Essays on processing trade in China.
详细信息
文摘
This dissertation includes three independent essays on the rise of processing trade in China and the impacts on China itself and the world. The first paper, "Government Fiscal Incentive and Foreign Direct Investment: Theory and Evidence from China", studies the political economy behind the rise of processing trade in China, which is the major component of Chinas trade activity. In explaining Chinas economic miracle, two of the most frequently cited explanations are the role of local governments and its embrace of globalization. In this paper I propose a channel which can connect these two factors in a common framework. The main hypothesis is Chinas local governments promote FDI in order to increase their fiscal revenue in response to the declining tax contribution from local firms in the period of transition and reform. To illustrate this point, first, I adopt a comparative perspective and detailed analysis of international trade data to study two neighboring provinces with divergent FDI and trade pattern. Then a model drawn from Branstetter and Feenstra 2002) is used to derive such a phenomenon from local governments fiscal incentive. In the last step, I test the fiscal incentive hypothesis across all provinces in China with a "natural experiment" approach. Using the largest SOE reform in Chinas history as an exogenous shock, I find provinces experiencing larger decline in SOE employment see faster increase of processing trade and FDI inflow in later years. The second paper, "Real Estate Price, Saving Rate and Trade Surplus in China", studies the relationship between Chinas trade balance and real estate price. A growing literature explores the correlation between real estate market and current account dynamics. While most of the existing research records a negative correlation between these two series, China is an outlier. In this paper, first, I establish the positive correlation between real estate market and current account surplus in China using the adjusted data on governments revenue from land sale. Second, I construct an economic model which can endogenize the real estate price and generate the correlation found in the first part. Interestingly, the model demonstrates that both the improvement of financial institutions and the entry of foreign firms can increase the real estate price. Under Chinas specific context, it can lead to the rise of saving rate and therefore trade surplus. In the empirical part, I run a horse-race type panel regression a la Chinn and Prasad 2003) and find the entry of foreign firms can be a more important contributor to the surge of trade surplus than the improvement of financial institutions. The third paper, "Globalization and the U.S. Labor Market: A New Perspective through the Lens of Occupation Data", joint with Zhiyuan Li, studies the impact of Chinas processing trade export on the U.S. wage ineqality. We examine the impact on U.S. labor market of the recent surge of import from China, especially import due to offshoring. Using occupation data from BLS, we study the movement of labor between the manufacturing and service sectors as such a channel for the shock from globalization to spread to the whole economy. We find that an occupations increasing exposure to offshoring import from China: 1) causes workers in this occupation to move from the manufacturing sector to the service sector, 2) reduces this occupations share in the total employment, and 3) within the occupation increases the relative wage between manufacturing and service for low skilled workers and decreases the relative wage for high skilled workers.