CEO experience and corporate financing decisions: Evidence from a natural experiment in China

Using the unique setting in China's economic transition and market reform, we investigate whether CEOs' experience regarding an economic boom affect corporate financing decisions. Economic booming, as a result of China's reform and open policy since 1978, affects individual risk preferences and decision behavior for those who grew up during the reform process. We find that Reform-and-Opening CEOs, who experience the reform and open-up era early in life, implement more aggressive capital structure policies and maintain higher leverage compared to Planned Economy CEOs. Furthermore, we determine that Reform-and-Opening CEOs tend to conduct debt issuance more frequently to cover financing needs as they can better deal with the liquidity risk of debt financing and confront the pressures arising from frequent monitoring by the debt markets. Using the stagewise regression, we find a cumulative effect of early growth experience. We also use the common trend test and placebo tests to deal with the concern that Reform-and-Opening CEOs pursue significantly more aggressive financial policies relevant to the systematic differences. Additional tests rule out the possibility that our results are driven by industry competition, state ownership, and educational ideology.     

Intergenerational income persistence and transmission mechanism: Evidence from urban China

In this paper I investigate the intergenerational income association and its transmission channels amid China's economic transition period using urban data from the Chinese Household Income Projects in 1995 and 2002. The estimated intergenerational income elasticity is 0.43 and 0.51 for cohorts educated prior to and after the market reform respectively, and reaches 0.71 among households with above average income in the post-reform era. Besides the conventional channel of education, this paper estimates the contribution from social capital and ownership of work unit across cohorts and income groups. There is weak evidence that prior to market reform, ownership of work unit contributes most to the intergenerational income persistence for households with below average income, while social capital leads the three contributors in households with above average income. However, in the post-reform era, parents with below average income invest statistically significantly in children's education which contributes most to the intergenerational income persistence. The leading contributor in families with above average income shifts to social capital. Possible explanations for such a shift lie in the ability and incentive of parents from different income categories to invest in their children. The results are tested through a series of robustness checks, and provide empirical support for promoting policies on the equality of opportunity.     

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.     

The impacts of income gaps on migration decisions in China

Using survey data from China, this article examines the effects of income gaps on migration decisions and the sources of these gaps. The econometric results support the hypothesis that income gaps significantly influence migration decisions. When income gap reaches a certain level, the reaction of the migration probability to income gap is weaker for men than for women. The relative income of women is less sensitive to an increase in rural income but more sensitive to a decrease in urban income than that of men. Moreover, we find that the urban to rural income gap is larger for women than for men, which suggests that women receive larger monetary return from migration than men do. In decomposing income gaps, we find that the gap for men is largely determined by differences in the attributes of migrants and nonmigrants, whereas for women, the gap is mainly determined by differences in returns to attributes.     

Patrilineality,fertility, and women's income: Evidence from family lineage in China

This study investigates how traditional patrilineal family institution influences women's income through fertility behavior by offering evidence from family lineage (zongzu) in China. We hypothesize that family with strong lineage—proxied by owning genealogy—has a negative effect on women's income through the son-targeting fertility behavior. Using a difference-in-differences strategy, this study confirms the hypothesis. Relative to the women whose first child is a son, the women marring into families owning genealogy indeed have more children and lower income, if their first child is a daughter. In contrast, such finding does not hold for the male sample. Preliminary evidence suggests that shorter work time can explain the findings.     

Self-selection and Earnings of Migrants: Evidence from Rural China

Using data from a rural household survey in China, this paper explores the link between employment choice (nonworking, local farm work, local nonfarm work and migratory work) and migrant earnings. We find significant self-selection in migration. Youths, men, better-educated individuals and those in good health are more likely to migrate. In terms of unobserved characteristics, we find positive selection in migration to be related to the alternatives of not working and local farm work, and negative selection to be related to local nonfarm work. Controlling for self-selection, the wage returns to gender (male), education and health are lower than those obtained from OLS, and the returns to experience are higher. More importantly, we find different self-selection between individuals who have moved as pioneers and migrants from households in which other members have already migrated.     

离土与离乡:西部山区农户的非农兼业研究

在可持续生计分析框架下(SLF),本文发展了一个农户模型,阐释了在多重不完全市场条件下,农户的资本禀赋包括人力资本的分布特征和金融可及性等,如何决定农户参与两类不同的非农兼业活动。基于陕西周至山区的农户调查数据,文章的实证结果表明:高人力资本水平是外地打工兼业的关键因素,而本地非农经营兼业还要求农户具备较高的物质资本和社会关系资本等。     

中国农村地区消费收敛的证据:家庭调查数据

本文的目的在于提出研究消费收敛的经济模型，将模型应用到中国的一系列数据中；并且讨论研究结果的各种含义。本论文的主要发现有(a)全部谷物、精细谷物、食用油、家禽、水产品和糖证实为条件收敛；(b)动物脂肪和红色肉食品是消费分散；(c)收入增长的不平衡和市场的不发达是消费收敛的障碍；(d)收敛商品的收敛速度比较慢。     

Convergence in food consumption in Rural China: Evidence from household survey data

The aims of this paper are to propose an econometric model for studying consumption convergence, to apply the model to a set of panel data from China, and to discuss various implications of research results. Major findings of the paper include (a) conditional convergence is confirmed for total grain, fine grain, edible oil, poultry, aquatic product, and sugar; (b) animal fat and red meat exhibit consumption divergence; (c) rising income inequality and underdevelopment of market are identified to be obstacles to consumption convergence; and (d) for commodities that converge, the speed of convergence is slow.     

