The impact of regional trade policy uncertainty on the productivity of Chinese export enterprises: The case of China–ASEAN Free Trade Area

Reduction of regional trade policy uncertainty is critical for promoting Chinese export enterprise productivity and will help the economy enter the high-quality development stage. We use the case of the China–ASEAN Free Trade Area to empirically tests the impact of the reduction of regional trade policy uncertainty on the productivity of Chinese export enterprises. We apply the difference-in-difference method to micro-enterprise level data from the “China industrial enterprise database” and “China Customs enterprise database” for 2007–2013. Our analysis and results show that establishing the China–ASEAN Free Trade Area has dramatically reduced regional trade policy uncertainty, significantly impacting the productivity of Chinese enterprises exporting to ASEAN. The results also show that enterprises with different ownership types, regions, factor density, and pollution emission intensity show significant heterogeneity in the level of productivity improvement. Applying a mechanism test, we found that the promotion of productivity from a reduction of regional trade policy uncertainty is achieved through the learning effect, the competition effect, and improving the trade environment of imported intermediate goods. The learning effect mechanism has the highest contribution, accounting for 39.01% of the net effect. The empirical results provide novel insight into promoting the productivity of Chinese enterprises exporting to ASEAN from the perspective of reducing regional trade policy uncertainty.     

Home-country environment and firms’ outward foreign direct investment decision: Evidence from Chinese firms

This paper takes a holistic view and examines the environmental effect of the home country on firms’ outward foreign direct investment (OFDI) decisions. We construct an economic growth index to assess the overall economic environment of Chinese regions and find that the home country’s business environment is negatively associated with firms’ decisions to invest abroad, and that such a negative relationship can be intensified for firms with state ownership or without an export network. Moreover, unlike previous literature, we look at both the environmental effect on OFDI decisions and the consequential impact of OFDI on firm performance. We employ propensity score matching and difference-in-differences methods, as well as the Heckman two-step model, for our estimations. Our results show that OFDI does indeed improve Chinese firms’ productivity and sales. This paper, therefore, contributes to the literature by identifying a range of home country business environmental factors that have a combined effect on firms’ OFDI decisions, adding to a more comprehensive understanding of OFDI originating from emerging economies.     

Does foreign direct investment increase exports’ productivity? Evidence from developing and emerging countries

Raising the productivity content of exports is an important issue for developing and emerging countries. What role do foreign firms play in this process? This question has not been adequately studied. We contribute to the literature by generalizing the role of foreign direct investment (FDI) in the host country’s export productivity level. Using panel data, we present new empirical evidence suggesting that FDI boosts the overall productivity level of the developing and emerging countries’ exports.     

Does WTO accession matter for the dynamics of foreign direct investment and trade?

The aim of this article is to study the impacts of World Trade Organization accession on the dynamics of foreign direct investment (FDI) and trade in Vietnam. In order to do this, we employ an augmented gravity model and use a panel data set covering bilateral trade and FDI between Vietnam and its 17 most important partner countries, over the period 1990–2008. Firstly, we find that WTO accession has a significantly positive effect both on Vietnam’s imports and on inward FDI. Secondly, even though we find no evidence to demonstrate convincingly that WTO accession influences Vietnam’s exports, this accession seems to indirectly encourage Vietnam’s exports through the FDI channel due to a strong connection between these two.     

Does it matter where you come from? Vertical spillovers from foreign direct investment and the origin of investors

This study uses firm-level panel data from Romania to examine whether the origin of foreign investors affects the degree of vertical spillovers from FDI. Investors' origin may matter for spillovers to domestic producers supplying intermediate inputs in two ways. First, the share of intermediates sourced locally by multinationals is likely to increase with the distance between the host and the source economy. Second, the sourcing pattern is likely to be affected by preferential trade agreements. In this case, the Association Agreement between Romania and the European Union (EU) implies that inputs sourced from the EU are subject to a lower tariff than inputs sourced from the United States or Canada. This means that on average American investors may have a greater incentive than EU investors to source from Romania and hence present a greater potential for vertical spillovers. The empirical analysis produces evidence consistent with this hypothesis. The results show a positive association between the presence of American companies in downstream sectors and the productivity of Romanian firms in the supplying industries and no significant relationship in the case of European affiliates. The results also indicate that Romanian firms in sectors whose products are expensive to transport benefit more from downstream presence of American affiliates than Romanian firms in sectors with low shipping costs. No such pattern is found for European affiliates.     

Does foreign direct investment promote growth? Exploring the role of financial markets on linkages

Do multinational companies generate positive externalities for the host country? The evidence so far is mixed varying from beneficial to detrimental effects of foreign direct investment (FDI) on growth, with many studies that find no effect. In order to provide an explanation for this empirical ambiguity, we formalize a mechanism that emphasizes the role of local financial markets in enabling FDI to promote growth through backward linkages. Using realistic parameter values, we quantify the response of growth to FDI and show that an increase in the share of FDI leads to higher additional growth in financially developed economies relative to financially under-developed ones.     

Does human capital constrain the impact of foreign direct investment and remittances on economic growth in Ghana?

This article empirically investigates whether human capital constrains the impact of Foreign Direct Investment (FDI) and remittances on economic growth in Ghana. An economic growth model for Ghana is specified and estimated using Fully Modified Ordinary Least Squares (FMOLS) estimator and employing annual data spanning the period 1965 to 2008. Empirical results indicate that FDI and remittances are key determinants of economic growth in Ghana. Results indicate that human capital enhances the impact of FDI and remittances on economic growth. Although both government expenditure and trade openness are growth-enhancing, government expenditure appears to crowd-out private investment. Empirical results also indicate that domestic inflationary pressures, unstable political environment and volatile global economy exert a negative impact on economic growth in Ghana.     

