Browsing by Author "Wang, Zheng"
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Item Open Access Aid for Trade and the Quality of Exports(Taylor & Francis, 2017) Wang, Zheng; Xu, MeinaThis paper studies how aid for trade (AfT) affects the quality of recipient countries’ exports. It shows that the quality effect is most discernible for AfT for assistance in trade policy: a 50% increase in the value of AfT received in this category is associated with a 0.5%-1% increase in the quality of exports to the donor and other OECD countries. On average, the actual AfT received for assistance in trade policy leads to a 2% upgrade of the recipient country in the quality ladder of all developing countries. Around half of this quality effect is driven by the quality improvement of continued products in continued markets (intensive margin), and the other half by the quality upgrading of new products in continued markets and existing products in new markets (extensive margin).Item Open Access The Belt, the Road, and the Carbon Emissions in China(Elsevier, 2023-01-16) Xiao, Zhaohua; Du, Limin; Wang, ZhengThis 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.Item Open Access Blame the Foreigners? Exports and Sulfur Dioxide Emissions in China(Springer, 2021-08-02) Wang, ZhengThis paper provides an overhaul of the contribution of exports to industrial sulfur dioxide (SO2) emissions in Chinese cities. My estimation strategy exploits the import demand shocks of export destination markets (net of their demand for Chinese products) as a plausibly exogenous source of variation in the cities' exports. The baseline results show that a 10 percentage-point increase in export shock (weighted by the exporting industry's relative emission intensity) leads to a 1.6 percentage-point rise in SO2 emissions, equivalent to a 635-ton increase per year for an average Chinese city. This estimate remains qualitatively stable to an array of robustness checks by accounting for: alternative controls for production for domestic sales shocks, the city market share in global trade, and the influence of a lagged impact of foreign demand shocks. Tentative evidence also suggests that production for exports does not contribute to nationwide emission intensity drop. A further anatomy shows with weak evidence that foreign-owned fims and deeper contractual links with the global production network could play a positive role in reducing the environmental footprint of industrial activities.Item Embargo Comrades from the Town: How did a Factory-Commune Pairing Policy during the Send-Down Movement Propel Rural Industrialization in China?(Wiley, 2023-04-30) Du, Limin; Lai, Zhenhao; Shi, Jinchuan; Wang, ZhengThis paper traces the institutional root of China’s rural industrialization to a historical policy which paired factories in urban areas with people’s communes in the countryside during the Send-Down Movement in the 1970s. The policy, initially intended to improve the lives of sent-down youth, is believed to have provided some initial impetus for industrial development in rural areas before the marketization reform that began in the late 1970s. Based on a manually collected county-level panel dataset of Zhejiang Province, we find that following the implementation of the pairing policy in 1974, counties that received a higher concentration of sent-down youth, relative to their rural population, achieved faster growth in per capita industrial output of commune enterprises. Our results are consistent with various historical accounts. In addition, our tentative evidence shows that the pairing policy had a prolonged effect on rural economic development, lasting into the 1980s. Overall, our findings reveal the importance of some pre-reform institutions in shaping China’s unique paths towards industrialization.Item Embargo Cutting ties with local bureaucrats: How does the environmental vertical management reform affect firm pollution in China?(Elsevier, 2024-02-23) Du, Limin; Wang, Ruqi; Wang, ZhengChina's local environmental protection agencies are the basic government units that implement the country's environmental regulations. Initiated decades ago, the vertical environmental management reform was gradually rolled out throughout the country with the aim of enhancing the independence of local environmental enforcement by shifting the control of the agencies' resources from local governments to higher-level environmental protection authorities. This research investigates the effects and influencing channels of this reform on firm pollution behavior in China. Combining manually collected data on the timing of the reform at the county level with a unique firm-level emission dataset, we use a difference-in-differences approach to estimate the effect of the reform. Our results suggest that the reform leads to a significant reduction in firms' pollution, and this reduction is achieved mainly through a scaled-back production and a cleaner production process. A further analysis shows that the reform weakens local bureaucrats' political and economic incentives that could distort environmental enforcement. Our findings highlight the importance of minimizing political interventions in environmental governance in a large country like China to achieve environmental targets.Item Open Access Decoupling in Science and Education--A Collateral Damage beyond Deteriorating U.S.