The government revenue and government expenditure nexus: empirical evidence from nine Asian countries

The nexus between government revenue and government expenditure has been an important topic in public economics. In this paper, we investigate evidence for cointegration and causality between government revenue and government expenditure for nine Asian countries. We use the recently developed bounds testing approach to cointegration and the conventional F-test to examine Granger causality. Our empirical results suggest that for three out of the nine countries government revenue and government expenditure are cointegrated. Our results on the direction of causation are mixed: (a) for Indonesia, Singapore, Sri Lanka in the short-run and for Nepal in both the short- and long-run we find support for the tax-and-spend hypothesis; (b) Indonesia and Sri Lanka are in conformity with the spend-and-tax hypothesis in the long-run; and (c) for other countries there is evidence of neutrality.     

Green creates value: Evidence from China

This study explores whether and how the issuance of green bonds affects firm value in China from January 2015 to September 2020. Based on a multiperiod difference-in-differences model, we observe that firm value increases with the issuance of green bonds, but this positive effect is unsustainable and weakens gradually. The heterogeneity analysis suggests that the expected positive effect of green bond issuance on firm value is highly evident in non-state-owned firms, small firms, firms in green finance pilot zones, and firms in the eastern region. Moreover, we explore the mechanism in terms of financing condition, government support, and green investment and find that the financing condition, tax burden, and government subsidy of firms improve following the issuance of green bonds. However, green investments erode firm profits, which may lead to the unsustainability of the driving effect of green bond issuance on firm value. Further analysis reveals that when the volume of the green bonds issued by firms increases by one standard deviation, firm value increases by 0.032 units on average.     

Transportation infrastructure and entrepreneurship: Evidence from high-speed railway in China

Using high-speed railway (HSR) construction in China as a quasi-experiment, this paper contributes to the understanding of how transportation infrastructure affects entrepreneurship. On the basis of a difference-in-difference approach, we find that access to an HSR connection leads to an increase in entrepreneurship by approximately 3.5 percentage points (35% of the mean). Mechanism exploration suggests that market potential is the main channel that HSR encourages entrepreneurial activities, which is realized by accelerated information sharing and face-to-face interactions. And the effect is bigger for high-educated families, wealthy families and in large cities.     

Capitalization of local government grants on land values: Evidence from Tokyo metropolitan area,Japan

This study investigates the capitalization effect of intergovernmental fiscal transfers from central to local governments on land prices. Using a drop in the size number of fiscal transfers following fiscal reform in the early 2000 s, this study examines the extent to which unconditional fiscal transfers to municipalities in the Tokyo metropolitan area are attributed to land prices. The result shows that the decline in the transfer has decreased the land prices in the municipalities. Furthermore, reducing one unit in the per capita grant reduced the value of housing area per capita by one or more units, even if the real discount rate was assumed to be as low as 2%. Therefore, the fiscal transfer reform more negatively affects the benefits of residing in a municipality in the area than the reduction amount in the transfer.     

Impacts of high-speed rail construction on land prices in urban agglomerations: Evidence from Kyushu in Japan

High-speed rail integrates regions and cities, and thus can possibly have significant impacts on the distribution of economic activities. Using the opening and extensions of a high-speed rail, Shinkansen, in Kyushu, Japan, we examine its effects on land prices in urban agglomerations, which would reflect changes in the distribution of economic activities across urban agglomerations. We estimate hedonic price equations to conduct a difference-in-differences analysis. We find that the large metropolitan areas gained from the high-speed rail by experiencing increases in land prices, whereas small metropolitan areas located between them lost by experiencing decreased land prices. However, such positive effects are shown to be limited to areas close to Shinkansen stations.     

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.     

