Estimating round-tripping FDI from firm-level data in China
Zeyi Qian, Junfu Zhang, Qiangyuan Chen
Abstract: When capital leaves a country and then flows back as foreign direct investment (FDI), we call it round-tripping FDI. It is widely suspected that China's official FDI statistics contain a substantial amount of round-tripping FDI. However, it is difficult to quantify the round-tripping FDI due to the lack of data. In this paper, we propose two methods to identify round-tripping FDI. The first one tracks capital flows at the firm level. If a firm in China invests in a foreign firm and this foreign firm makes an investment back to China shortly after, then we consider this investment to China as round-tripping FDI. Our second measure of round-tripping FDI adds to the first measure by including investments in China made by Chinese investors registered in tax havens. The first estimate of round-tripping FDI accounts for up to 3% of China's total FDI from 1999 to 2015, whereas the second estimate accounts for up to 70% in the period. Our firm-level analysis shows that industrial firms facing higher tax burdens are more likely to make round-tripping FDI. We also show that at the city level, adjusted FDI statistics by subtracting the estimated round-tripping FDI are better predictors of imports and exports. Finally, we show that provinces receiving higher shares of round-tripping FDI are more likely to be punished for illegal financial activities. Taken together, these findings suggest that our measures of round-tripping FDI, although noisy, are indicative of real transactions.
Yuan Chen, Qikexin Yu, Peiwen Yuan, Yeyang Zhao
Abstract: In this study, we employ the synthetic control method to evaluate the transmission of external shocks, taking COVID-19 as an example, on the stock market in the Chinese hospitality and tourism industry, specifically in the catering, hotel, cultural landscape, natural landscape, and travel agency sectors. We find an increasingly negative causal effect on stock returns in all five sectors within 1–2 days after the external shock occurred. However, this impact then gradually shrank, disappearing after 7 days. We also show that the short- and long-term causal effects of the external shock on stock volatility in the above sectors are positive and significant, due to the great uncertainty induced by the pandemic. We examine the sensitivity of stock market reactions and find that hotels are the most vulnerable among the five sectors in terms of the duration of the pandemic's negative impact. Finally, we report that larger firms in the catering and hotel sectors (compared to the other three sectors) show a greater increase in volatility. These findings provide valuable insights into financial market reactions to an external shock and offer implications for crisis management in the hospitality and tourism industry during such events.
Privatization of SOEs and its innovation performance: A reexamination
Peizhen Wu, Zhen Sun
Abstract: The empirical literature comparing the innovation performance of state-owned enterprises (SOEs) and private firms in China often yields conflicting results. To shed new light on this debate, we construct an extensive dataset by linking the Annual Survey of Industrial Enterprises (ASIE) dataset with patent quality data. Our analysis focuses on the impact of privatization on the innovation performance of former SOEs. Our findings suggest that the privatization of SOEs generally results in a decrease in innovation performance. This adverse effect is particularly pronounced for firms situated in regions characterized by low levels of market development or those grappling with high financial constraints. This supports the hypothesis that SOEs can serve as a mechanism to address institutional deficiencies in China's context. Our study contributes to a deeper understanding of the relative innovation performance of SOEs and private enterprises and has significant policy implications for ongoing SOE reforms in China and other developing countries.
How does digital economy drive the high-quality development of regional manufacturing?
Deyan Yang, Tingting Xiong
Abstract: Digital technologies promote economic progress. The digital economy drives the development of manufacturing. This paper explores the impact of the digital economy on the high-quality development of manufacturing using panel data from the Yangtze River Economic Belt in China. Employing the entropy method, we first measure the level of the digital economy and the high-quality development of manufacturing. Then, we divide the digital economy into three dimensions: the digital foundation, the digital application, and the digital innovation, and investigate how each dimension influences the high-quality development of manufacturing. Results show that: (1) Both the digital economy level and the high-quality development level of manufacturing exhibit steady growth, while the overall value of the Yangtze River Economic Belt stays low. (2) Three dimensions of the digital economy positively affect the high-quality development of manufacturing, with the most noticeable effect of the digital innovation, followed by the digital application and the digital foundation. (3) Threshold effect tests demonstrate that both the digital foundation and the digital application exhibit a double threshold effect on the high-quality development of the manufacturing, but the digital innovation has a single threshold effect. (4) Last but not the least, the digital foundation positively affects the high-quality development of the manufacturing in downstream and upstream regions, but less apparently influences midstream regions by the heterogeneity analysis. Additionally, both the digital application and the digital innovation have significant effects on the high-quality development of the manufacturing across all regions.
A fuzzy approach to economic freedom performance
Muhammed Benli, Ahmet Çağlar
Abstract: This study aims to determine the most important component of economic freedom and to rank the performance of countries using multiple criteria decision-making tools within the context of fuzzy set theory. To do so, we utilize a combination of fuzzy entropy weighting and fuzzy technique for order of preference by similarity to ideal solution (TOPSIS) methods to assess the economic freedom performance of 122 countries for the period 2000–2020. The findings suggest that the stability and reliability of a country's monetary system is the most crucial attribute for economic freedom performance. This implies that a stable and reliable monetary system is considered a fundamental aspect of economic freedom. Based on the TOPSIS analysis, the top 10 best-performing countries/regions in terms of economic freedom are Hong Kong, Singapore, Switzerland, New Zealand, the United States, the United Kingdom, Australia, Canada, Denmark, and Ireland. On the other hand, Venezuela, Myanmar, Congo Republic, Algeria, Syrian Arab Republic, Congo Democratic Republic, Zimbabwe, Central African Republic, Chad, and Iran are the worst-performing countries.
Temporal and spatial effects of mass shootings on gun demand
Yuan Chen, Xun Li, Lisi Shi, Rui Wang, Qikexin Yu
Abstract: Mass shootings in the U.S. have been at the center of the public crisis debate for a long time. Combining information on mass shootings with background check reports from the Federal Bureau of Investigation, this study applies mass shootings as exogenous shocks and reveals that the demand for guns is especially strong in the month in which a shooting occurs, and it decays with time. In addition, results confirm a spatial spillover effect of mass shootings, in which a mass shooting in one state affects gun demand in other states. The magnitude of the effect depends on the distance between the states. Our analysis also explores the difference in the effects between states with loose regulations on handguns and long guns and those with strict regulations. In the former, gun demand increases significantly after mass shootings, whereas in the latter the increase is insignificant. Finally, this study shows that consumers respond heterogeneously given the different characteristics of mass shootings, such as the number of victims and location.