-China Relations(Oxford University Press, 2021-07-16) Tang, Li; Cao, Cong; Wang, Zheng; Zhou, ZhuoDeteriorating relations between the United States and China since 2018 have extended to education and scientific research arenas. We put the U.S.–China science and education in a historical perspective and describe the win-win situation when both countries collaborated. We discuss an ongoing loss-loss scenario of the decoupling and speculate its far-reaching adverse impacts beyond the two countries. We call for actions to be taken for a brighter future by the leaderships in both countries. Keywords: decoupling; U.S.-China Relations; science diplomacy.Item Open Access Does the US EXIM Bank Really Promote US Exports?(Wiley, 2017-08-14) Agarwal, Natasha; Wang, ZhengThis paper investigates the impact of US Export-Import Bank (EXIM) on US exports particularly in the wake of international competition from foreign national export credit agencies (ECAs). We employ a gravity framework on a country-industry-year-level panel dataset that matches EXIM authorizations with US bilateral exports. Our results depict the general ineffectiveness of the Bank in promoting exports within and across industries. Some heterogeneities behind the general finding are also uncovered: industries other than aerospace parts and products are more likely to benefit from EXIM authorizations, and EXIM authorizations to larger businesses seem to be more effective in encouraging exports. Furthermore, we find no evidence that explains the role of EXIM in encouraging US exports by offsetting foreign ECA competition. These results are neither affected by competing countries’ membership to the OECD Arrangement nor by the size of American firms that received EXIM support. Our results cast doubt on the ubiquitously positive claims made by the Bank and its supporters, yet also provide policy lessons for countries that are either in the inception stages of establishing their own ECAs or are now placing greater importance on ECA financing in encouraging exports.Item Open Access Economic Integrations and their Role in Intra-Africa Trade(Mesford Publisher Inc, 2019-04-12) Wangombe, Wangari; Turner, Paul; Wang, ZhengThis paper investigates the roles of economic integrations (EIs) in the development of trade within Africa region vis-à-vis Africa’s trade with the rest of the world. Specifically, we examine how the removal of trade barriers could eventually lead to harmonization of trade policies in Africa and in turn the growth of trade between the member countries. Our study focuses on a 20-year period in which we observe that as the domestic markets for the developing economies continue to expand, the expected trend is that their export competitiveness will also expand. However, data shows that while African Nations put EIs at the core of their development, only 10 percent of total value of African trade is intra-African in nature, and 90 percent is with countries outside the region. Using a gravity model adapted for African context, our analysis indicates that streamlining and employing similar policies encouraged and promoted trade. As trade entails the interaction of many other sectors, our results imply that policy reforms to deepen their economic integrations should proceed at a faster rate to stimulate investment flows from both intra-regional and extra-regional sources in addition to the diversification of products for export.Item Open Access The Employment and Wage Effects of Export VAT Rebates: Evidence from China(Springer, 2020-11-18) Gao, Bo; Ma, Jing; Wang, ZhengThis paper studies the employment and wage effects of VAT rebates to exporters with comprehensive firm-product-level data of China. It is found that the adjustments in VAT rebates significantly and positively affect firm’s employment but have no statistically significant effect on firm’s wage. Moreover, this paper finds that the employment effect of VAT rebates is heterogeneous across firms. In particular, low-productivity firms are more sensitive to the adjustments of VAT rebates than high-productivity firms, suggesting that an increase of VAT rebates may cause mis-reallocation of resources.Item Metadata only From one to many central plans: Drug advertising inspections and intra-national protectionism in China(Elsevier, 2015-10-19) Eberhardt, Markus; Wang, Zheng; Yu, ZhihongThis paper provides the first micro-level evidence for the existence and patterns of intra-national