Does wage justice hamper creativity? Pay gap and firm innovation in China

Although the pay gap between executives and employees has received considerable attention, its economic consequences remain unclear due to the unavailability of data. In this study, we examine the effects of the pay gap on firm innovation by using data from Chinese listed firms. We show that: 1) the first-order effect of pay gap on firm innovation is significantly positive, supporting the tournament theory; 2) however, when pay gap is relatively high, the importance of comparison theories increases; 3) high management pay premiums provide incentives for management to devote to innovation activities, while pay premiums for ordinary employees impede firm innovation; and 4) both the employee's human capital and state ownership play significant roles in the negative effects of employee pay premiums on firm innovation. Overall, we provide critical insights and a serious challenge for regulators in China. The policy implications of this study could be of interest to regulators who intend to encourage firm innovation.     

Chinese block transactions and the market reaction

This paper examines block transactions in the Chinese equity market. We find that most of the block transactions are traded at prices at or below the closing price of the regular continuous auction market, and more than half are traded at or below the lowest price of the day. Consistent with the price pattern indicating that the block transactions are seller-initiated, the overall market reaction is negative. However, we find a different market reaction to block transactions when the buyer is represented by China International Capital Corporation (CICC), the number one investment bank in China which counts many foreign institutional investors as its clients. The positive reaction is consistent with the buyer-certification hypothesis, that is, the fact that some smart institutional buyers enter block trade indicates the buyers' assessment of undervaluation.     

夏威夷农产品礼物篮的消费者偏好分析——对于广州购买者的问卷研究

文章使用广州的调研数据，采用联合分析方法研究了消费者对于高价值、夏威夷生产的食品礼物篮的偏好。我们计算了相对重要性指标衡量消费者对礼物篮属性的评价。研究得到了三点结论：（1）食品和容器应为“夏威夷制造”，从而使得消费者愿意支付高的价格；（2）企业消费者一般不愿意为礼物篮支付高的价格；（3）个人消费者愿意支付高价格的奎阿相思木礼物篮。这说明一个新兴的高消费阶层在中国出现。     

夏威夷农产品礼物篮的消费者偏好分析——对于广州购买者的问卷研究

文章使用广州的调研数据,采用联合分析方法研究了消费者对于高价值、夏威夷生产的食品礼物篮的偏好.我们计算了相对重要性指标衡量消费者对礼物篮属性的评价.研究得到了三点结论:(1)食品和容器应为"夏威夷制造",从而使得消费者愿意支付高的价格;(2)企业消费者一般不愿意为礼物篮支付高的价格;(3)个人消费者愿意支付高价格的奎阿相思木礼物篮.这说明一个新兴的高消费阶层在中国出现.     

Home value misestimation and household behavior: Evidence from China

Households often make errors when self-assessing their housing wealth. By using the Chinese Households Finance Survey, we show that Chinese urban households systematically overestimate their home value. This bias is significantly related to household consumption: a one standard deviation increase in the extent of estimation bias is associated with a 10% increase in household consumption. Our main results are robust against a variety of robustness checks, e.g., taking into account the expectations of future home price, using the interviewee's estimation as the instrumental variable for the household self-estimation, implementing the hedonic model on an external data source to assess real homevalue, etc.. Further, we show that overestimated households are more likely to take risk in financial market, and have a larger amount of immediate and conspicuous consumption. These findings have policy implications for the recent debate about property tax, indicating the unintended consequences of property tax through providing more precise information about home value.     

Hukou status,housing tenure choice and wealth accumulation in urban China

In Chinese cities, migrants with rural hukou, compared to residents with local urban hukou, face more uncertainty, have limited access to mortgage finance, and are less eligible for low-cost housing. A simple model demonstrates that for these reasons, rural-to-urban migrants are less likely to own housing units in cities and as a result accumulate less wealth. Our empirical analysis examines a nationally representative household survey from 2013 and uses mother's hukou status as an instrumental variable. We find that household heads with rural hukou are about 20 percentage points less likely to own housing units in cities than comparable household heads with local urban hukou. Consequently, the average household head with a rural hukou owns 315 thousand yuan less housing wealth and 226 thousand yuan less total wealth than comparable household heads with local urban hukou. The average household head with a rural hukou has 288 thousand yuan less in housing capital gains than comparable household heads with local urban hukou. Moreover, we find that these differences are much larger in the first- and second-tier cities, cities with more stringent hukou regulations, and among younger cohorts.     

