How fast has Chinese industry grown? – The upward bias hypothesis revisited

This study addresses two potential problems when single-benchmark price weights are applied to commodity indicators to assess the official estimates of China’s industrial growth, i.e., the substitution bias and the constant value-added ratio given by a fixed input–output table. It introduces the 2002 and 2007 input–output tables and price weights in order to capture changes in a more market-based pricing and more liberal policy environment following China’s WTO entry. My new findings have not only lent a further and stronger support to the upward-bias hypothesis but also confirmed the Maddison–Wu conjecture (2008) that official estimates tend to smooth out high-growth volatility. By the alternative index, the impact of external shocks to Chinese industry appears to be more pronounced than the official index.     

How do investors respond to Green Company Awards in China?

We find that firms winning Green Company Awards in China from 2008 to 2011 experienced on average insignificant and in some cases significantly negative effects on shareholder value. Various robustness checks suggest that these findings are not driven by the inefficiency of the Chinese stock market or a lack of perceived credibility of the award. In addition, we find important variation in the responses across firms: shareholders of firms in low-pollution industries and firms with primarily private ownership responded more negatively to award announcements. Furthermore, the peers of winning firms showed higher announcement returns than the award winners. Our results suggest that a key benefit of corporate environmentalism in China comes through building stronger relationships with government, and that otherwise the market generally discourages firms from environmental leadership.     

Will Inequality Lead China to the Middle Income Trap？

China has departed from the East Asian development model by letting inequality rise to a high level, which is now contributing to China＇s current problems of macroeconomic imbalance, declining efficiency of capital, and rising social tensions. If inequality persists, China may get caught in the ＂inequality-trap,＂ which may then lead to the middle income trap （MIT）. Fortunately, China still has the levers to pull to reduce inequality and avoid the MIT. Measures along both the ＂wage route＂ and the ＂redistributive route＂ can be adopted for this purpose. In addition, China may pursue the ＂cooperative route＂ to more equitable distribution.     

How can robots affect wage inequality?

We explain the simultaneous presence of i) increasing per capita output, ii) declining real wages of low-skilled workers, and iii) a rising wage premium of higher education within a model of economic growth in the age of automation. The theoretical implications are consistent with the data for the United States since the 1970s. Thus, automation contributes towards our understanding of the driving forces of rising inequality. The immediate policy conclusion is that investments in higher education can help to soften the negative effects of automation.     

Correction to: What can deregulators deregulate? The case of electricity

Journal of Regulatory Economics - The published version of this article contained a mistake. The name of the second author was printed incorrectly. The correct name is Kwok Ping Tsang.     

How to curb poverty-related deforestation?

Drawing upon recent data from the Southeast Asian Mekong region, I study poverty-related drivers of deforestation (logging) activities by rural households. I do not find an environmental Kuznets curve-type relation between income and deforestation. Albeit I find a negative relation between income and the deforestation probability, this relation turns insignificant once I take into account specific socio-economic household characteristics: better education, higher relative affluence, younger age, self-employment, a higher value of nonproductive assets owned by the household as well as affiliation to an ethnic majority significantly reduce the deforestation probability. Received credits, remittances or (public) transfers do not significantly affect the deforestation probability. This implies for development policy that pure income-increasing financial support does not suffice for curbing poverty-related deforestation. Fostering education, social status, doing business and private ownership of assets are more promising options.     

How strongly can industrial structural transformation affect GDP?

It is well known that when a country develops, its leading industry shifts from agriculture to non-agriculture. This industrial structural transformation has recently attracted considerable attention from scholars. Then, how strongly can this industrial structural transformation affect a country’s income? In this study, we shed light on this research question. More specifically, we measure magnitudes of the industrial structural transformation’s influence on GDP, by examining the following counterfactual GDP. We calculate a country’s counterfactual GDP when the country specializes in agriculture. If the counterfactual GDP is considerably small without the non-agricultural sector, this suggests that the industrial structural transformation from agriculture to non-agriculture is considerably important, in terms of GDP. We use Japan as our sample economy. Consequently, we find that the counterfactual GDP is surprisingly small, which suggests that the industrial structural transformation’s influence on GDP is surprisingly large. We also find that one of the main factors responsible for the surprisingly small counterfactual GDP is land, which has not been deeply examined.     

Does a foreign degree pay? The return to foreign education in China

A large body of literature is devoted to estimating causal effects of schooling; however, few studies have addressed the returns on education overseas. In this paper, we focus on the causal impact of holding a foreign education degree on one's performance in the homeland labor market in the context of China, the world's leading source of students pursuing education overseas. To address the issue of endogeneity, we construct an instrumental variable based on the exchange rate when the individual is about to make further education plans to isolate the arguably exogenous cost‐side shocks to one's education decision. Utilizing data from the China Household Financial Survey, we find that holding a foreign education degree has no effect on one's propensity to join the labor market but leads to a 108.95% increase in one's wage upon employment. Moreover, such effects display significant heterogeneity among returnees regarding their background. Specifically, returnees earn less if they went abroad after China joined the WTO, work in public sectors or have rich family resources.     

Aiding regional instability? The geopolitical paradox of Japanese development assistance to China

During the past decade, Japan established itself as the largest bilateral donor of development aid in the world, with more of it directed toward projects in China than any other recipient. Japan sees its aid flows to China as maintaining economic stability in East Asia, particularly as China's raw material and energy resources are articulated into regional markets. In this article, I argue that Japan's aid to China may unintentionally diminish Japan's and the East Asian region's long‐term security for two reasons. First, similar to other nations receiving such assistance, this aid may allow China to reallocate scarce capital to military modernisation. Such military modernisation may enable China to both better suppress internal dissent and carry out a more aggressive foreign policy. Second, this aid does not address the fundamental structural aspects of China's present instability. Long‐term structural instability has many sources, but the two discussed here are socio‐economic inequality (both interregional and intraregional), and sustainable production and environmental problems. Taken together these have important regional and geopolitical implications and repercussions. This article fills a gap in the existing literature on East Asian geopolitics. Namely, that by attending only to relatively short‐term corporate and perceived state interests of China and Japan, Japanese aid to China does little to ameliorate and potentially exacerbates long‐term structural social and environmental problems for China's vast majority living in rural hinterlands. The potential for internal turmoil springing from this uneven and unsustainable development inside China is the real basis for China's ‘threat’ to East Asian security. Thus what appears to make good development and geopolitical sense at first look, Japan's current aid regime with China, paradoxically may actually be the worst path to follow.     

What can econophysics contribute to financial economics?

Econophysics presents itself as a new paradigm and a new specialty (or even a discipline), using various models and concepts imported from condensed matter and statistical physics to analyze financial phenomena. Financial economics is becoming more and more concerned by the emergence of econophysics because this new field deals with the economic reality. In this perspective, one might ask “What can econophysics contribute to financial economics?” After emphasizing the main differences between financial economics and econophysics, this paper will show that these two disciplines can be complementary. I then provide some research themes from econophysics that could be a source of inspiration for financial economists to broaden their theoretical framework.