Local government consumption and firm performance: Evidence from the "TPCs" in China

Government consumption is an important factor affecting corporate performance. By exploiting a unique data set that reveals the Three Public Consumptions (TPCs) of China’s prefecture-level city governments, this paper investigates the impact of actual local government consumption on corporate performance and identifies the potential impact mechanism. We show that increases in local government consumption did lead to declines in firm productivity. TPC expenditures on official cars and official receptions had the most obvious impact on corporate performance. After considering endogenous measurement errors and substitution variables, the conclusion remained stable. Moreover, we show that the increase of local government TPC expenditures caused an increase in corporate tax burden, a decline in government efficiency, and excessive administrative intervention, which in turn caused a decline in firm performance. Our findings are particularly pronounced in non-state-owned enterprises, in firms with tight financing constraints, and in regions with weak marketization and low budget transparency. This study expands the theory that government behavior affects corporate performance, and also provides policy implications regarding restraints on government consumption.     

Tax incentive and corporate financial performance: Evidence from income tax revenue sharing reform in China

How to stimulate corporate performance is a crucial issue of general concern in all countries. This paper examines how China’s Income Tax Revenue Sharing Reform in 2002 affects corporate financial performance. Unlike general tax policies that directly adjust the nominal tax rate or depreciation allowance, this reform indirectly affects the effective Enterprise Income Tax (EIT) rate by switching tax administration, thereby affecting corporate financial performance. We use a firm-level data-set from Annual Survey of Industrial Firms (ASIF), and test the impact by using a quasi-natural experimental design through regression discontinuity design (RDD). We find that after the reform, the effective EIT rate (ETR) of enterprises collected EIT by State Administration of Taxation (SAT) was 10% lower than that of enterprises collected EIT by the Local Administration of Taxation (LAT). If the ETR reduces by 1%, corporate financial performance, more specific, Return on Asset (ROA), increases by 1.7%. There are two available channels: increasing fixed asset investment (FAI), and alleviating external financial constraints. Additionally, the impact can be weakened for locally SOEs, large firms, firms with low SA index and those in less competitive industries.     

The impact of technology identification policy on firm innovation: Evidence from China

Using firm-level data of companies listed on China's A-share market from 2006 to 2017, this research applies a difference-in-differences (DID) empirical method to test whether the state policy in China used for identifying firms as being “high-tech” enhances their innovative capabilities. This paper presents three main findings. First, multiple robustness tests confirm that the state technology identification policy does improve the total number of patent applications as well as the number of patent invention applications. Second, government subsidy is an important channel through which this policy affects a firm's innovation capabilities. Third, this policy has a more prominent and positive influence on the innovation capabilities of firms located in regions where there exist a higher rate of taxation in addition and relatively more developed products and factor markets. Fourth, we conduct a flexible back-of-the-envelope cost-benefit analysis to demonstrate that the high-tech firm identification policy does improve the overall level of social welfare. The empirical results of this paper have far-reaching implications for China's innovation policies.     

The impact of digital finance on women's bargaining power: Evidence from China

This paper explores the effect of digital finance adoption on women's bargaining power within the family. Empirical analysis finds that higher digital finance adoption significantly improves women's bargaining power and thus alleviates intra-household inequality. We explain the underlying mechanism in terms of women's participation in both labor and financial market. The subsample regression results show that the impact differs among families with distinct characteristics in terms of regions, family living patterns and women's fertility status. This paper provides a new perspective for understanding the inclusive contribution of digital finance and forms a timely complement to the literature in related fields.     

Effects of financial inclusion on tax revenue mobilization: Evidence from WAEMU countries

Financial inclusion remains at the heart of governments concerns. By creating favorable conditions for access to a diversified range of adapted financial products and services at affordable costs for the populations, financial inclusion generates important opportunities that could lead to increased tax revenue mobilization. This paper analyzes the effects of financial inclusion on tax revenue mobilization, using panel data from West African Economic and Monetary Union (WAEMU) countries over the period 2006–2019. The findings suggest that financial inclusion positively and significantly influences government's tax revenue. Moreover, by looking at the effects of disaggregated financial inclusion dimensions (access, use, and affordability) on various components of tax revenue, we find that the estimated coefficients on the subcomponents of financial inclusion are statistically significant. Results also indicate that the magnitude of effect of financial inclusion is higher on indirect taxes compared to direct tax revenues. This research recommends that policy-makers should prioritize financial inclusion in their policies and development agenda through National Financial Inclusion Strategies (NFIS) because it can increase countries' resource mobilization and help them to build fiscal resilience.     

