Three essays in applied microeconomics on contemporary Chinese economic issues

Ma, Sen

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Description

Title

Three essays in applied microeconomics on contemporary Chinese economic issues

Author(s)

Ma, Sen

Issue Date

2018-04-16

Director of Research (if dissertation) or Advisor (if thesis)

Akresh, Richard

Doctoral Committee Chair(s)

Akresh, Richard

Committee Member(s)

• McMillen, Daniel P.
• Marx, Benjamin M.
• Osman, Adam

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

Applied Micro-economics, Chinese Economy

Abstract

The thesis has three chapters. Each chapter addresses a specific economic problem in contemporary China using applied-microeconomic methods. The first chapter studies the effects of culture on the destination choice of FDI. Recent economic research has started to consider culture as an important determinant of economic activities. In this study, I identify the casual effects of cultural ties on the destination choice of foreign direct investment using a fuzzy spatial regression discontinuity design. Speaking the same Chinese dialects is used to measure cultural ties among Chinese people. I find discontinuous increases in investment from Hong Kong, Macau, and Taiwan (HMT) to Mainland China across the geographic borders of Chinese linguistic dialect zones. The share of HMT firms located just inside a region that speaks the same dialects as HMT is 5–7 percentage points (20 percent) higher than those located just outside. The increase in investments from HMT also generates positive local spillovers that raise the productivity of domestic firms. A 1-percentage-point increase in the HMT firm share raises domestic firms’ productivity in the same location and industry by 1.7–2.8 percent. The second chapter studies the pattern of coresidence between elderly Chinese parents and their adult children. Coresidence between elderly parents and their married adult children is a common phenomenon in East Asian societies. We analyze theoretically and empirically with which adult child parents coreside when the extended family has multiple adult children and show that this decision-making process can be rationalized. To be specific, we find evidence that suggests division of labor among family members through the choice of coresidence. Theoretically, we show that when parents can help children with housework, they will coreside with higher-educated children whose opportunity cost of housework is higher. On the other hand, when parents need help from children in housework labor, they will coreside with lower-educated children whose opportunity cost of housework is lower. By adopting a dataset containing information on parents and their married adult children, we find our two hypotheses are supported among families from rural China. The probability of coresidence is positively associated with relative education of the children when parents can provide help, and negatively associated with education when parents need help. The third chapter studies the impacts of the Three Gorges Dam (TGD) on climate change and agricultural production. Can man-made megaprojects, such as hydroelectric dams, cause permanent climate change by dramatically altering natural landscapes? Using a difference-in-differences empirical design, we confirm that the TGD, the largest hydroelectric dam in the world, has increased the air temperature in the reservoir region and caused an unexpected decrease in precipitation in the vast downstream region along the Yangtze River. This decline in precipitation has negatively affected the crop yields of rice in the downstream region, which is the main grain grown in this area. However, farmers’ adaptation to this long-run climate shock has been limited and slow. Instead of enhancing economic efficiency by switching to drought-resistant crops, engaging in non-farm employment or mechanizing production, they have chosen to significantly increase short-run factor inputs, such as land, labor and irrigation expenditures, in order to maintain their output of rice. As a result, the decrease in rice yields persists and has not recovered 10 years after the dam’s construction.

Graduation Semester

2018-05

Type of Resource

text

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Copyright and License Information

Copyright 2018 Sen Ma

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