Economic development and carbon dioxide emissions in China: Provincial panel data analysis

This paper investigates the driving forces, emission trends and reduction potential of China's carbon dioxide (CO₂) emissions based on a provincial panel data set covering the years 1995 to 2009. A series of static and dynamic panel data models are estimated, and then an optimal forecasting model selected by out-of-sample criteria is used to forecast the emission trend and reduction potential up to 2020. The estimation results show that economic development, technology progress and industry structure are the most important factors affecting China's CO₂ emissions, while the impacts of energy consumption structure, trade openness and urbanization level are negligible. The inverted U-shaped relationship between per capita CO₂ emissions and economic development level is not strongly supported by the estimation results. The impact of capital adjustment speed is significant. Scenario simulations further show that per capita and aggregate CO₂ emissions of China will increase continuously up to 2020 under any of the three scenarios developed in this study, but the reduction potential is large.     

Counting carbon: historic emissions from fossil fuels,long-run measures of sustainable development and carbon debt

This article examines how to account for the welfare effects of carbon dioxide emissions, using the historical experiences of Britain and the USA from the onset of the industrial revolution to the present. While a single country might isolate itself from the detrimental effects of global warming in the short run, in the long all countries are unable to free ride. Thus, we support the use of a single global price for carbon dioxide emissions. The calculated price should decrease as we move back in time to take into account that carbon dioxide is a stock pollutant, and that one unit added to the present large stock is likely to cause more damage than a unit emitted under the lower concentration levels in the past. We incorporate the annual costs of British and US carbon emissions into genuine savings, and calculate the accumulated costs of their carbon dioxide emissions. Enlarging the scope and calculating the cumulative cost of carbon dioxide from the four largest emitters gives new insights into the question of who is responsible for climate change.     

Upstreamness,exports, and wage inequality: Evidence from Chinese manufacturing data

In this paper we investigate within-firm wage inequality across heterogeneous industries that hold different positions in the domestic value chain, and across heterogeneous firms that have different exposure to trade. We find that the wage inequality problem is more severe in upstream industries than in downstream ones, and among firms with greater exposure to trade (i.e., larger export share of sales). Our findings support both classic and new new trade theories on wage inequality. In downstream industries where Chinese firms are typically engaged in processing and assembly work with intensive use of unskilled labor, trade leads to less wage inequality within firms. However, trade also introduces pro-competitive effects which usually benefit exporters and their skilled labor. The results hold after various checks and controls for robustness.     

Outsourcing and productivity: Evidence from Korean data

This paper aims to provide the first investigation of the productivity effect of outsourcing by using the Korean industry data at the three-digit ISIC level. We find that there are positive productivity gains from material outsourcing. The impact of material outsourcing increases when we account for the share of imports from China. This is due to the growth of Chinese exports to Korea over the recent years. Moreover, the results also suggest that during our sample period Korea's experiment with service outsourcing did not lead to an increase in its productivity.     

Measuring economic localization: Evidence from Japanese firm-level data

This paper examines location patterns of Japan’s manufacturing industries using a unique firm-level dataset on the geographic location of firms. Following the point-pattern approach proposed by Duranton and Overman (2005), we find the following. First, about half of Japan’s manufacturing industries can be classified as localized and the number of localized industries is largest for a distance level of 40 km or less. Second, several industries in the textile mill products sector are among the most localized, which is similar to findings for the UK, suggesting that there exist common factors across countries determining the concentration of industrial activities. Third, the distribution of distances between entrant (exiting) firms and remaining firms is, in most industries, not significantly different from a random distribution. These results suggest that most industries in Japan neither become more localized nor more dispersed over time and are in line with similar findings by Duranton and Overman (2008) for the UK. Fourth, a comparison with the service sector indicates that the share of localized industries is higher in manufacturing than in services, although the extent of localization among the most localized manufacturing industries is smaller than that among the most localized service industries, including financial service industries.     

Carbon inequality in China: Evidence from city-level data

Carbon inequality has attracted increasing attention worldwide. Utilizing data from China's High Spatial Resolution Emission Gridded Database (CHRED), this paper presents the measured CO₂ emission inequality in China for the years 2005, 2012, 2015, and 2020. Results show that the Gini coefficients of carbon emission report a slight decrease from 0.411 to 0.385 and the distribution becomes more symmetric from 2005 to 2020. Linking carbon inequality to economic level, the positive concentration index (0.230 to 0.118) indicates asymmetricity between carbon emission and economic development. A further decomposition analysis reveals the industrial sector's uneven development, indicating that energy-intensive features can be blamed for a large proportion of carbon inequality. Our findings suggest that policymakers should not consider economic development level alone as the only indicator of the allocation of abatement, as economic structure, energy intensity, and climate conditions are all responsible for such inequality.     

Fiscal decentralization and environmental pollution: Evidence from Chinese panel data

China's environmental pollution casts a shadow on its economic success. Concerning fiscal decentralization, China introduced the rule-based tax assignment system in 1994. To avoid the structural change in underlying fiscal regimes, we use the provincial panel data during the period 1995–2010. We find that fiscal decentralization has no significant effect on environmental pollution as it is measured per capita emission of wastewater, waste gas or solid waste in system GMM (Generalized method of moments) estimation. Our results are robust when we use different measures of fiscal decentralization. We further find that fiscal decentralization has a significant, positive effect on pollution abatement spending and pollutant discharge fees, which indicates possible mechanisms for fiscal decentralization to help protect the environment.     

The Belt,the Road,and the carbon emissions in China

This paper explores the effect of the Belt and Road Initiative (BRI) on China's exports and the domestic carbon emissions induced by the exports. We employ a decomposition framework to assess the driving factors of the change of CO₂ emissions induced by China's exports to different destinations and evaluate the main contributions of the gap between the BRI countries and non-BRI (NBRI) countries. The decomposition results show that while the scale effect was the dominant force behind the pre-BRI emission growth, the contribution of the composition effect became more prominent after the inception of the Initiative. Our econometric analysis suggests that the Initiative leads to an increase in the share of carbon-intensive products in China's exports to the BRI countries by nearly 5 percentage points, which is approximately one quarter of the share of carbon-intensive exports to the BRI countries. A further investigation reveals that China's international project contracting is the main channel that has resulted in the increase of the share of carbon-intensive exports in China's exports to the BRI countries.     

Wholesalers,indirect exports,geography, and economies of scope: Evidence from firm transaction data in Japan

This study examines wholesalers’ roles in manufacturers’ exports in Japan. First, it is shown that, like in the case of manufacturing sector, a productivity sorting on the overseas activities is also present in the case of wholesalers. Namely, only the most productive wholesaler firms can engage in foreign direct investment, and the next productive wholesaler firms can participate in export activities, and the least productive wholesaler firms do domestic transactions only. Second, we investigate how the wholesalers facilitate manufacturers’ export activities in the form of indirect exports. We have found that the wholesalers through which manufacturing firms indirectly export their goods are predominantly located in Tokyo or Osaka. The probability of indirect exports is negatively correlated with distance between manufacturers and wholesalers, but there are certain threshold distances at 300–500 kilometers, over which the chance of indirect exports turns null. Another notable finding is that wholesalers’ productivities have positive correlation with the chances of indirect exports whereas manufacturers’ productivities do not matter. The number of manufacturers from which a wholesaler purchases goods, is found to have a positive correlation with the probability of indirect exports, a type of economies of scope effect.     