Bank market power and revenue diversification: Evidence from selected ASEAN countries

This paper examines the association between bank market power and revenue diversification using a sample of 153 commercial banks from five Association of Southeast Asian Nations (ASEAN) member countries (Indonesia, Malaysia, the Philippines, Thailand and Vietnam). We find a non-linear relationship between bank market power and revenue diversification, where at lower degrees of market power (in loan and deposit markets) banks concentrate on revenue diversification. In contrast, those with greater market power focus more on traditional interest-based products. Our findings also indicate that credit losses experienced earlier, during and after the Asian financial crisis have encouraged ASEAN banks to diversify into non-traditional activities to compensate for their excessive losses. When the markets recovered and loan demand increased, however, traditional interest-based business has become more important. These results remain consistent across all models providing robust results.     

Intergenerational transfer of human capital and its impact on income mobility: Evidence from China

This paper analyzes theoretically and empirically the impact of intergenerational transmission of human capital on the income mobility in China. We use a three-period overlapping-generations (OLG) model to show that the human capital transfer plays a remarkable role in determining the parent-to-offspring investment in human capital and the intergenerational elasticity of income. We then estimate a simultaneous equations model (SEM) using the 1989–2009 China Health and Nutrition Survey (CHNS) data to verify our theoretical predictions. The results show that (i) human capital, measured by health and education, is directly transmitted from one generation to the next, reflecting the parent-induced inequality of development opportunities among offspring in China; (ii) the estimated intergenerational income elasticity increases from 0.429 to 0.481 when the direct transfer of human capital is accounted for, suggesting that omitting this mechanism would overestimate China's income mobility. Our findings provide policy implications on strengthening human capital investments among the disadvantaged groups, reinforcing reforms that promote equality of opportunity, and improving the efficiency of labor markets in China.     

The impact of an accelerated depreciation tax policy on employment: Evidence from China

We examine the impact of an accelerated depreciation tax policy (ADP) on employment. As a tax incentive policy, we expect an ADP to impact firm behavior significantly, but its effect on employment remains uninvestigated. Leveraging the two-stage implementation of an ADP in selected industries in China in 2014 and 2015 and using a difference-in-differences research design, we find that: 1) the ADP significantly increases employment, which is consistent with the output effect hypothesis; and 2) the ADP increases firms’ labor demand, mainly by stimulating investment in fixed assets and easing their financial constraints. Additional analysis suggests that the impact of ADP on employment is more salient for small firms, non-state-owned firms, and high growth firms, and skilled labor employment, indicating that the ADP is more effective for firms with high financial constraints and hiring skilled labor to accompany the increase in capital investment.     

浅议我国地方政府“土地财政”问题及对策

土地财政作为地方的主要财政收入,近年来不断被我国地方政府所重视并加以利用。尽管土地财政确实能够增加地方政府的财政收入,促进当地经济发展,为各项政府支出提供资金支持,但是,土地财政的过度运用必然将引发一系列的社会问题以及经济问题。倘若不正确运用土地财政,势必会影响社会的稳定,经济的发展。因此必须重视如何正确运用土地财政这一问题,让土地财政更好地发挥出其相应的价值。本文首先介绍了土地财政的概念,并对土地财政的原因作出简要的分析,在结合地方政府在运用土地财政中存在的问题的基础上,对更好地发挥土地财政的作用提出若干意见与建议。     

The impact of special economic zones on producer services productivity: Evidence from China

Do Special Economic Zones (SEZs) promote the productivity of producer services, and what are the channels of the effect? To shed light on these questions, we collect a dataset of 1.46 million producer service firms on the basis of the Second Economic Census of China. We then use the dataset to prove the productivity advantages of producer service industry in the SEZs. Guided by a “new” new economic geography model, we estimate these advantages using the IV model and unconditional distribution characteristic-parameter correspondence method. Results imply that agglomeration effect is the source of the productivity advantages of the producer services in the SEZs. This effect is positively correlated with the local manufacturing scale. A high industrial relevancy between the producer services and the leading manufacturing industry in the SEZs results in a strong agglomeration effect. The preferential policy in the SEZs reduces the entry barrier for firms and attracts a high proportion of inefficient firms entering with the selection effect. This result has a negative impact on promoting the productivity of producer services. The conclusions are robust in different circumstances.     

