Does non-employment based health insurance promote entrepreneurship? Evidence from a policy experiment in China

Previous researchers have shown that employment-based health insurance lowers job mobility and deters entrepreneurship. The Urban Resident Basic Medical Insurance (URBMI) program, piloted in 2007 in China and fully established in 2009, offers health insurance to about 271 million urban residents without formal employment. Before the implementation of URBMI, most urban residents obtained health insurance through their employers, and therefore a large number of unemployed and self-employed individuals were uninsured. Thus, URBMI creates a new insurance option that does not depend on formal employment and may promote entrepreneurship. We take advantage of this policy change to evaluate the effect of URBMI on self-employment. Using 2000–2011 data from the China Health and Nutrition Survey and a difference-in-differences approach with propensity score weighting, we found that URBMI increased self-employment rate by at least 8.73% for the overall population. The result was mainly driven by the URBMI’s impact on unhealthy workers, individuals with 12 years of schooling or less, and workers above 30 years old.     

Can entrepreneurship bring happiness? Evidence from China

This paper investigates the relationship between entrepreneurial activities and the happiness of entrepreneurs. We estimate the effects of entrepreneurial decision-making, business experience and other factors on happiness by using China Household Finance Survey data. Our results derived from maximum likelihood estimation methods indicate that entrepreneurial decision-making and entrepreneurial experience affect household happiness significantly. The family well-being is significantly increased if the family is entrepreneurial, and it will be higher if actively entrepreneurial. Both entrepreneurial experience and entrepreneurial investment of time have significantly positive effect on the probability of family well-being. In addition, we find that the mechanism by which entrepreneurship brings happiness to households is through raising household income and wealth, that is, income effects and wealth effects.     

Does labor diversity promote entrepreneurship?

We find evidence that workforce educational diversity promotes entrepreneurial behavior of employees as well as the formation of new firms, whereas diversity in demographics hinders transitions to self-employment. Ethnic diversity favors entrepreneurship in financial and business services.     

Can investment advisors promote rational investment? Evidence from micro-data in China

Investment advisors are important participants in financial markets. With the increasing demand for household financial asset management in China, the role of investment advisors is being widely discussed. Taking investors’ degree of diversification as the proxy of the rational investment, this study examines the role of investment advisors in promoting rational investments. It finds that investors with investment advisors are more likely to invest rationally. Further analysis shows that investment advisors play a greater role in promoting rational investment of investors with more investment experience, better financial literacy, more investible assets and male. The conclusions of this study indicate that giving full play to the role of professional investment advisors in household asset allocations and encouraging investors to invest rationally is important for the prevention of financial risks and the promotion of the healthy development of the financial market.     

Does fiscal decentralization promote the inflow of FDI in China?

This paper tests whether China's fiscal decentralization promotes the inflow of foreign direct investment (FDI). Using provincial panel data during 1995–2002, we find that fiscal decentralization has a positive and significant effect on inward FDI, after controlling for other factors, and fixed time and province effects in both LSDV (Least squares dummy variables) regression and system GMM (Generalized method of moments) estimations that address the endogeneity of fiscal decentralization. The results are robust to six measures of fiscal decentralization that consider budgetary amount, extra-budgetary funds and inter-governmental transfers. A simple theory is offered to explain the findings. The results during 1987–1994 are further contrasted. Policy implications are also presented.     

Does top management Team’s academic experience promote corporate innovation? Evidence from China

This study investigates whether top management teams’ academic experience affects corporate innovation, using manually-collected data on Chinese firms from the period of 2008–2017. The results indicate that academic experience has a strong positive effect on corporate innovation. The positive effect of academic experience on corporate innovation is more pronounced, when firms grow faster or are non-state-owned. By exploring the transmission channels, the results generally show that academic experience influences corporate innovation by improving internal controls and reducing the degree of information asymmetry. These findings are among the first empirical evidence of the association between academic experience of top management teams and corporate innovation.     

Does Openness Increase the Efficiency of China’s Manufacturing Firms? Evidence from the World Bank Investment Climate Survey

Based on the World Bank Investment Climate Survey, this paper investigates the openness effects on the efficiency of firms in China’s manufacturing industry using a two-step data envelopment analysis (DEA) approach. In the first step, the aggregate efficiency of open firms and non-open firms is compared in each sub-industry using a group-wise heterogeneous bootstrap procedure. The results show, at a 90% confidence level, that open firms are more efficient than non-open firms in four out of five sub-industries. Furthermore, in the second step, we employ the two-stage bootstrap DEA approach to more specifically evaluate the effects of openness on the efficiency of firms. The regression results show that three openness indicators (foreign capital, import and export) have strong positive effects on firms’ efficiency in China’s manufacturing industry. In addition, the results also suggest that a larger state share, larger firm size, and more capital stock are negatively related to the efficiencies of firms, while a firms’ learning and absorptive capacity is positively related to its efficiency.     

