Do political connections affect corporate poverty alleviation decisions? Evidence from China

Programs to alleviate poverty by corporations are increasingly popular as a new form of corporate social responsibility. This study examines how the political connections of a firm's chairperson are associated with decisions to alleviate poverty based on a sample of listed Chinese firms from 2016 to 2018. We find that the chairperson's political connections increase the probability of participation and the amount of investment in programs to alleviate poverty. This positive relationship is mainly manifested in firms with high agency costs and low regional economic conditions. In addition, the chairperson's political connections are not related to the efficiency of the poverty alleviation program. Politically connected firms receive less government recognition with an increase in investment in poverty alleviation. Our findings are consistent with the notion that firms participate in poverty alleviation programs for reciprocal favor exchanges, but they fail to manage these programs efficiently.     

Do men and women discriminate against women for the same reason? Evidence from China

In this study, we examine whether men and women form gender discrimination for the same reason. To do that, we build an experimental Chinese labor market in which employers evaluate the productivity of workers who perform a real-effort task. Before evaluation, the employer observes the worker’s personal and group information. The personal information contains gender identity and a signal of productivity. The group information reveals the productivity distributions of some other male and female workers who do not differ in average productivity. However, it shows more male workers at the very top productivity levels and more female workers at the very bottom productivity levels in one treatment than in the other. According to the belief-based theory, there will be a greater degree of discrimination against female workers in the former. We find that, however, only male employers’ evaluations are well predicted by this approach. Female employers behave oppositely: their degree of gender discrimination is smaller in the treatment emphasizing men’s advantage in the tails of the productivity distributions. To explain female employers’ evaluations, we adopt the preference-based approach. Our findings suggest that employers of different genders can have different motivations for gender discrimination, and thus call attention to the theoretical foundation of gender discrimination and policy measures aimed at reducing gender discrimination.     

How do firms respond to minimum wage regulation in China? Evidence from Chinese private firms

To study how firms respond to minimum wage regulation in China, this paper empirically explores a number of dimensions along which firms adjust in response to minimum wage differences, using three waves of a national survey of Chinese private firms. Consistent with the predictions of economic theory, we find that private firms in China respond to minimum wage increases by cutting various fringe benefits such as pension and insurance, and by laying off low-skilled workers and short-term workers. Despite these adjustments, firms cannot fully mitigate the detrimental effects on firm profitability when faced with adverse demand shocks because of the wage rigidity introduced by minimum wage regulation. These findings highlight the unintended consequences of minimum wage regulation on the private sector in China.     

Why is inequality higher among the old? Evidence from China

This paper studies income inequality in old age and its development over the life cycle. We show that income is more unequally distributed in old age than in working age. We combine the regression-based inequality decomposition method and the three-step mediating effect test to analyze the transmission of income inequality from initial socioeconomic differences to income inequality in old age. Our study is based on a panel of over 4000 old households from the China Health and Nutrition Survey during 1991–2015. We find that the urban-rural gap and educational inequality are the primary causes of old-age income inequality. The effect of the urban-rural gap is partially mediated by educational inequality. Inequality accumulates with age and is reinforced in old age by the fragmented Chinese public pension system.     

Do environmental regulations and financial constraints stimulate corporate technological innovation? Evidence from China

Does China achieve the Porter effect which states a win-win development of economy and environment? Besides environmental regulations (ER), financing is a critical factor affecting corporate technological innovation (TI). This study develops an integrated model to empirically investigate the interrelationship between ER, financial constraints (FC), and TI. The model is tested to make use of the Driscoll–Kraay standard error estimation and various regression models, based on detailed Chinese listed firm-level data covering the period from 2011 to 2017. Our baseline results show that ER have produced a crowding out effect of R&D input and inhibited patent outputs; as a consequence, the “weak” version of the Porter hypothesis is not underpinned in A-share stocks listed firms. Further tests indicate that FC have a mediating effect on the relationship between ER and TI. The moderating effect of FC between ER and TI is mixed. The effect of ER on TI is affected by the threshold effect of FC—the lower FC can better support the innovation compensation effect or alleviate the crowding out effect of ER. Thus, our findings offer new ideas for supporting financing mechanism of environmental governance to stimulate R&D innovation of listed companies.     

Do politically connected independent directors matter? Evidence from mandatory resignation events in China

This paper investigates the contributions of politically connected independent directors to shareholder value by examining stock price reactions to their mandatory resignations. Employing an event study, we find that, if a private firm loses its politically connected independent director due to mandatory resignation, its stock price drops 4.61% on average within ten trading days, compared with control firms. We observe that, compared with independent directors from academia, politically connected independent directors are absent from more board meetings and are reluctant to express dissenting opinions even if they attend meetings. So the negative stock price reaction cannot be mainly explained by the loss of supervisory functions after politically connected independent directors were forced to resign from positions. By employing DID estimation, we further find that the economic benefits obtained by private firms decrease after the mandatory resignation. The heterogeneity and robustness checks further confirm that private firms indeed were unable to get the same amount of economic benefits from the government as before, which provides a reasonable explanation for the negative stock price reaction after mandatory resignations of politically connected independent directors.     

