Institutions and Real Sector Activity
Saturday, Jan. 6, 2018 2:30 PM - 4:30 PM
- Chair: Mikhail Klimenko, Georgia Institute of Technology
Law and Finance in China: The Role of Xinfang
AbstractAlthough xinfang is not part of the judicial system, and therefore is largely ignored by scholars studying the law and finance in China, xinfang is a formal institution that addresses an array of commercial, contractual, property, and financial disputes and that often handles more cases than the judicial system. We construct the first cross-province, cross-time measures of xinfang effectiveness and discover that differences in xinfang are associated differences in industry and firm financing patterns that are consistent with the law and finance view.
What Ails Southern Europe?--A Quantitative Assessment of Financial Liberalization and Capital Reallocation
AbstractDuring the 1980s the member states of the European Union proceeded to dismantle many of their restrictions on international capital flows, This paper analyzes the macroeconomic effect of such episode of financial liberalization on the economies of Southern Europe using a small-open economy growth model with two-sectors of traded and nontraded goods. A carefully calibrated model of this type mapped into the data accounts for the large shift towards non-traded activities and away from the technologically-driven traded sector through a standard Balassa-Samuelson effect and through the additional impact of declining real interest rates since the mid-1990s. We find that the reallocation of resources away from the innovation-driven, traded sector and into the non-traded sector was a major contributor to the slowdown in aggregate TFP and also in the traded sector TFP in countries like Spain, Italy and Portugal. Financial liberalization and the low real interest rates of the period since the mid-1990s contributed to a boom in labor productivity disconnected from the patterns of TFP and sustained through capital deepening directed mainly towards non-traded activities.
Hukou Reform, Labour Reallocation and Firm Growth in China
AbstractThis paper investigates the relationship between a more relaxed Hukou System and firm growth in China. A preliminary conceptual framework is provided in which Household registration System (also knowns as Hukou System), regulating internal migration in China, is in favor of state-owned firms, while non-state-owned firms are exposed to restricted labour supply and a fragmented product market. A more relaxed Hukou System towards migration not only increases labour supply to the local non-state-owned firms but also provides a more integrated regional product market for the local non-state-owned firms. Using a firm-level data panel from 2001 to 2007, we estimate the causal impact of a more relaxed Hukou System (Hukou reform) on firm behaviors in a difference-in-difference framework. A unique policy dataset is collected to measure the Hukou reform at the prefecture-city level. Main findings are as follows: First, Hukou reform increases non-state-owned firms’ employment, labour cost per worker as well as share of domestic sales relative to total sales. Second, the reform impact is larger for firms located in labour intensive industries relative to skill intensive industries, consistent with previous findings that low skilled migrant workers are attracted by the Hukou reform the most. Third, the reform impact is negatively associated with the size of state sector in the reform cities. Overall, this paper confirms that a more relaxed Hukou System affects firm growth in China not only through providing more labour supply, as Imbert et al. (2016) indicate, but also through providing a more integrated domestic product market for non-state-owned firms.
- D0 - General