Does Over-credit Stimulate Corporate Investment? Evidence from Listed Companies in China

We define and quantify for the first time over-credit at the firm level, which refers to the case in which the amount of bank credit that a firm obtains exceeds its expenditure on corporate investment for the year. Then, we explore how over-credit affects corporate investment to determine whether credit expansion in China is consistent with the principle of finance serving the real economy. The results show that over-credit promotes firm investment, and this effect was enhanced by the housing boom. However, the effect of the property market reversed after 2012, owing to China’s economic transition from a quantitative to a structural mismatch between supply and demand. Finally, we explore how over-credit affects the capacity utilization ratio and whether it has aggravated the overcapacity problem in China. The results show that over-credit reduces firms’ capacity utilization ratio. This finding indicates that excessive credit expansion has exacerbated the overcapacity problem in China.     

Does the market care about investor protection practices in China?

This study develops a scorecard with which to measure the investor protection practices of major listed firms in China during 2007–2010. We use time-series data to examine the relationship between the change in firm investor protection practices and market performance. Our results show that firms exhibiting improvements in investor protection practices manifest a subsequent increase in buy-and-hold abnormal returns. The results further indicate that the changes in the sub-index have different effects on a firm’s future performance. Shareholder rights to be rewarded seem to have the most significant and positive effect on a firm’s future performance for both local and international investors. Moreover, international investors pay attention to their rights to information. Our results provide evidence in support of the notion that the market does care about firm’s investor protection practices. The findings are robust to other measures of firm performance.     

Does foreign technology transfer spur domestic innovation? Evidence from the high-speed rail sector in China

This paper investigates the introduction of high-speed railway (HSR) technology into China to study the local impacts of foreign technology transfer. The large-scale technology transfer project, covering specific technological categories and directly benefiting railway-related firms in various cities, enables us to describe how foreign technology is digested and spurs follow-up innovation in firms apart from directly receiving ones. We find that technology transfer generates significant localized spillovers to nearby firms not only in terms of more patents, but also as higher productivity and revenue growth. Moreover, technological similarity, rather than input-output linkages, plays a dominant role in explaining the knowledge spillover both at the firm level and the aggregate level, which indicates the importance of absorptive capacity in digesting foreign technologies. Overall, our paper sheds new light on the innovation policy of developing countries as well as the global business strategy of multinational corporations (MNCs).     

Does Population Aging Hinder the Accumulation of Human Capital? Evidence from China

There is no consensus on the impact of population aging on education investment. To explore this question, we first build an overlapping generations (OLG) model to theoretically analyze the effect of population aging on human capital investment in China, and then test our theory by conducting an empirical study based on micro household data. We find the following. (1) Theoretically, the OLG model shows that population aging has a crowding-out effect on education investment. (2) Empirically, the results show that the share of education and training expenditures decreases by 5.27 percentage points as the ratio of old people in the household increases by 100 percentage points, which confirms the crowding-out effect of population aging on human capital investment. (3) The crowding-out effect is far more intense on urban households than on rural households since health care expenditures will be greater in urban areas as population aging increases. (4) A quantile regression indicates that the negative effect of population aging on the share of educational expenditure is concentrated in households with higher shares of education expenditures. We confirm the robustness of our results using regional fixed effect and instrumental variable (IV) regressions.     

Does democracy affect taxation and government spending? Evidence from developing countries

Focusing on developing countries in three geographical areas (South-East Asia, Latin America and European Union), we explore the relation between political variables and tax revenue, public spending and their structure. We build a new dataset for the 1990–2005 period with fiscal, political and socio-economic variables. Since democracy is a complex and multidimensional concept, we measure it using two variables, the political strength of democratic institutions, and the protection of civil liberties. We perform three sets of estimates: (i) cross-country pooled OLS regressions with region fixed effects, (ii) country fixed effects regressions and (iii) region specific regressions with country fixed effects. While the first model delivers some significant correlations between political variables and tax items, when controlling for country fixed effects we find that tax revenue and tax composition are in general not significantly correlated with the strength of democratic institutions and the protection of civil liberties. The only exceptions are indirect, trade and property taxes. A similar result applies to public spending, with the exception of defense expenditure. Overall, our findings cast some doubt on the exact public policy channels through which political institutions affect economic development.     

Does bank shareholding impact corporate innovation? Evidence from China

Corporate innovation is an engine of economic development, while bank shareholding is the phenomenon of having a bank as a shareholder. Their relationship, however, has been underexamined. We provide the first study on the direct impact of bank shareholding on corporate innovation. Using patents granted to Chinese firms from 1999 to 2013, our findings suggest that bank shareholding significantly contributes to corporate innovation. Additional analysis suggests that easing financial constraints can facilitate the positive impacts of bank shareholding on corporate innovation. We also find that bank shareholding works better when firms have effective external monitoring and when they are nonstate-owned firms with nonstate-owned banks as shareholders. We contribute to the literature by showing that (1) despite the restrictions some countries impose on bank shareholding, allowing it could be a good economic policy for promoting corporate innovation, and (2) successful corporate innovation requires proper monitoring and incentives.     