Do the self-employed underreport their income? Evidence from Japanese panel data

This paper examines to what extent self-employed households underreport their income to tax authorities in Japan. To this end, we employ the so-called expenditure-based approach, which essentially compares the current expenditure of self-employed and wage earner households while controlling for their income, net worth, and household characteristics. Using Japanese household-level panel data for the period 2009−2019, we find that the self-employed possibly underreport their income by 33.0–36.4%. Our findings are also robust to the different preferences (degree of risk-loving, time discount rates, etc.), planned retirement age, and degree of measurement error in expenditure between the self-employed and wage earners.     

Which firms benefit from robot adoption? Evidence from China

This paper investigates which firms benefit from robot adoption in a developing open economy such as China. First, we construct a unique comprehensive dataset to identify robot adoption in Chinese industrial firms. Second, we adopt difference-in-differences to provide empirical analysis after conducting the common trends tests. Third, we find that adopting robots significantly increases a series of firm performance indicators in robot adoption firms. Compared with adopting firms in the labor-intensive sector, firms in the capital-intensive sector significantly benefit from robot adoption in a series of firm performance indicators, e.g., employment, capital stock, output, total factor productivity, capital returns, and exports. Finally, we check the robustness, investigate the dynamic effects, and find persistent positive effects. Our findings shed some light on the impacts of robot adoption in developing and transition countries.     

Does export liberalization cause the agglomeration of pollution? Evidence from China

This paper investigates the impact of export liberalization on the geographic concentration of water pollution. Data shows that water pollution emissions are unevenly distributed across regions in China. Using China's accession to the World Trade Organization (WTO) as the exogenous shock, we identify a negative causal effect of export liberalization on the agglomeration of water pollution across regions in China. It suggests that relatively more water pollution is discharged in those previously low-pollution regions after export liberalization. We confirm this with data on regional relative pollution emissions. Further decomposition shows that it is the intensive margin (average pollution emission) rather than the extensive margin (number of polluting firms) that drives the deglomeration of water pollution emissions within the liberalized industry.     

Does participating in the standards-setting process promote innovation? Evidence from China

This paper provides novel empirical evidence on the positive effect of standards-setting involvements on corporate innovation in China, reflecting in improving the patent quantity and patent quality. This kind of positive effect increases as the firm's top management team quality increases. We also show that the positive effect of standards-setting involvements is more evident for state-owned enterprises than non-state-owned enterprises due to the unique features of state-owned enterprises. Our results are robust to a battery of tests, including the use of alternative model specifications, firm fixed effects, the instrumental variable approach, potential omitted variables, and propensity score matching procedure. Further analysis reveals that standards-setting involvements foster innovation mainly through improving firms' R&D efficiency, reducing financial constraints, and inducing collaborative innovation. Overall, our findings suggest that standards-setting involvements matter for corporate innovation in China.     

Does Land Rent between Acquaintances Deviate from the Reference Point? Evidence from Rural China

This paper theoretically and empirically investigates whether acquaintance networks influence the deviation of land rent from the reference point advanced by Hart and Moore. The coefficient of variance and the range of land rent are used to represent the degree of deviation from the reference point. Based on village‐level data from the 2015 China Household Finance Survey, the estimated results indicate that land rent between acquaintances is more likely to significantly deviate from the reference point. Although rental transactions are conducted between acquaintances, larger deviations from the reference are also associated with a longer time to close deals. Our analysis using household‐level data further supports our findings, indicating that land rental markets embedded in the acquaintance networks of rural China are in a transition period and have characteristics of both relational and market orientation. The policy makers should introduce more outer village lessees or other market ingredients to increase the voluntary marketization of land rentals inside acquaintance networks.     

Do Free Trade Agreements Increase the New Goods Margin? Evidence from Korea

We analyze the changes in the composition of bilateral trade—and more specifically, in the new goods margin—following the free trade agreements (FTAs) signed by Korea between 2004 and 2008. We find that new goods trade increased disproportionately after the FTAs came into effect, and that least-traded goods (LTG)—those accounting for the lowest 10% of trade prior to the FTAs—ended up accounting for 37% of post-FTA trade with FTA partners. In contrast, the corresponding share for a comparable group of countries that did not sign FTAs with Korea was only half as large, averaging close to 20%. We also find that only less than 2% of all least-traded products accounted for most of the growth in LTG trade, and that those goods tended to be clustered in the same industries as the intensively-traded goods. Furthermore, a larger fraction of LTG became heavily traded for the case of FTA partners than for non-FTA countries. Finally, we find evidence that least-traded imports were subject to higher pre-FTA tariff protection than other products.     