Global value chains and servicification of manufacturing: Evidence from firm-level data

Recent literature on global value chains (GVCs) has mainly focused on manufacturing firms’ global sourcing and investment strategies. Our question here is that, if the manufacturing firms established foreign manufacturing plants and engaged in sourcing inputs and exporting outputs, have they changed their domestic employment composition toward service workers? This is what we call servicification of manufacturing firms in this paper. To answer this question, using Korean firm-establishments matched data, we examine changes in the shares of service employment in manufacturing firms from 2008 to 2013, when those firms are participating in both import-and-export and foreign direct investment (i.e., GVC firms). We find that the two-way trading firms that own manufacturing plants in foreign countries—and particularly in nearby foreign countries—have changed their domestic employment structures to increase the number of service workers they employ. Moreover, the relatively greater increase in the share of R&D workers than of wholesale-and-retail workers serves as further evidence of the servicification of domestic manufacturing. Overall, our findings suggest that Korean firms who engage in GVCs through both trade and foreign direct investment have reorganized domestic labor structure to be able to provide high value-added headquarter services for their manufacturing plants that are closely located in foreign countries.     

Divorce and female labor force participation: Evidence from times-series data and cointegration

The divorce rate in the United States has increased over the last 40 years. This increase was accompanied both by growing female labor force participation and rising female income. These changes were accompanied by a significant reduction in the birth rate for married women. This article uses time-series data and cointegration techniques to determine the direction of causality between these variables. Analysis of the impulse functions show that the divorce rate will increase if either female labor force participation or income increases. Positive innovations to the divorce rate increase the labor force participation rate of married women. Rising levels of income lead to greater female participation in the labor market.     

Spread of E-commerce,prices and inflation dynamics: Evidence from online price big data in Korea

The so-called Amazon effect is generally defined as such that the increasing competition in the online market and between online and traditional retailers is reducing retail markups and putting downward pressure on prices. This paper investigates the existence of the Amazon effect using online price big data in Korea where e-commerce has been rapidly spreading. For this task, the direct comparison between the online and offline prices were conducted in terms of the levels, trends, inflations, and dynamic correlations for two prices. Online prices for products were collected and classified under the identical classification in the CPI for 14 items in two divisions: food and non-alcoholic beverages and clothing and footwear. Laspeyres formula with identical weights as for the CPIs was applied to compilation of the item- and division-level OPIs (online price indexes) from July 2018 to June 2019. The empirical analyses overall indicated that persistent decreasing trends in the online prices were found when compared to those in the offline prices represented by the CPIs, indicating the existence of the Amazon effect in Korea. More specifically, the OPI covering two divisions decreased by 1.8%, while the CPI increased by 3.6% for the period. In addition, the close dynamic correlations between on-month inflations of two indexes were also found in panel regression and VAR estimations, indicating that a 1% increasing shock to OPI inflation led to an around 0.3% increasing response in the CPI inflation. The dynamic correlations, however, were quite different across the divisions. Those were more pronounced for the division of food and non-alcoholic beverages while they were found little in the division of clothing and footwear.     

The wage impact of undocumented workers: Evidence from administrative data

Using administrative, individual level, longitudinal data from the state of Georgia, this article finds that rising shares of undocumented workers results in higher earnings for documented workers, but by a small amount. A one percentage point increase in the share of undocumented workers in a documented worker's county/industry results in an average wage boost of 0.44%. Within the firm, a one percentage point increase in the percent of undocumented workers employed by the firm boosts wages by 0.09% (0.11, 0.12, and 0.04 in low, medium, and high skill firms, respectively). Potential explanations for a positive wage impact are discussed.     

Inequality of opportunity in China: Evidence from pseudo panel data

We construct a pseudo panel sample from the China General Social Survey to study the inequality of opportunity in China. The pseudo panel enables us to control for cohort-specific heterogeneities when estimating the Mincer equation, and the results show that individual circumstances play a prominent role in determining income advantage. Counterfactual analysis further reveals the importance of cohort-level circumstances: individual circumstances account for less than 10% of the observed income inequality, whereas equalizing both the individual circumstances and the cohort fixed effects reduces income inequality by 30%. Among the individual circumstances we examine, gender and paternal characteristics contribute more to income inequality than does hukou of birth. Subsample analysis shows that China's western provinces exhibit the highest inequality of opportunity and that the inequality of opportunity among younger cohorts is smaller than that among older cohorts.     

