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China’s Manufacturing success; Lessons for India

by Pravakar Sahoo and abhirup Bhunia

IEG Working Paper no. 344, 2014

This paper attempts to study the conditions under which China’s manufacturing sector thrived in the last few decades. We discuss some distinctive policies (such as in decentralisation, foreign direct investment (FDI), special economic zones (SEZ), and infrastructure development) and stress the importance of a policy framework in China’s manufacturing success. It follows that India fell short on a number of aspects, and that there is considerable merit in finding lessons in China’s success for India. To add topical relevance,
we also discuss the recent policy changes in India to boost manufacturing.

Product Differentiation, Export Participation and Productivity Growth:Evidence from Chinese Manufacturing Firms

by Cui Hu and Yong Tan

MPRA paper no. 65343, January 2015

In this paper, we investigate how the degree of export participation and product differentiation affect firms’ productivity growth through learning-by-exporting. We extend the model of Melitz and Ottaviano (2008) to endogenize the effort firms allocate to learning. This choice depends on both the degree to which firms enter export markets and the extent to which products are differentiated across producers. Using a firm-level dataset from China’s manufacturing industries, we implement propensity score matching methods to test the model’s predictions. Our results indicate that the degree of export participation is positively correlated with TFP improvements. Simultaneously, we empirically verify that firms exporting less differentiated products experience faster TFP growth than those exporting more differentiated products.

URL: mpra.ub.uni-muenchen.de/65343/1/MPRA_paper_65343.pdf


The Heterogeneous Impact of Pension Income on Elderly Living Arrangements: Evidence from China’s New Rural Pension Scheme

by Lingguo Cheng; Hong Liu; Ye Zhang and Zhong Zhao

IZA Discussion Paper .9116, June 2015

This paper investigates the impact of pension income on living arrangements of the elderly. Taking advantage of a unique opportunity due to the recent establishment and expansion of
the social pension system in rural China, we explicitly address the endogeneity of pension status and income through a fixed-
effect model with instrumental variable approach by exploiting exogenous time variation in the program implementation at county level. We find an overall positive effect of pension income on independent living as well as considerable heterogeneity. The elderly with easy access to their adult children, possessing higher
financial capacity, in less long- term care and psychological need, and having more education are more likely to live independently after receiving pension income. Our results confirm that
independent living is a normal good, but highlight that living arrangement is multidimensional in rural China.

Can the Chinese Connection Speed India’s Development?

by Ravi Bhoothalingam

Economic and Political Weekly, May 9, 2015

China and India are the world’s second largest and third largest
economies, respectively. Yet, the engagement between their
economies remains modest at best and people-to-people contact
is minuscule. Will the various Silk Roads proposed by China
including the Bangladesh–China– India–Myanmar Economic
Corridor and the Maritime Silk Road offer India beneficial ways
to engage with China and the world? How could Sino–Indian
economic connectivity help India in achieving its goals of rapid,
equitable, balanced, and sustainable development? This essay outlines how the complementary capabilities of India and China can unleash innovation and creativity in both countries, addressing common people’s concerns as well as rejuvenating the economies of
countries in the neighbourhood.

Financial Deepening and Economic Growth in Advanced and Emerging Economies

Keshab Bhattarai

Review of Development Economics Volume 19, Issue 1, February 2015

While over-financing caused crises and slow growth in advanced economies including Germany, France and the UK after 2008, more prudent financial deepening sustained higher economic growth in China and India—two major emerging economies in the world. The actual financial deepening ratios (AFDR) observed in the non-consolidated balance sheet from the OECD exceeded by factors of 3.5, 2.4 and 5.1 the optimal financial deepening ratios (OFDR) obtained from the solutions of dynamic general equilibrium (DGE) models of those three advanced economies. The corresponding factors were 2.3 and 0.49 for China and India respectively. Labor intensive production technology and a low OFDR relative to a high AFDR in China allowed it to grow at 10% between 1990 and 2010 period that ended with the global financial crisis. With a reasonable OFDR and low AFDR India also managed to grow at 6.5%. Thus huge gaps between the optimal and actual financial deepening ratios led to massive macroeconomic consequences as observed after the crises in 2008. Smooth, sustainable and efficient economic growth requires adoption of strategies for separating equilibria in line of Miller–Stiglitz–Roth mechanisms avoiding problems of asymmetric information in the process of financial intermediation with as narrower gaps as possible between the AFDRs and OFDRs.

URL: http://onlinelibrary.wiley.com/doi/10.1111/rode.12133/abstract

Courtesy: Wiley online library

The Emergence of New Corporate Social Responsibility Regimes in China and India

Afra Afsharipour and Shruti Rana

UC Davis Business Law Journal, Vol. 14

In an era of financial crises, widening income disparities, and environmental and other calamities linked to corporations, calls for greater corporate social responsibility (“CSR”) are increasing rapidly around the world. Though CSR efforts have generally been viewed as voluntary actions undertaken by corporations, a new CSR model is emerging in China and India. In a marked departure from CSR as it is known in the United States and as it has been developing through global norms, China and India are moving towards mandatory, not voluntary, CSR regimes. They are doing so not only in a time of great global economic change, but at a time when both countries are themselves undergoing massive economic and social changes as they re-orient towards more market-based economies and seek to enter the ranks of global economic superpowers.

This Article conducts a comparative analysis of the emerging CSR regimes in China and India and highlights key characteristics of these developing frameworks. This Article begins an inquiry into some of the most significant implications of the CSR regimes now unfolding in China and India, and their potential for effecting legal and societal change. It also raises questions about why China and India are moving towards mandatory CSR when other key global players are taking a largely voluntary approach. Finally, this Article seeks to add to global debates over corporate governance models by enhancing understanding of the corporate governance developments and innovations now arising in China and India.

URL: http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2472146

Courtesy: SSRN


Military spending and economic growth in China: a regime-switching analysis

F. Menla Ali & O. Dimitraki

Applied Economics Volume 46, Issue 28, 2014

This article investigates the impact of military spending changes on economic growth in China over the period 1953 to 2010. Using two-state Markov-switching specifications, the results suggest that the relationship between military spending changes and economic growth is state dependent. Specifically, the results show that military spending changes affect the economic growth negatively during a slower growth–higher variance state, while positively within a faster growth–lower variance one. It is also demonstrated that military spending changes contain information about the growth transition probabilities. As a policy tool, the results indicate that increases in military spending can be detrimental to growth during slower growth–higher growth volatility periods.

URL: http://www.tandfonline.com/doi/abs/10.1080/00036846.2014.929626?queryID=%24{resultBean.queryID}#.VB0MVFeJuus

Courtesy: T&F