The Journal of World Economy 2023, No.7
Intellectual Property Rights, Quality Ladder and Import Quality Catching-up in Developing Countries
Fang Jiewei; Shi Bingzhan; Hu Kun
Abstract：Unlike the existing literature focusing on product quality, this paper examines the change in a country’s relative position on the world’s quality ladder, i.e. the problem of quality catching-up. This paper first uses global bilateral trade data to estimate the quality ladder worldwide, and then situates the import quality of 34 developing countries from a cross-border comparative perspective to analyze the impact of intellectual property rights on import quality catching-up. The empirical results show that intellectual property rights in developing countries can improve import quality catching-up because of market expansion. However, due to the increased market power of exporters, intellectual property rights in developing countries will make it difficult for the import quality of knowledge-intensive, differential, intermediate and capital goods to catch up. The application of competition law can also reduce the negative effect of intellectual property rights on import quality catching-up. Therefore, the strategy of developing countries to achieve import quality catching-up through intellectual property rights reform appears to be effective and feasible, but with limitations and conditions.
Key words：intellectual property rights, quality ladder,import quality catching-up,market expansion, market power
JEL codes：F12; F13; P14
US Monetary Policy Spillovers in Emerging Markets: The Multinational Corporate Channel
Gou Qin; Su Xiaomei; Tan Xiaofen
Abstract：This paper explores the role of multinational enterprises (MNEs) in the cross-border transmission of US monetary policy. Using corporate data from 19 emerging markets (EMs), it finds that tightening (easing) US monetary policy has a significantly greater contractionary (expansionary) effect on real investment by US EM affiliates than their local counterparts. The paper identifies MNEs’ internal capital markets and supply chain links as the two micro-level mechanisms driving the international propagation of global financial shocks within MNEs. It also finds similar effects on other corporate outcomes, including sales growth, employment growth and cash holdings, and a horizontal and vertical spillover effect on local firms through domestic production linkages. The paper provides micro-level channel evidence of US monetary policy spillovers to EMs and the role of MNEs in the cross-border transmission of financial shocks, which offers important policy implications for EMs to better respond to Fed shocks.
Key words：US monetary policy, emerging markets (EMs), multinational enterprises (MNEs), cross-border spillover effect
JEL codes：E52; F23; F61
Poverty Reduction Effectiveness of Chinese Aid to Sub-Saharan Africa: A Study Based on the Spatial-Temporal Estimation Strategy
Li Xiao; Zhang Liyunpeng; Zhuang Yuhang
Abstract：Given the continued expansion of Chinese aid, a reasonable and accurate assessment of its effectiveness in reducing poverty in Africa within the“South-South cooperation”framework is crucial for the government to respond to relevant criticism from abroad and optimise resource allocation. This paper empirically analyses the impact and mechanism of Chinese aid projects on local multidimensional poverty in Sub-Saharan Africa by introducing a spatial-temporal estimation strategy. The results indicate that Chinese aid can effectively alleviate local multidimensional poverty. Analysis of the mechanism reveals that impact is mainly achieved by encouraging people to participate in non-agricultural activities and improving their labour stability, while concurrently boosting industrial production, optimising economic performance from spillovers and improving the availability of public resources. Further analysis suggests that effectiveness is heterogeneous in terms of local aid intensity, project type and the governance and self- development capacity of the recipient country. This study advances the understanding of Chinese aid effectiveness and provides policy implications for further optimising the China-Africa international development cooperation mechanism aimed at improving the sustainability of aid to poverty reduction.
Key words：Chinese aid, Sub-Saharan Africa, multidimensional poverty, spatial-temporal estimation strategy
JEL codes：F21; F53; I32
Of Machines and Men: How the Rise of Robots Affects China’s Labor Income
Wang Yongqin; Dong Wen
Abstract：The rise of robots has been deeply affecting the labor markets. As China is the world’s biggest user of industrial robots, how the rise of robots and AI affects China’s income inequality remains an important open question. Leveraging a Bartik IV identification strategy, the paper is among the first to use robot usage data from the International Federation of Robotics (IFR), Urban Household Survey (UHS) data and China Migrants Dynamic Survey (CMDS) data to explore the effects of robots on individual labor income. Especially, we pay attention to the role of labor-market institutions. The study shows that in the manufacturing sector, regional robot penetration has negative effects on the growth of worker earnings both local residents and migrants. In the non-manufacturing sectors, regional robot penetration has crowding- out effects on the wage of local residents, while it has crowding-in effects on the wage of migrants. The effects also vary across workers with different skills, showing wage polarization. Further analysis shows the effects are heterogenous over age, gender and job types (formal vs informal). The paper also studies the role of Hukou system and social security. The results suggest that to tame the negative effects on income inequality and better share the exposure risks socially, better exploit the social gains from robot usage, more policies need to be taken account of.
Key words：robots, labor income, wage polarization, Hukou system
JEL codes：J23; J24; O33
Crowding-in or Crowding-out: How Infrastructure Investment Affects Household Consumption
Yan Zhiyu; Yuan Yufei; Xue Yi
Abstract：This paper constructs a dynamic model of household consumption decisions and accordingly designs empirical analyses to identify how infrastructure investment affects private consumption. The estimation results of provincial panel data reveal that infrastructure investment can not only indirectly promote household consumption through the income channel but also directly promote household consumption expansion through the expectations channel, with a significant “crowding-in” effect. However, the effect is significantly weaker in provinces with a lower housing supply elasticity, showing the “crowding-out” pattern through the wealth channel. Household survey data provide an explanation for individual heterogeneity. Infrastructure investment has a greater pushing effect on house prices in provinces with a lower housing supply elasticity. Rapid house price growth has significant “crowding-out” effects on the consumption of wealthy households. This not only significantly weakens the driving effect of infrastructure investment on aggregate household consumption, but also increases long- term wealth inequality. This paper explains how infrastructure investment affects household consumption and the corresponding role played by house prices, providing empirical evidence for theoretical studies related to macro-regulatory policies in China.