Preferential policies and income inequality: Evidence from Special Economic Zones and Open Cities in China

This paper examines whether cities with preferential policies have higher inequality in household disposable income per capita than cities without preferential policies in urban China. “Preferential policies” refers to the autonomy and deregulation given to Special Economic Zones (SEZs) and Open Cities, allowing them to experiment with market policies and reforms, as the country moves from a state-controlled economy towards a market-oriented economy. While the effect of these policies on economic growth is extensively documented, their relationship with income inequality remains undetermined. Subgroup decompositions of income inequality, using the China Household Income Project's urban datasets of over 6000 households and 20,000 individuals from of up to 70 cities from 12 provinces, were used to identify income inequality gaps between cities with and without preferential policies. The results reveal that while income inequality increased in urban China from 1988 to 2007, the change was lower for cities awarded preferential policies across regions. Furthermore, the decompositions by region indicate that cities receiving preferential policy treatment had higher income growth but a lesser increase in income inequality than cities without preferential policies in each region. Finally, cities receiving preferential policies were able to increase the share of income of the poorest 40% of households while reducing the share of the richest 10%.     

Tax incentive and corporate financial performance: Evidence from income tax revenue sharing reform in China

How to stimulate corporate performance is a crucial issue of general concern in all countries. This paper examines how China’s Income Tax Revenue Sharing Reform in 2002 affects corporate financial performance. Unlike general tax policies that directly adjust the nominal tax rate or depreciation allowance, this reform indirectly affects the effective Enterprise Income Tax (EIT) rate by switching tax administration, thereby affecting corporate financial performance. We use a firm-level data-set from Annual Survey of Industrial Firms (ASIF), and test the impact by using a quasi-natural experimental design through regression discontinuity design (RDD). We find that after the reform, the effective EIT rate (ETR) of enterprises collected EIT by State Administration of Taxation (SAT) was 10% lower than that of enterprises collected EIT by the Local Administration of Taxation (LAT). If the ETR reduces by 1%, corporate financial performance, more specific, Return on Asset (ROA), increases by 1.7%. There are two available channels: increasing fixed asset investment (FAI), and alleviating external financial constraints. Additionally, the impact can be weakened for locally SOEs, large firms, firms with low SA index and those in less competitive industries.     

Intergenerational transfer of human capital and its impact on income mobility: Evidence from China

This paper analyzes theoretically and empirically the impact of intergenerational transmission of human capital on the income mobility in China. We use a three-period overlapping-generations (OLG) model to show that the human capital transfer plays a remarkable role in determining the parent-to-offspring investment in human capital and the intergenerational elasticity of income. We then estimate a simultaneous equations model (SEM) using the 1989–2009 China Health and Nutrition Survey (CHNS) data to verify our theoretical predictions. The results show that (i) human capital, measured by health and education, is directly transmitted from one generation to the next, reflecting the parent-induced inequality of development opportunities among offspring in China; (ii) the estimated intergenerational income elasticity increases from 0.429 to 0.481 when the direct transfer of human capital is accounted for, suggesting that omitting this mechanism would overestimate China's income mobility. Our findings provide policy implications on strengthening human capital investments among the disadvantaged groups, reinforcing reforms that promote equality of opportunity, and improving the efficiency of labor markets in China.     

Perceived relative income,fairness, and the role of government: Evidence from a randomized survey experiment in China

Previous studies have shown that Chinese citizens generally are optimistic about their economic opportunities and tolerant of the high levels of inequality in their society. This paper conducts a random survey experiment to examine whether the established views on fairness and inequality change after the respondents receive the general information on wealth concentration or the customized information on their household income ranking. We find that both types of information lead respondents to view society as less fair than they had initially believed. The information on the wealth concentration also increases public concern about social inequality. Nevertheless, neither information offered to the respondents make them think that government should play a more significant role in reducing inequality. This lack of demand for government intervention may be partially explained by a lower level of trust in the local government induced by the two information treatments.     

More-money and less-cash effects of diversification: Evidence from Japanese firms

This study provides evidence for the more-money and less-cash effects of diversification based on the industry-adjusted debt and cash holdings of Japanese firms. Diversified firms are more leveraged while holding less cash than focused firms in the same industries, even after controlling for the standard determinants of capital structure, unobserved heterogeneity, and the endogeneity of firm scope. The study also finds that these effects are mitigated when a firm has an ownership structure that insulates managers from capital market pressures for risk-taking. This pattern suggests that the risk-taking incentives of managers differentiate the effect of diversification on finance across firms.     

The impact of agricultural technology adoption on income inequality in rural China: Evidence from southern Yunnan Province

This study analyzes the impact on income inequality of government efforts to increase agricultural incomes in rural China. It collects and analyzes survey data from 473 households in Yunnan, China in 2004. In particular, it investigates the effects of government efforts to promote improved upland rice technologies. Our analysis shows that farmers who adopted these technologies had incomes approximately 15% higher than non-adopters. Despite this relatively large increase, we estimate that the impact on income inequality was relatively slight. This is primarily due to the fact that lower-income farmers adopted the improved rice technology at rates that were roughly equivalent to those of higher-income farmers.