underlying reasons for this overpricing and evaluates the effects of implementing restrictions on yield spreads. Our findings indicate that underwriters may inflate prices to receive undisclosed benefits from local governments, such as local treasury cash deposits. We further show that the lower bounds severely impede price discovery in the primary municipal bond market. Even bonds not restricted by the lower limit are priced at the reference spread, exacerbating overpricing of riskier bonds. Local governments exploit these fixed prices by increasing the bond issuance amount and extending bond maturity. Our findings suggest that regulatory interference in pricing can have unintended consequences for pricing efficiency and that attempts to rectify mispricing may result in even more severe mispricing.
Credit Constraints and Fraud Victimization: Evidence from a Representative Chinese Household Survey
Nan Gao, Yuanyuan Ma, Lixin Colin Xu, Jun 09, 2021How and why do household credit constraints affect fraud victimization when households face fraud schemes? Using the urban sample of a novel nationally representative data set on fraud victimization and household finance, we find that households facing credit constraints are associated with a higher probability of becoming fraud victims and suffer from higher economic losses from frauds than households...