Does an intra-household flypaper effect exist? Evidence from the educational fee reduction reform in rural China

We test for evidence of an intra-household flypaper effect by evaluating the impact of an educational fee reduction reform in rural China on different categories of household expenditure, including spending on individual children. Using pre- and post-reform data, this study exploits cohort comparisons, variation in the extent of school fee reductions across different villages, and variation in the subsidies received by children enrolled in different grades within the same family to identify the impact of the reform. The results show that educational fee reductions are matched by increased voluntary educational spending on the same children who receive the fee reductions, providing strong evidence of an intra-household flypaper effect.     

Does providing informal elderly care hasten retirement? Evidence from Japan

This paper examines the implications of providing care to elderly parents for adult children's retirement plans using micro data from a Japanese survey. We find no significant effect of caregiving on family caregivers’ planned retirement age if we do not take into account caregiving intensity but find a negative and significant effect on retirement plans for intensive caregivers, particularly among women. These findings suggest that relying on family members to provide elderly care can pose a serious challenge to the ongoing efforts of the government to promote the labor supply of women and the elderly as a way of addressing the shrinkage of the working‐age population in Japan. The estimation results suggest that ensuring access to formal care services can help family members reconcile their paid work with caregiving requirements, thereby alleviating the adverse effect of caregiving on their retirement plans. The results also suggest that the financial burden of formal care services could require caregivers to postpone retirement in some cases.     

How Does the Minimum Wage Affect Firm Investments in Fixed and Human Capital? Evidence from China

This paper empirically analyzes the impact of Chinese minimum wage regulations on the firm decision to invest in physical and human capital. We exploit the geographical and inter‐temporal variations of county‐level minimum wages in a panel data set of all state‐owned and all above‐scale non‐state‐owned Chinese firms covering the introduction of the new Chinese minimum wage regulations in 2004. In our basic regressions including all Chinese firms, we find significant negative effects of the minimum wage on human capital investment rates and no overall effects on fixed capital investment rates. When grouping firms by their ownership structure, we find that these results hold for most firms. Foreign‐owned firms are an exception to some extent, because the likelihood that they invest in human capital has not decreased in response to the policy.     

Does education promote social capital? Evidence from IV analysis and nonparametric-bound analysis

This study uses the British National Child Development Study to examine the effect of educational attainment on social capital at the individual level. Social trust and membership of voluntary groups are considered as two basic indicators of social capital. We employ the IV analysis and nonparametric bound analysis to tackle the problem of education endogeneity. Both the approaches reveal that the OLS estimator of the educational effect suffers from an upward bias in the study of group membership. We do not observe any significant bias in the educational effect on social trust. Our empirical findings indicate that education has a positive influence in promoting social trust and membership of voluntary groups.     

Can government improve tax compliance by adopting advanced information technology? Evidence from the Golden Tax Project III in China

This paper explores the tax compliance effects of adopting advanced information technology by tax bureau. Although many governments adopt advanced information technology in tax collection, little is known about the effect on tax compliance. Using difference-in-differences method, we exploit a staggered reform in which tax authorities adopt a comprehensive information reporting system in China, the Golden Tax Project III. Employing listed firm level data from 2010 to 2017, using book-tax difference and its remaining component which cannot be explained by earnings management as proxy measures of tax sheltering, we find that the adoption of GTP III decreases tax sheltering levels by a 1.88 percentage point. The effect is stronger for companies with higher tax rate. By exploring channels, our results suggest that the effect works by enhancing third-party reporting and by improving tax enforcement capacity in provinces that lack tax inspectors.     

Does China really lose from RMB revaluation? Evidence from some export industries

This study attempts to examine the impacts of Real Exchange Rate (RER) misalignment on China's export performance. Using the SUR methodology coupled with disaggregate panel export data, it shows that China's export sector may not necessarily lose from the Central Government's decision to revalue its RMB against the US dollar because the negative impact of the RER appreciation on Chinese exports may be diluted by the positive impacts attributing to a reduction in the RER misalignment.     

Does simplifying divorce and marriage registration matter? Evidence from China

This article evaluates the marital consequences of easier access to divorce and marriage by exploiting a major policy change in China that simplifies both. I first use a regression discontinuity design to examine the short-run effect and find that simplified registration immediately triggered more and faster divorces and marriages. In estimating the long-run effect, I adopt a difference-in-differences strategy that further exploits cross-sectional variation in urbanization rate. Results indicate that the positive effect on marital outcomes, especially on marriage rate, persisted in the medium run for 4 years.