Household appliance ownership and income inequality: Evidence from micro data in China

As the residential sector is becoming increasingly important in the total energy consumption and appliance ownership is a significant but under-examined driver, this study investigates the relationship between income inequality and appliance ownership using panel data from the China Health and Nutrition Survey (CHNS). We find that income inequality has negative impacts on appliance penetration rate across specifications, except for the initial development stage. On average, households start adopting air conditioners at a threshold of over 60,000 (2011 RMB) based on annual income, much higher than TV, fridge and washer (8500–9000 RMB). The empirical results validate the S-shape curve of appliance established in the literature. To understand the magnitude of the impact and policy implications, we further simulate the impact of poverty alleviation and the penetration paths under inclusive versus exclusive income growth. Our results demonstrate that current poverty line is too low to achieve appliance adoption – a signal for modern life-styles. In addition, a more inclusive growth path could lead to much higher penetration for regions that have relatively low growth rate.     

Unobserved firm heterogeneity and the size-exports nexus: Evidence from German panel data

This paper starts from the stylized fact that firm size and exporting tends to be positively related. Using large sets of establishment panel data for three different industries from official statistics, evidence is presented that the familiar picture of an export/sales ratio that increases (at a decreasing rate) with firm size vanishes if unobserved firm heterogeneity is controlled for in a fixed-effects fractional logit regression model. This finding is well in line with the fact that many small firms are “hidden export champions.” JEL no. F10, D21, L60     

The pitfalls of estimating transactions costs from price data: Evidence from trans-Atlantic gold-point arbitrage, 1886-1905

This paper argues that bilateral spatial price models do not estimate bilateral transactions costs when trade with third cities is important. The paper examines trans-Atlantic gold arbitrage during the gold standard era by assembling a database indicating when trans-Atlantic gold shipments occurred. It shows that two-way gold shipments between New York and London frequently occurred prior to 1901. However, in 1901 gold shipments to London ceased and were replaced by triangular arbitrage shipments through Paris. Consequently, New York and London gold price data cannot be used to estimate New York-London transactions costs after 1901, as no trade took place.     

Is devaluation expansionary or contractionary: Evidence based on vector autoregression with sign restrictions

The purpose of the paper is to examine the impact of real exchange rate changes – real devaluation or real depreciation – on outputs in 16 countries that fall within one of the three groups: Latin American countries, Asian countries, and non-G3 developed countries. For the first time in the contractionary devaluation literature, the analysis is based on a Vector Autoregression (VAR) model with sign restrictions method by Uhlig (2005) and Fry and Pagan (2011). The exchange rate shock is identified by imposing restrictions on the signs of impulse responses for a small subset of variables. The findings are as follows: (1) whether output increases after a real devaluation or not has little to do with whether the current account improves or not; (2) Latin American countries are quite homogenous in that the current account generally improves while output decreases after real devaluation; and (3) contractionary devaluation could happen in developed countries as well as in developing countries.     

Digital finance and household carbon emissions in China

Sustained economic growth and environmental degradation are two of the key goals in the SDGs (Sustainable Development Goals). Digital finance provides an opportunity to simultaneously address the trade-off between the two goals. Based on data from CEADs, CNBS, CFPS, IDFPU, VIIRS and NPCGIS, this article examines the causal impact and transmission mechanisms of digital finance on consumption-based HCEs. To address the potential endogeneity, IV and IV-MA as well as HDFE models are applied in empirical estimates. Results show that digital finance has a positive impact on consumption-based HCEs. Mechanism analysis indicates that digital finance can increase HCEs through stimulating consumption scale, which is scale effect. Besides, digital finance can decrease HCEs through promoting greener consumption patterns, which is composition effect. On the whole, scale effect prevails composition effect. Our findings contribute to the literature on digital finance and green finance and have policy implications on common prosperity, not only for China, but also for other economies.