Field Experiment Tests for Discrimination against Hispanics in the U.S. Rental Housing Market

This article tests for discrimination against Hispanics in the U.S. rental housing market using e‐mail correspondence with landlords advertising units online. We divide Hispanics into two groups: those that appear assimilated into American culture and recent immigrants. We find little difference in the treatment of assimilated Hispanics and whites; however, Hispanics we portray as recent immigrants receive less favorable treatment with margins of net discrimination as large as 6.89% of landlords. We also find discrimination varies significantly at the region level and by the ethnic composition of neighborhoods.     

The impact of the rise and collapse of Japan's housing price bubble on households’ lifetime utility

This study estimates the impact of the dramatic changes in housing prices during Japan's bubble from the late 1980s to the 1990s on households’ asset accumulation and utility over their life cycle. We construct a life-cycle model explaining households’ consumption/saving and housing decisions under collateral and borrowing constraints. We estimate this model using data from the Family Income and Expenditure Survey (FIES), which includes data on households’ housing wealth estimated from objective information. Using the estimated model, we then conduct a counterfactual simulation in which we assume that housing prices remained constant during the bubble period. Doing so allows us to quantify the gains/losses of lifetime utility due to the housing price boom and bust. We find that 72.2% of the households experienced an average decrease in lifetime utility equivalent to 5.7% of lifetime income. On average, Japan's housing price boom and bust caused a loss in lifetime utility equivalent to 4.7% of lifetime income. Moreover, we compare the impact of the housing price bubble across cohorts and find that the impact was greatest for those who experienced the bubble at ages 35–45.     

Confucius Institutes and FDI flows from China to Africa

Is the establishment of new Confucius Institutes (CIs) in African countries motivated by resource seeking? We focus on uncovering new empirical evidence about the establishment of CIs, whether they are related to natural resources, and the extent to which the establishment of new CIs and Chinese foreign aid flows affect one another. Whereas Chinese aid flows do indeed appear to be empirically associated with African countries' natural resources, the evidence we report suggests that CIs are established based on a distinct set of motives. We find that CIs, Chinese foreign aid flows to Africa and natural resources have joint predictive power on the subsequent year's Chinese FDI outflows. CIs are not, however, positively associated with the subsequent year's aid flows. And aid flows are not positively associated with the subsequent year's expected number of CIs. We interpret this as evidence that CIs reflect an economically significant expression of Chinese soft power. The goals underlying the expression of this soft power are not subsumed by natural resource seeking and are not easily compressed to a single dimension. The data show that CIs and aid flows are not positive predictors of each other and are not subsumed (i.e., made to disappear) by the inclusion of controls for natural resources. Thus, the presence of a CI reveals independent, novel, and economically significant information about future trade flows that cannot be explained away by differences in resources or other control variables commonly found in empirical models of trade flows. The empirical evidence suggests that CIs are indeed an effective instrument for increasing China's soft power but that this soft power is not motivated solely (if at all) by resource seeking.     

Testing for horizontal and vertical foreign investment spillovers in China, 1998–2007

As with many developing countries, the Chinese government hopes that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In this paper, we show that foreign investment originating outside of Hong Kong, Macau, and Taiwan has positive effects on individual firm level productivity, while foreign investment from HKMT firms does not. We also test for both horizontal (within the same industry) and vertical (upstream or downstream) linkages from foreign investment. Using a manufacturing firm-level panel for 1998 through 2007, we find zero or weak positive horizontal externalities. However, our results show that foreign direct investment (FDI) has generated positive productivity spillovers to domestic firms via backward linkages (the contacts between foreign affiliates and their local suppliers in downstream sectors) as well as forward linkages (between foreign suppliers and their local buyers in the upstream sectors).     

Chinese consumer quality perception and preference of sustainable milk

A sustainable food consumption and production system is at the center of the global sustainability initiative. With the world's largest population and rapidly growing environmental concerns, it is urgent for China to develop effective ways to motivate sustainable food consumption and production. Understanding consumer perception and preference of sustainable food provides critical information for Chinese policy makers to identify barriers and develop rules and policies to reach this goal. Our paper shows that most Chinese consumers do not clearly understand the meaning of sustainability, and lack knowledge about sustainable food production. The premium that consumers are willing to pay for sustainable milk is about 40%. Consumers who do not perceive the linkage between sustainable production and food quality have a significant lower willingness to pay for sustainable milk. Interestingly, people with children are more willing to pay for sustainable milk, suggesting a potential over-generation concern about sustainable development.     

Quality of life in Chinese cities

The Rosen-Roback spatial equilibrium theory states that cross-city variations in wages and housing prices reflect urban residents' willingness to pay for urban amenities or quality of life. This paper is the first to quantify and rank the quality of life in Chinese cities based on the Rosen-Roback model. Using the 2005 1% Population Intercensus Survey data, we estimate the wage and housing hedonic models. The coefficients of urban amenity variables in both hedonic models are considered the implicit prices of amenities and are used as the weights to compute the quality of life for each prefecture-level city in China. In general, provincial capital cities and cities with nice weather, good air quality, and accessible public transit have high quality of life. We also find that urban quality of life is positively associated with the subjective well-being of urban residents.     

The Effect of a Program‐Based Housing Move on Employment: HOPE VI in Atlanta

We combine records of Atlanta Housing Authority (AHA) clients, Georgia Department of Labor (DOL) employment records, and neighborhood characteristics to analyze the causal effect of an exogenous move out of public housing on the employment of public housing residents. The exogenous move was caused by a HOPE VI or HOPE VI‐like project in Atlanta. We find that such an exogenous move has a positive and statistically significant effect on the probability of employment for those residents who moved relative to other public housing tenants. We also compare the change in employment of those whose exogenous move was to another public housing unit to those who took a housing voucher. We also compare the change in the probability of employment associated with an exogenous move and a voluntary move and find that both types of moves are associated with a greater probability of employment as compared to those who did not move.     

Chinese and world equity markets: A review of the volatilities and correlations in the first fifteen years

After more than 15 years of Chinese equity markets, we study how variance, covariance, and correlations have developed in these markets relative to world markets, based on the dynamic conditional correlation (DCC) model of Engle [Engle, R., 2002. A dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics 20(3), 339–350.]. Chinese markets offer A-shares to domestic investors and otherwise identical B-shares to foreign investors. We find that the volatility of A-shares has declined over the past decade. We find no asymmetric volatility relative to world markets in China. Contrary to the global trend of increasing cross-country correlations, we find stationary correlations for China. A-share indices have never been correlated with world markets, and B-share indices exhibit a low degree of correlation with Western markets (0–5%) and a slightly higher degree of correlation with other Asian markets (10–20%). We interpret these findings using Gordon's growth model.     

Determinants of China's and Japan's Foreign Aid Allocations in Africa

Foreign aid plays an important role in promoting economic development in Africa. Recently, several countries, most notably China, have emerged as alternative sources of foreign aid. However, their motives for providing foreign aid have been questioned. The present study examines and compares determinants of China's and Japan's foreign aid allocations in Africa. It assumes that the distribution of foreign aid was determined by the aid donors’ self‐interest and also by the aid recipients’ needs. Three panel model methods, namely, the pooled OLS method, the one‐way fixed effects method and the two‐way fixed effects methods, were employed to examine and compare the patterns of China's and Japan's foreign aid allocation in Africa. The main finding was that the provision of foreign aid by China and Japan was primarily driven by the aid donors’ self‐interest. Additionally, the size of population in a recipient country was an important element to determine China's and Japan's aid allocations. The findings also suggest that Japan tended to pay more attention to the aid recipient countries’ needs as well as to the quality of governance and institutions in these countries. Overall, the findings indicate that there was no considerable difference in the motives for the provision of aid between the two aid donor countries.     