Do Migrants Rob Jobs? New Evidence from Australia

This study contributes to the recent debate on immigration and unemployment in Australia by investigating the causal linkage between immigration and unemployment. The question of whether 'immigrants rob jobs' is examined by identifying the sources of unemployment through causal linkages between unemployment and other key variables such as immigration. The research finds no Granger causality between immigration and unemployment, but does run from industrial structural change to the high unemployment rate in Australia. This research also finds that both GDP growth and immigration inflow reinforce each other in the course of economic development in Australia.     

Do Community Characteristics Influence Environmental Outcomes? Evidence from the Toxics Release Inventory

This research uses neighborhood characteristics (at the zip code level) in 1990 to explain toxic releases in 1993. It combines the Toxics Release Inventory data with demographic data from the 1990 U.S. Census. We first analyze the location of manufacturing facilities in a particular neighborhood using a sample selection model, and then estimate the relationship between releases in 1993 and the demographic characteristics of the neighborhood in 1990. We conduct the analysis for the entire U.S. as well as for different geographic regions to study regional differences in determinants of environmental outcomes. Releases in nonurban areas of the southeastern U.S. exhibit a pattern suggesting that race might be an important determinant of release patterns. Economic characteristics of neighborhoods (such as income levels and unemployment) also affect releases. Our variables that proxy the propensity for communities to engage in political action exert greater influence on environmental outcomes in nonurban areas.     

Do social interactions foster household entrepreneurship? Evidence from online and offline data from China Family Panel Studies

Using China Family Panel Studies data, we analyze online and offline social interactions' influence on household entrepreneurial choice. We conclude that social interactions can positively influence household entrepreneurial choice, intensity and performance, and our findings are robust considering the possible endogeneity problem. The mechanisms of information acquisition, financing constraints relaxing and relative wealth concern are valid. In terms of heterogeneity analysis, for entrepreneurs of rural migrant backgrounds (those with agricultural hukou and urban permanent residence), the impact of online social interaction is more significant than it is for others. For households in the eastern regions, social interactions show significant positive impacts on entrepreneurship choices. We also find that the promotion effect of social interactions is more pronounced for households with a higher debt level than for those with a lower debt level.     

Do Currency Barriers Solve the Border Effect Puzzle? Evidence from the CFA Franc Zone

In this paper, we use a gravity model to investigate the extent to which currency barriers explain the border effect puzzle, i.e. the impact of national borders on international trade. We focus on the two monetary unions of the CFA Franc Zone in West and Central Africa. We find that these countries display large border effects, and that currency barriers explain between 17 per cent and 28 per cent of the overall border effect. JEL no. F11, F15, F33     

Does religion matter to corruption? Evidence from China

There is a growing interest in understanding how religion affects corruption. Using provincial-level panel data from 1998 to 2009, this paper investigates the effect of religious beliefs on bureaucratic corruption in China. The empirical results show that, bureaucratic corruption is negatively associated with local religious heritage, implying that religious culture plays a positive role in restraining official's corruption since religion has influence on political preference and work ethic. We also find that the negative association between religion and corruption is weaker in provinces with stronger law enforcement, which identifies the substitution effect between religious ethic and legal supervision in curbing corruption. Our findings also reveal that, among the different religions, the anti-corruption effects of China's native religions (i.e., Taoism and Buddhism) are more significant than those of foreign religions (i.e., Christianity and Islam). These conclusions are consistent and robust to various measures of main variables and a variety of robustness checks. Given the very few studies and limited data resources in the context of China, this paper as a tentative study provides new evidences of the relationship between religion and corruption.     

Does higher language proficiency decrease the probability of unemployment? Evidence from China

This paper considers how proficiency in Standard Mandarin, China's official language, affects employment probabilities in China. Previously, research has focused on language proficiency' effects on earnings, with little research having been done on how proficiency affects employment probabilities vis-à-vis unemployment. Data will be taken from the China Labor-force Dynamics Survey (CLDS), which makes it possible to distinguish between employed and unemployed people. Using a linear probability model, it is estimated that a one-standard-deviation increase in Mandarin proficiency decreases unemployment probabilities by 5%. Significant heterogeneity is also found. The ‘employment premium’ for language proficiency is highest for younger people and people living in urban areas. The effects on employment is not significant for older people, and people living in rural areas.