protectionism in China. We demonstrate that drug advertising inspections are used by provincial governments to discriminate against firms from outside the province. We further reveal systematic patterns in the degree of discrimination across firms: those from neighboring areas, those from regions with more economic links to the destination province, those from provinces with a stronger presence in the market, and those with political ties to “allied” provincial governments are less likely to be targeted. Our findings highlight the unique politico-economic structure in China and confirm that giving local governments strong incentives to compete with each other may exacerbate the market distortions inherent in a partially reformed economy.Item Open Access How Do VAT Reforms in the Service Sectors Impact TFP in the Manufacturing Sector: Firm-Level Evidence from China(Elsevier, 2021-03-06) Peng, F.; Peng, L.; Wang, ZhengThis paper estimates the impact of a pilot policy reform in China that replaced the business tax (BT) with a value-added tax (VAT) for the service sectors on the total factor productivity (TFP) of manufacturing firms. Employing a difference-in-differences (DD) estimation approach, our results show that through forward and backward linkages (FLs and BLs, respectively) along the value chain, this pilot program has a positive effect on manufacturing firms’ TFP. A 1% increase in FLs (BLs) leads to an approximately 7% (16%) increase in firm productivity. This effect is larger for non-state-owned enterprises and labor-intensive firms than for other firms. Manufacturing firms with high intensities of exporting activities are affected only through BLs. Further exploration shows that this increase in productivity is realized mainly through increased specialization of firms. Our findings imply that simplification and unification of the tax system across sectors can help boost firm productivityItem Open Access The Impact of U.S.-China Tensions on People Mobility(The Chinese University Press, 2023) Wang, Zheng; Tang, Li; Cao, Cong; Zhou, ZhuoUsing novel international aviation data, we assess the impact of U.S.-China tensions on people inflows from China to the U.S. through the lens of monthly air passenger traffic data. We find that, relative to other source countries in the period between 2017 and 2019, air passenger flows from China into the U.S. declined 6%. When differentiated by geographical locations, relative to other U.S. airports, U.S. airports near universities with a significant presence of Chinese students are found to have experienced a more than 10% drop annually in passengers originating from China. A further investigation reveals that the decline in people inflows is driven mainly by the loss of passenger arrivals in August and is consistently steeper than the decrease for airports near tourist destinations during the same period. These findings offer updated evidence on the detrimental effect a hostile political climate could have on international people mobility between two major scientific powers.Item Embargo Mitigating Information Frictions in Trade: Evidence from Export Credit Guarantees(Elsevier, 2023-10-31) Agarwal, Natasha; Chan, Jackie M.L.; Lodefalk, Magnus; Tang, Aili; Tano, Sofia; Wang, ZhengInformation frictions make foreign trade risky. In particular, the risk of buyer default deters firms from selling abroad. To address this issue, many countries offer export credit guarantees to provide insurance to exporters. In this paper, we investigate the causal effects of guarantees by exploiting a quasi-natural experiment in Sweden and rich register data on guarantees, firms and trade. Estimates from a fuzzy regression discontinuity design show large positive effects on the probability of exporting and the value of exports to the destination for which the guarantees are issued. These results are robust to an alternative approach using a difference-in-differences matching estimator. Further findings suggest that guarantees impact firms heterogeneously and play an important role in resolving buyer default risk and easing liquidity constraints. Larger impacts are observed in non-OECD countries, on smaller, liquidity constrained exporters and for firms selling products that face a relatively high cost of buyer default.Item Open Access Production Network and Emission Control Targets-Theoretical Approach(De Gruyter, 2023-03-15) Eslamipoor, Reza; Wang, Zheng; Kolade, OluwaseunBy spurring trade, the level of income and consumption and production increase, which consequently causes a more polluted environment. As global economic integration escalates, the possibility of contention becomes more translucent. The foundation of this article is based on the Ricardian model regarding consumption and production pollution function in six scenarios depending on Autarky or trade situation. There is also a difference in the relative labour