A Bridge on Economic Issues between China and the World
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Bilateral Economies of Scope in International Trade
Yao Amber Li, Sichuang Xu, Stephen R. Yeaple, Tengyu Zhao, Jan 15, 2025This paper presents evidence that firms’ export and import decisions within the same foreign market are complementary, due to bilateral economies of scope that allow substantial cost savings when engaging in both activities. By quantifying these savings through a structural model, we show that bilateral economies of scope significantly enhance firms’ participation in international trade and amplify the effects of trade liberalization, offering new insights for policymakers and researchers.
Free Education's Impact on Schooling Outcomes: Direct Effects and Intra-household Spillovers
Naijia Guo, Shuangxin Wang, Junsen Zhang, Mar 05, 2025This study estimates the direct and spillover effects of a free education program on educational outcomes in rural China. We find that although the program encourages more eligible children to attend secondary school, it also leads to a decrease in high school enrollment among ineligible girls with eligible siblings, as they are more likely to choose work instead. In the long run, males exposed to free education have more years of schooling than their non-exposed counterparts. However, such effect is not found among females. This disparity suggests that a gender-neutral policy may have an asymmetric effect between males and females because of spillover effects through intra-household resource allocation.
E vs. G: Environmental Policy and Earnings Management in China
Darwin Choi, Feifei Lai, Mar 12, 2025We examine the conflict between environmental and governance issues arising from China’s automatic air pollutant monitoring system, introduced in 2012. Our findings suggest that polluting firms engage in downward earnings management to potentially minimize regulatory attention, with factors such as firm size, profitability, and market conditions influencing the extent of this behavior. This study highlights the unintended consequences of environmental policies.
Beyond the Fundamentals: How Media-Driven Narratives Influence Cross-Border Capital Flows
Isha Agarwal, Wentong Chen, Eswar Prasad, Apr 02, 2025We provide the first empirical evidence on how media-driven narratives influence cross-border institutional investment flows. Applying natural language processing techniques to 1.5 million newspaper articles, we document substantial cross-country variation in sentiment and risk indices constructed from domestic media narratives about China in 15 countries. These narratives significantly affect portfolio flows, even after controlling for macroeconomic and financial fundamentals. This impact is smaller for investors with greater familiarity or private information about China and larger during periods of heightened uncertainty. Political and environmental narratives are as influential as economic narratives. Investors react more sharply to negative narratives than positive ones.
Migration and Resource Misallocation in China
Xiaolu Li, Lin Ma, Yang Tang, Oct 23, 2024This article discusses how reducing frictions across Chinese provinces could significantly improve aggregate output, lower spatial inequality, and discourage population concentration in large cities.