Key words：infrastructure investment, household consumption, housing supply elasticity, macro- regulatory policies
JEL codes：F123; F126; F294
Government Educational Investment, Human Capital and Common Prosperity
Kang Yankun; Hou Jiayi; Chen Binkai
Abstract：The urban-rural difference in government education investment is an important reason for the urban-rural education and income gaps. This paper takes the Midwestern Rural High School Building Reconstruction Project as an exogenous policy shock to identify the impact of government education investment on rural human capital accumulation and the income gap between urban and rural areas. The results indicate that, first, the completion rate in junior high schools and senior high schools is 1.46% and 2.40% higher than that of students who are not affected by the policy, and this effect is more pronounced in low-income and low-educated groups. Second, the policy also improves the long-term labour market performance of school-age adolescents, with a 3.97% increase in the probability of obtaining non- agricultural work and a 7.68% increase in their income. Third, cost-benefit analysis shows that the benefits of the policy far outweigh the costs, resulting in significant economic benefits. The results of this paper provide rigorous empirical evidence on the relationship between government investment in education and common prosperity, as well as exploring the underlying mechanism of this relationship from the perspective of human capital accumulation.
Key words：education investment, human capital accumulation, common prosperity, cost-benefit analysis
JEL codes：H52; I28; I38
Mending the Shortcomings of People’s Livelihood for Common Prosperity: Tax Incentives and Employment of Minority Groups
Zhao Renjie; Zhang Ziyao
Abstract：The employment of minority groups, such as disabled people, is an essential objective in stabilizing employment and is vital for consolidating the achievement of poverty alleviation. This paper investigates the impact of tax incentives for the employment of people with disabilities at the corporate level based on the intensity difference-in-differences (DID) method using the urban land use tax reduction and exemption policy for the employment of disabled people and data from the National Tax Survey. We find that the tax exemption significantly promotes the employment of disabled people, particularly those with mild disabilities. This effect is exclusively observed in firms subject to urban land use tax. Non-tax-paying firms do not show a significant response to incentives, and the effect is more pronounced in firms with a higher tax burden prior to the policy implementation. The positive impact of tax incentives is most evident in the private sector, light industry and firms with higher social security compliance. The employment of disabled people helps to reduce the tax burden of urban land use for firms, without having a negative impact on the employment of non-disabled people and corporate output. This paper provides empirical evidence highlighting the critical role of tax policies in promoting the employment of people with disabilities. It also emphasises the importance of implementing tax incentives, improving the certification rate of the disabled, and integrating complementary social security policies to promote the integral development of these people.
Key words：people with disabilities, tax incentives, employment
JEL codes：H20; H31; M51
How the Reduction in Social Security Contributions Benefits Enterprises and Employees: Sharing Mechanism and Incidence of Social Security Contributions
Xu Shu; Zhang Bing; Wang Hui
Abstract：The distribution of the benefits of tax cuts between employees and enterprises is an important aspect to consider when assessing the effectiveness of relevant policies, and the problem of their tax incidence is also a core proposition of long-term concern for the public economies. This study estimates for the first time the benefit sharing of reduced social security contributions using the difference in the lower limit of the social security payment base in various regions of China. It constructs a theoretical model to express the social security contribution incidence as a series of sufficient statistics that can be estimated, and decomposes the different effects of the product market price channel and the factor market wage channel. The results reveal that employees receive the main benefits of the social security contribution reduction, and the price channel dominates in the improvement of social welfare. This paper examines the effect of reducing social security contributions from the perspective of the product market and the factor market, which is useful for a thorough understanding of the economic effect and mechanism of“tax and fee reduction”in benefiting enterprises and individuals.
Key words：tax and fee reduction, social security contribution incidence, price pass-through
JEL codes：H22; H23; H55
Effects of Social Security Contributions on Labour Employment, Wages and Household Savings: New Evidence from Monthly Household Panel Data
He Fan; Zeng Xin; Huang Wei
Abstract：A thorough understanding of the impact of social security contributions on labor force employment, wages, and household savings is crucial not only for achieving the goals of “employment stabilization” and “growth stabilization” but also for driving reforms in China’s social security system. This paper presents a comprehensive examination, utilizing data from monthly panel surveys of urban households and taking into account the implementation of the Social Security Law, to assess the effects of social security contributions on labor force employment, wages, and household savings at the individual household level. The findings of this study are as follows: 1) The implementation of the Social Security Law has significantly increased social security contributions from both companies and the labor force. This suggests that the law has not only amplified the burden of social security contributions for companies but has also resulted in higher levels of savings in pension accounts. 2) The increase in social security contributions has not resulted in labor force unemployment. However, the incumbent labor force has shouldered at least half of the company’s social security contribution burden through reduced wages.3) While the rise in social security contributions has led to a significant reduction in the household savings rate by 0.9 percent, it has still played a significant role in fostering the accumulation of China’s overall pension wealth. 4) The mechanism test results highlight the salience of social security contribution income as a crucial factor driving the aforementioned outcomes. Consequently, strengthening the collection and management of social security contributions not only increases the income of social security funds but also facilitates the accumulation of overall pension wealth in China. By considering these findings, it becomes evident that an in-depth examination of social security contributions’ impact is instrumental in formulating effective strategies for social security reform, promoting sustainable employment, and fostering economic growth in China.
Key words：social security contributions, employment, wages, household savings, Social Security Law
JEL codes：F21; F53; I32