Do trade flows respond to nudges? Evidence from the WTO’s Trade Policy Review Mechanism

Relatively little is known about the economic effects of WTO members’ communications outside of official negotiations and dispute proceedings. This paper considers whether interactions between members through the Trade Policy Review Mechanism, the WTO’s prime transparency institution, lead to subsequent changes in bilateral trade flows. Trade policy concern submissions are more likely to lead to positive trade responses when (i) the receiving country is less concerned about terms‐of‐trade losses, (ii) the submitter is more willing to engage in WTO disputes with the reviewed member to challenge controversial trade policies, and (iii) the submitting country challenges trade policies in the nonchemical manufacturing sector. Nudges through the TPR process are not successful in raising agricultural trade.     

Does the presence of high-skilled employees increase total and high-skilled employment in the long run? Evidence from Austria

Studies conducted for the US have found a positive effect of human capital endowments on employment growth, with human capital endowments diverging at the same time. In contrast, studies for European countries have found convergence of human capital endowments. This paper tests these relationships for the 99 Austrian districts for the observation period 1971–2011 by estimating how the presence of high-skilled employment affects total, low-skilled and high-skilled employment growth. To this end, OLS, fixed-effects and first-difference regressions are estimated. The results indicate continuous convergence of high-skilled employment which, however, slowed down significantly since the 1990s. In contrast to previous studies, evidence for positive effects of high-skilled on total and low-skilled employment is only weak and varies over time. Furthermore, the results show that total and high-skilled employment in suburban areas grew faster than in other regions, while districts which bordered the Eastern Bloc were disadvantaged. Nevertheless, spatial neighbourhood effects within Austria are only weak.     

Does the mixed-ownership reform improve the productivity of state-owned enterprises? Evidence from companies listed in Chinese stock

The Chinese government initiated a new round of state-owned enterprise (SOE) reform in 2015 to improve SOE's performance with a focus on introducing multiple ownership shareholders and strategic partners, known as the mixed-ownership reform (MOR). This paper examines the policy effectiveness of the current MOR, an ongoing quasi-experiment, for listed SOEs’ productivity from 2011 to 2019 using a time-varying difference-in-difference (DID) approach. Overall, the total factor productivity (TFP) of SOEs selected as pilots by the government improved significantly by 14.57% after the reform compared to other SOEs, providing evidence for the positive role of the current MOR. This positive impact is prolonged and tends to increase in the post-reform years. A series of robustness checks show that our empirical specification satisfies the basic assumptions of DID and our findings are robust. By comparing the two reform strategies in the MOR, we find that the restructuring and reorganization plan is the primary channel driving TFP growth, showing a 0.4% improvement after the reform, rather than the employee stock ownership plan. We also investigate the impact of MOR on other financial and non-financial indicators, but we only find a significant increase in the profitability of SOEs’ assets.     

Does having a cadre parent pay? Evidence from the first job offers of Chinese college graduates

We estimate the wage premium associated with having a cadre parent in China using a recent survey of college graduates carried out by the authors. The wage premium of having a cadre parent is 15%, and this premium cannot be explained by other observables such as college entrance exam scores, quality of colleges and majors, a full set of college human capital attributes, and job characteristics. These results suggest that the remaining premium could be the true wage premium of having a cadre parent.     

Does the reliability of institutions affect public good contributions? Evidence from a laboratory experiment

Reliable institutions, i.e., institutions that live up to the norms that agents expect them to keep foster cooperative behavior. We experimentally confirm this hypothesis in a public goods game with a salient norm that cooperation was socially demanded and corruption ought not to occur. When nevertheless corruption attempts came up, groups that were told that ‘the system’ had fended off the attempts made considerably higher contributions to the public good than groups that learned that attempts only did not affect their payoffs or that were not exposed to corruption at all.     

Do networks or performance impact the promotion of Chinese officials? Evidence from prefecture‐level cities

This study examines the effects of connections and economic performance on the promotion of Chinese city mayors. Our study differs from the published literature in four respects. First, this study covers a comprehensive data set, including 1,422 mayors from 284 prefecture‐level cities. The use of a large data set helps resolve mixed results of past studies. Second, we use a broader range of top leaders. Third, we apply a more comprehensive definition of connections than earlier studies. Finally, we examine the effects of the policy shift of the 11th 5‐year plan on promotion of mayors. Our results reveal that the performance of a city mayor assisted his/her promotion to party secretary before 2006 but not afterwards. However, a mayor's connection with five types of top leaders is helpful. Among the four types of connection, colleagueship is the most effective in expediting the promotion of mayors. Graduating from the same university and department is also helpful but to a lesser extent. Township connection is not useful.     

Does the early bird catch the worm? The effect of school starting age on educational attainment and labor market outcomes: Evidence from Chinese urban twins data

This paper estimates the effects of school starting age (SSA) on educational attainment and labor market outcomes by using unique urban adult twins data from China. Ordinary least squares (OLS) estimates indicate that late enrollment in primary school lowers years of education, earnings, wage rate, and probability of employment. However, when we use the within-monozygotic (MZ)-twin fixed effects method to exclude unobservable endowments and family factors, the effects of SSA on years of education become less negative. For earnings, wage rate, and the probability of employment, the within-twin fixed effects estimates become insignificant. The results indicate that a one-year delay in primary school starting age lowers schooling by 0.51 years but does not affect earnings, wage rate, or probability of employment. The difference between OLS and within-MZ-twin fixed effects estimates indicates that the negative return to SSA is due to unobservable family variables and omitted individual-specific endowments. We further find that the earlier primary school starters fail to obtain a level of education with high return. Specifically, early birds do not have a high probability of getting a vocational school degree or above.