北京前两月土拍收入602亿绿城、华润拿下了半壁江山

据北京市规划和自然委员会披露的土地转让数据,截至2月底,年初以来北京市合计转让了16个地块,合计金额602亿元,年初以来北京土地转让成交额同比变化不大。《中国经济周刊》记者统计发现,绿城房地产集团有限公司(以下简称“绿城”)和华润置地(1109.HK),这两家公司拿地金额最大,分别是144亿元和177亿元,合计占到了北京市成交额半数以上。     

Alleviating multi-dimensional poverty through land transfer: Evidence from poverty-stricken villages in China

This study constructs a Ramsey–Cass–Koopmans growth model of the agricultural sector, which includes land transfer characteristics, to investigate the theoretical basis of the land transfer impact on multi-dimensional poverty, under a steady equilibrium. Using 2010, 2012, and 2014 panel data from the Mutual Aid Fund for Poverty-Stricken Villages in China, we obtained results indicating the impact of land transfer on multi-dimensional poverty, based on the generalized propensity score method. The research results are as follows: (1) The intensity of rural households' land transfer in poverty-stricken villages remains low, at only 14.54%; however, it demonstrates an increasing trend. (2) When the intensity of land transfer is continuously enhanced, the multi-dimensional poverty of rural households in poverty-stricken villages decreases. (3) Rural households' land transfer in poverty-stricken villages can reduce multi-dimensional poverty by improving their savings behavior. “Precautionary savings motivation” is an important land transfer mechanism affecting rural households' multi-dimensional poverty in poverty-stricken villages.     

Global value chains,firms, and wage inequality: Evidence from China

How does participating or moving to more upstream in the global value chains (GVCs) affect the premium paid to skilled compared to unskilled labor within firms? In this paper, we develop a model of heterogeneous firms with intermediate trade and two skill inputs, in which we apply the fair wage hypothesis to predict the wage premium changes according to firms' GVCs activities. The model predicts that firms' backward GVC participation, as measured by the share of foreign value-added content in exports (FVAR), has an ambiguous impact on wage inequality of skills, which depends on the relative importance of “FVAR-labor substitution effect” and “FVAR-profit effect.” However, moving to upstream sectors in GVCs, as measured by the export varieties' upstreamness (or average distance from final use), raises a firm's wage premium. Using detailed Chinese firm-level data from 2000 to 2006, we develop a Mincer-type empirical model to study the wage premium changes associated with FVAR and upstreamness. We find robust empirical evidence that the rise of wage inequality in China mainly arises from moving to more upstream sectors rather than changing GVC participation.     

Measurement of relative welfare poverty and its impact on happiness in China: Evidence from CGSS

Individual or household income has been the conventional yardstick of poverty. Presently, non-income factors are universally accepted as measures of poverty. Attention on the multiple dimensions of poverty and their policy implications has been growing in the past 20 years. However, few studies have analyzed relative multidimensional poverty, especially in China. Moreover, the relationship between relative welfare poverty and happiness has been rarely studied, particularly given that the decline of poverty seemed not bringing a significant increase in happiness in China. This research gap is noteworthy because enhancing the subjective well-being of the people is crucial to a nation's sustainable economic development. On the basis of the micro-level data from China General Social Survey, this study puts forward a welfare approach to analyzing the relative multidimensional poverty and then determines the link between relative welfare poverty and individual happiness. Our results show that 1) relative welfare poverty has not declined significantly and 2) there is a significantly happiness-reducing effect of relative welfare poverty.