Targets' Tax Shelter Participation and Takeover Premiums

This paper examines the effect of targets' participation in tax shelters on takeover premiums in mergers and acquisitions. Using a novel data set in which targets disclose that they have not participated in tax shelters, we find that targets that make this statement in their merger filings are associated with 4.6 percent higher takeover premiums, on average. These findings suggest that acquirers are concerned about the potential future liabilities when targets have engaged in tax sheltering. Consistent with this interpretation, the results also indicate that the positive association between targets' nonsheltering disclosure and acquisition premiums is stronger for less tax‐aggressive acquirers. This paper demonstrates the importance of targets' aggressive tax positions in the determination of premiums offered to targets' shareholders.     

The Impact of Housing Prices on Health in the United States Before,During, and After the Great Recession

We estimate the effects of U.S. Metropolitan Statistical Area housing prices on a variety of health outcomes and health-related behaviors separately for homeowners and tenants. The constructed data set consists of information on individuals from the 2002–2012 Behavioral Risk Factor Surveillance System combined with homeownership data from the March Current Population Survey and housing prices from Freddie Mac. We estimate positive effects on homeowners' mental health when housing prices increase. We also find negative effects on tenants' health and health-related behaviors with increases in housing prices. These estimated contemporaneous effects are concentrated among low-income homeowners and tenants, and the effects for tenants are not persistent in the long run. However, the cumulative effects of an increase in housing prices on obesity become more pronounced for homeowners in the long run, resulting in worse self-reported health.     

Peer effects in rural housing demand: Evidence from China

This paper utilizes data from the China Household Finance Survey 2011 to study peer effects in housing demand in rural China. We find that focal households' housing consumption is heavily influenced by peer households' housing consumption. Evidence from placebo tests, IV estimates and robust tests suggests that the relationship is causal. In addition, we show that status seeking and social learning play important roles in determining peer effects in the demand for rural houses. Finally, we explore the heterogeneity in peer effects and determine that the leading mechanism is status seeking.     

Language and consumption

We examine the relationship between proficiency in Mandarin and consumption in China. We find that proficiency in Mandarin has a positive effect on an individual's total consumption expenditure as well as most categories of consumption expenditure. We also find considerable heterogeneity in the effects of Mandarin proficiency on consumption across subsamples. In addition, we find that proficiency in Mandarin has a positive effect on relative consumption, irrespective of the manner in which the reference group is defined. Our results have important policy implications for debates on the promotion of a national language and, in particular, recent debate about the promotion of speaking Mandarin in China.     

China's outward foreign direct investment in the Belt and Road Initiative: What are the motives for Chinese firms to invest?

Because of the potentially large and important effects of the extremely ambitious Belt and Road Initiative (BRI) launched by China in late 2013, considerable attention has been given to the motives for, and repercussions of, the BRI-driven infrastructural projects. Yet, the non-infrastructural outward foreign direct investment (FDI) from China to BRI countries, which varies quite substantially across different sectors and different countries, has not yet received much attention. In contrast to some recent studies showing that the massive initiative has increased China's total FDI outflows to fellow BRI countries, in this paper, based on our sector-level difference-in-differences models, we find that effect to be statistically insignificant. Yet, at the same time, we provide empirical evidence on the sectoral pattern of China's outward FDI before and after 2014 indicating that China's FDI outflows to BRI countries have significantly increased in sectors characterized by overcapacity and contributing to pollution in China, thereby demonstrating that China's BRI-driven outward FDI has been very selective in terms of sectors. We confirm these findings with a variety of robustness checks and show that it is BRI countries with relatively low institutional quality that have been more likely to receive these types of FDI from China. We thus speculate that Chinese firms have been motivated to place FDI investments in BRI countries for the sake of alleviating China's own overcapacity and pollution problems. Our findings lead us to suggest that, although these sectoral patterns are consistent with the different stages of economic development in which China and its fellow BRI-identified countries find themselves, Chinese investors and host country governments should be more concerned with the potential for unwanted side-effects of the FDI investments so that the mutually beneficial effects of the BRI can be sustained into the indefinite future among all countries involved.