size of countries. Also, pollution tightness can clarify whether there are any concerns about climate change regarding the production pollution function and consumption pollution function. The theoretical approach proves that unemployment does not occur when we have no concerns about climate change and this tightness of pollution would not impact the level of production and consumption. The emission intensity, relative labour size and tightness of pollution targets are the key elements discussed in both Autarky and trade. The critical point about trade is that it enters specialization, and the home country only produces good 1 and the foreign country only produces good 2. The main finding of this paper, based on a simple theoretical approach, is about the impact of one unit change in relative labour size regarding pollution tightness with respect to the labour force of both home and foreign countries is provided at the end.Item Open Access Publish or Perish? A Tale of Academic Publications in Chinese Universities(Elsevier, 2022-03-12) Wang, Zheng; Tie, YingItem Open Access Quantity Restrictions and Price Adjustment of Chinese Textile Exports to the U.S.(Wiley, 2017-10-27) Bernhofen, Daniel; Upward, Richard; Wang, ZhengThe elimination of the Multifibre Arrangement (MFA) in 2005 provides an unusual opportunity to examine the effects of a trade policy shock on export prices and firm behaviour. It was massive in scale, discrete in timing and exogenous to firms and consumers in the textile industry. Since the MFA quota removal did not affect all textile products at the same time, we are able to use a difference-in-difference approach to estimate the causal effects of the MFA. Using transaction-level data from the Chinese Customs Trade Statistics over the period 2000-2006, we find that the MFA removal reduced average export prices by about 25%. This fall was mainly caused by a combination of the entry of new low-price exporters and new low-price products, rather than a fall in prices of existing firm-product combinations. We also find that price reductions are twice as large for heterogeneous than for homogeneous products.Item Metadata only Quota restrictions and intra-firm reallocations: Evidence from Chinese exports to the US(Elsevier, 2016-05-04) Upward, Richard; Wang, ZhengWe study how Chinese textile and clothing firms adjusted the product structure of their exports to the US, as triggered by the termination of Multifiber Arrangement (MFA) quotas. We find that the removal of MFA quotas induced firms to expand their product scope while reducing the concentration on their core product. These effects are strong for domestic and foreign privately-owned firms, but insignificant for state-owned firms.Item Open Access Risk Perceptions and Risk Management Approaches of Chinese Overseas Investors: An Empirical Investigation(Elsevier, 2018-09-24) Ullah, S.; Wang, Zheng; Stokes, Peter; Xiao, W.Item Open Access Understanding China’s Economic Engagement in Africa: An Exploration of the FDI-Trade Nexus(MDPI, 2022-11-24) Zhang, Qiyue; Wang, Zheng; Okafor, GodwinThe rapid rise of China on the global stage has promoted a widely held concern about the country’s political intention behind its expanding overseas economic activities. This paper attempts to shed new light on this old question: Is the abundance of natural resources in Africa the primary motivation for Chinese economic engagement in the continent? To this end, we investigate the nexus of China’s direct investment in 54 African countries and its international trade with the region between 2003 and 2014 to estimate how and to which extent Chinese investment affects its trade with the continent. This empirical task is facilitated using a transaction-level trade database from Chinese customs, which allows us to trace the trade records by product, destination, and exporting firm. Our empirical results support the trade-promoting effect of China’s foreign direct investment in the region, and this effect is found to be more significant for China’s exports of consumption and processed goods to the continent than for China’s imports of primary goods from this same region. Furthermore, we do not find systematic evidence that these investment activities lead to more primary goods being imported by Chinese state-owned enterprises. While these findings do not rule out the existence of resource-seeking motivation, they cast doubt on that being a primary driving force behind Chinese investment in Africa.Item Metadata only Volatility and diversification of exports: Firm-level theory and evidence(Elsevier, 2016-07-25) Vannoorenberghe, Gonzague; Wang, Zheng; Yu, ZhihongWe show using detailed firm-level Chinese data that, among small exporters, firms selling to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This a priori surprising result for small firms is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility.