Uncertainty and housing tenure choice by household types: Evidence from China

In this paper, we propose an uncertainty-preference-housing choice model and empirically investigate the effect of uncertainty on the probability of homeownership using microdata from Chinese cities. Introducing several measures of uncertainty, we observe that after the reform of the housing distribution system, unemployment uncertainty negatively affects the housing tenure choices of high-income families, whereas educational expenditure uncertainty has a negative effect on the homeownership rates of low-income families. We also find that unemployment uncertainty negatively affects the housing choices of local families and that medical expenditure uncertainty has a negative effect on housing choice for migrant families. Finally, an increase in unemployment uncertainty decreases the homeownership rate among families in which the head of household did not experience the change in enterprise ownership.     

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.     

Access to credit and farmland rental market participation: Evidence from rural China

In this study, we analyze the impact of access to credit on farmland rental market participation of rural households. The study uses a nationally representative survey data of China Family Panel Studies and an endogenous switching probit model that accounts for selection bias for both observed and unobserved factors. Findings reveal that access to credit stimulates farmers' decisions to participate in farmland rental markets by increasing the likelihood of renting in and renting out farmland by about 10% and 20%, respectively. Results also reveal that the impact of access to credit on farmland rental market participation is heterogeneous when it comes to the age of the operator and and geographic locations of farmers. We show that younger credit users have a higher probability of renting in farmland, while their older counterparts have a higher probability of renting out farmland. Besides, credit users residing in central China have a higher probability of renting in farmland, while those living in eastern China have a higher likelihood of renting out farmland. Our findings highlight the importance of improving farmers' access to credit in facilitating the development of rural farmland rental markets.     

The role of market imperfections in the relationship between housing prices and household credit: Evidence from Taiwan

Given the credit market imperfections in Taiwan, this paper examines the threshold effects in the adjustment towards the long‐run equilibrium relationship between housing prices and household credit. The empirical findings verify the potential for regime shifts in the dynamically adjusted relationship between housing prices and household credit. Only when the benefits cover the cost of market imperfections, do housing and credit markets trigger convergence to their long‐run equilibrium. The hidden effect of the limitations on housing and credit markets is to raise the thresholds of the self‐adjustment mechanisms. As a result, economic boom‐bust cycles will be more severe and increase the fragility of financial sectors.     

The effects of state-led relocation on labor market participation: Evidence from China

The urbanization of China has been accompanied by large-scale state-led relocation (SLR) programs. This paper studies the effects of urban SLR on labor market participation. With three waves of China Household Finance Survey (CHFS), we find that urban SLR reduces labor market participation, on both the extensive margin and the intensive margin. The reduction is stronger for females, and there is some substitute effect between husbands and wives. The reduction is also stronger for individuals who are elder and less educated, and who choose lump sums of monetary compensation. Finally, we find no evidence that urban SLR experience stimulates business creation.     

Financial literacy,financial inclusion,and savings behavior in Laos

This study examines the effects of financial literacy on financial inclusion and savings behavior in Laos. Compared to previous literature, we use a broader definition of financial literacy which covers not only financial knowledge but also financial behavior and financial attitudes. We also use a new definition of financial inclusion which goes beyond the supply-side perspective to consider the consumer’s perspective. To do so, we use the survey instrument designed by the Organisation for Economic Cooperation and Development International Network on Financial Education. We also used more reliable instrumental variables to investigate the effects of financial literacy on financial inclusion (and its components) and savings behavior. We find that financial literacy has statistically positive effects on both financial inclusion and savings. Moreover, the effects of financial literacy on different measures of financial inclusion vary. Our results further show that individuals with higher financial literacy scores are more likely to hold savings in both formal and informal forms than those who have lower financial literacy scores, even when we control for income and education.     

Bank market power, economic growth and financial stability: Evidence from Asian banks

This paper examines whether Asian banks are still prone to moral hazard in the aftermath of the 1997 Asian crisis. Using a sample of commercial banks from 12 Asian countries during the 2001–2007 period, our empirical findings highlight that greater market power in the banking market results in higher instability. Although banks are better capitalized in less competitive markets their default risk remains higher. A deeper investigation however shows that such behaviour is dependent on the economic environment. Higher economic growth contributes to neutralize greater risk taking and higher instability in less competitive markets.     

Macroprudential policy and household wealth inequality: Evidence from China

The influence of LTV ceiling on household wealth inequality is not constant. This paper finds that when the return on housing investment is higher than the return on liquid assets, the LTV ceiling generally has a negative impact on household wealth inequality; otherwise, it is more likely to be positive. Increasing the LTV ceiling can significantly alleviate household wealth inequality in China. Housing price and the number of houses purchased are important channels, and the house purchase preference (savings rate and house purchase intention) plays a key role in regulating wealth distribution through the LTV ceiling.     

Asymmetries in housing and financial market institutions and EMU

Despite convergence pressures, differences in housing and financialmarket institutions across the 15 member states of the EuropeanUnion are still enormous. This paper argues that they have profoundeffects on the responsiveness of output and inflation in thedifferent countries to changes in short-term interest rates,as well as to asset-market shocks of external origin. The economicreasoning behind this claim is set out and the institutionaldifferences are described. The paper assesses the sometimesconflicting empirical evidence on this issue. Barriers to convergenceand implications for labour-market flexibility are discussed.The UK, Ireland, Finland and Sweden tend to cluster at one extremeof the relevant institutional characteristics. The paper concludeswith a set of proposals for institutional reforms which wouldsignificantly reduce the tensions within EMU and the potentialfor instability in these economies entailed by EMU membership.     

Income inequality and access to housing: Evidence from China

Economic theory suggests that income inequality predicts housing price and housing affordability for low-income households. Employing Chinese urban household survey data, this paper examines empirically the relationship between income inequality and access to housing for urban low-income households. The empirical results demonstrate that higher income inequality within cities is significantly related to a higher housing cost burden, a smaller per capita living space, and lower housing quality for low-income households. Further studies demonstrate that the negative impacts of income inequality could be moderated by product differentiation in housing markets, as a higher degree of differentiation in the size of housing units corresponds to a smaller effect of income inequality on housing affordability.     

Financial Development,Market Deregulation and Growth: Evidence from China

In this paper, the relationship between finance and growth is analysed in the context of an endogenous growth model with government regulation and intervention. Our theoretical model suggests that financial intermediaries can affect the process of economic growth in several ways. Using the recent Generalized Method of Moments (GMM) techniques, we test our model in a panel data set covering 29 Chinese provinces over the period of 1990–2001. Empirical results show that financial development and government deregulation in the financial sector significantly promote China's economic growth.     

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.     

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.     

Financial Development,Capital Accumulation and Productivity Improvement: Evidence from China

Financial sector development may contribute to economic growth by facilitating capital accumulation and by improving productivity. This article investigates empirically the contribution that financial development may make to these two alternative drivers of economic growth in China using annual data for the period 1952 to 2005. Using cointegration and Granger-causality testing we examine the relationship between financial development and, respectively, capital accumulation and productivity in a time-series vector autoregression (VAR) framework. The substantive findings are that there is either bi-directional Granger causality between financial development and capital accumulation or that Granger causality runs from capital accumulation to financial development, depending on how capital accumulation and financial development are measured. The link between financial development and productivity is found to be statistically weak.     

Financial development and economic growth: Evidence from China

This paper investigates the relationship between financial development and economic growth for the case of China over the period 1952–2001. After considering the time series characteristics of the dataset, a multivariate vector autoregressive (VAR) framework is used as an appropriate specification and the long-run relationship among financial development, growth and other key growth factors is analyzed in a theoretically based high dimensional system by identification of co-integrating vectors through tests of over-identifying restrictions. The empirical results suggest that there exists a unidirectional causality from economic growth to financial development, conclusions departing distinctively from those in the previous studies.     

FDI and market entry/exit: Evidence from China

This paper considers the impact of FDI and FDI-related spillovers on the entry and exit rates of domestic firms in mainland China's manufacturing sector. Since we suspect that aggregate results obscure differing effects based on the source of the FDI, we disaggregate FDI into that originating from Hong Kong, Macau and Taiwan (HMT) area and the rest of the world. The empirical analysis, based on 4-digit industry level panel data over the period 2003–2007, reveals that FDI originating from the rest of the world has made a significant contribution to the entry rate of domestic firms in China and the spillover effect arising from backward linkages is also positive and significant. However, FDI originating from HMT area has not encouraged domestic entry, whilst it has contributed to an increase in the exit rate of domestic firms.     

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.     

Institutions and participation in global value chains: Evidence from belt and road initiative

The “One Belt and One Road” (OBOR) initiative proposed by China aims to promote highly efficient resource allocation, deep regional integration, and extension of global value chains (GVCs). The main challenges faced by OBOR include large variations in regional institutions and a high degree of political instability among OBOR countries. This paper examines the linkage between regional institutions and GVC participation. First, we show that OBOR countries have much weaker institutions and less GVC participation than non-OBOR countries. Second, we find that institutions play important roles in GVC participation in both OBOR and non-OBOR countries. Improved regulatory quality, political stability, government effectiveness, and rule of law can significantly promote GVC participation in institutionally sensitive industries. Finally, a firm-level analysis that is based on the World Bank's Enterprise Survey Data indicates that better quality local institutions encourage firms to participate in GVCs.     

Housing wealth changes and entrepreneurship: Evidence from urban China

This paper studies the impact of household-level housing wealth changes on entrepreneurship in urban China. Exploiting the 2011–2015 China Household Finance Survey, we control for lagged proxies for wealth, city-by-year fixed effects, and other household attributes and directly estimate the magnitude of homeowner's response to housing capital gains net of home maintenance and upgrading expenditures. We also instrument for housing wealth changes with structural breaks in city housing price trend. We find that a 10,000 RMB increase in housing wealth increases the propensity of a household becoming a business owner by about 0.7 percentage points in IV estimation. In addition, we provide new evidence for underlying channels that housing capital gains alleviate household credit constraints, reduce risk aversion and increase awareness of financial information.