The Journal of World Economy 2024, No.4
International Submarine Optical Cables, Bilateral Information Flow and Chinese Cross-Border M&A
Ma Shuzhong, Wu Peng, Fang Chao
Abstract
Submarine optical cables are the most important carrier of cross-border information, and they are of strategic significance in the digital economy era. This paper takes the Asia-Africa-Europe-1 (AAE-1) submarine optical cable as an example to examine the impact of international submarine optical cable construction on China’s cross-border M&A from a bilateral information flow perspective. Using SDC cross-border M&A data from 2009 to 2021 and the difference-in-differences (DID) technique, it finds that the opening of the AAE-1 submarine optical cable significantly boosts cross-border M&A by Chinese firms in directly connected countries. The mechanism analysis reveals that the AAE-1 submarine cable facilitates the cross-border economic activities of firms by increasing bilateral information flows between China and the respective countries. It is also observed that the promoting effect of submarine optical cables is stronger in countries with poorer initial digital infrastructure and greater network freedom, and that it mainly facilitates mergers and acquisitions in high-technology industries. Besides, the AAE-1 submarine cable has a strong spillover effect, which can lead to cross-border M&A in countries bordering the landing points. In conclusion, China-led construction of digital infrastructure can bridge the digital divide and promote China’s high-tech go global.
Key words
cross-border M&A / information asymmetry / submarine optical cables
E-Commerce Policies and Entrepreneurship
Cao Xiguang, Deng Min
Abstract
Drawing on the theoretical analysis of the internal mechanism of e-commerce affecting the entry of new enterprises, this paper uses the quasi-natural experiment of national e-commerce demonstration city construction to explore the impact of urban e-commerce policies on entrepreneurship by using a multi-period difference-in-differences (DID) model. The results of the study indicate that the construction of e-commerce demonstration cities can significantly stimulate entrepreneurship, and the effect of this policy has a certain degree of sustainability. The mechanism test reveals that the construction of e-commerce demonstration cities mainly stimulates entrepreneurship among entrepreneurs and increases urban entrepreneurial activities through convenient financing mechanisms, market access expansion mechanisms and diversified supporting service mechanisms. The heterogeneity analysis indicates that the entrepreneurial effect of e-commerce demonstration cities is generally more significant in the sample of cities in the southern region, with strong market integration and a good business environment, and it exhibits different degrees of policy influence in different industries. The construction of e-commerce demonstration cities is also mainly based on the creative effect rather than the transfer effect of neighbouring cities to promote an increase in urban entrepreneurial activities. The paper’s conclusion has clear policy implications and provides important practical insights for promoting government-related e-commerce policies and developing e-commerce that empowers industries.
Key words
e-commerce policies / entrepreneurship / urban entrepreneurial activities
Quality of University Subject and Regional Technological Innovation
Fan Jianyong, Zhang Feng, Tang Wei
Abstract
Exploiting a large-scale relocation of university departments in the 1950s, this paper examines the impact of university subject quality on local innovation at the disciplinary level, using the net number of department relocation across cities as IV. We find that: 1) A 1% improvement of university subject rating increases the number of local patent applications and patent citations related to the subject by 0.6% and 1.2% respectively; 2) The impact of university subject quality on local innovation structure only exists in medium and high-tech industries, and is generally stronger in the central and western provinces; 3) Collaborated R&D between universities and firms, the citation of university patents by local social patents, and the improvement of specific human capital in the local labor market constitutes three important channels for the local spillover effect of the university subjects. The policy implications of this paper help shed light on how to facilitate innovation and high-quality development of the economy.
Key words
university subject quality / innovation / university department relocation
Potential Consequences of Environmental Information Embellishment Behaviour
Zhang Detao, Zhang Jingjing, Dong Shuai
Abstract
This paper examines the environmental information embellishment behaviour of Chinese listed companies. By constructing a China-specific environmental thesaurus covering 1597 keywords, this paper utilizes data from non-financial enterprises listed on the Shanghai and Shenzhen stock exchanges that have published social responsibility reports between 2008 and 2022 to capture environmental text information disclosed by enterprises within the cultural context of “one meaning, multiple words” by leveraging text analysis methods, and employs threshold and quantile models to examine the existence of environmental information embellishment behaviour. Furthermore, we employ a panel fixed effects model to investigate the impact of environmental information embellishment behaviour from a benefit-risk perspective. Research reveals that Chinese listed companies engage in environmental information embellishment behaviour, which leads to earnings losses and exacerbated long-term risks for the firms. The reason is that embellishment behaviour diminishes the quality of information disclosure and impairs market participants’ preference for firms. Additionally, the tone of expression serves as a means of embellishment. The deterioration in the accounting information quality, the enhancement of investors’ environmental information recognition capabilities, and the increased corporate visibility amplify the economic consequences of embellishment behaviour. This study offers a new perspective on the strategic behaviour of environmental information disclosure, thus offering insights to improve the green governance system.
Key words
environmental thesaurus / information disclosure / embellishment behaviour / information manipulation / information asymmetry
Basin Horizontal Ecological Protection Compensation and Common Prosperity
Zhang Bingbing, Wang Yuan, Shen Guangjun
Abstract
The paper takes the implementation of the cross-provincial Basin Horizontal Ecological Protection Compensation policy as a quasi-natural experiment and uses econometric analysis to investigate the effect and mechanisms of the policy on the common prosperity of basins based on multi-source data. The findings suggest that the policy can significantly bridge the wealth gap between the residents of the upstream and downstream counties. The mechanism analysis demonstrates that the policy can eventually increase the wealth among residents in compensated areas through the direct channel of increased transfer income and the indirect channel of increased wage income, thereby narrowing the wealth gap between the upstream and downstream counties. On the other hand, the policy can reduce the income gap within villages in compensated areas and effectively improve the village public services. The conclusion of the study provides a new perspective on building a multi-stakeholder ecological and environmental governance system and realizing China’s path to modernization with harmonious coexistence between humans and nature.
Key words
Basin Horizontal Ecological Compensation / common prosperity / regional disparities
The Common Prosperity Effect of Long-term Care Insurance System: From the Perspective of Family Care Decision and Risk Diversification
Chen Fei, Wang Ruotong
Abstract
Long-term care insurance (LTCI) is an important institutional arrangement designed to improve the social security system in China. Analysing its impact on common prosperity from an income growth and distribution perspective is of practical significance. Drawing on the unitary household decision-making theory, this paper constructs a household utility maximization model, and uses the difference-in-differences technique to identify the causal effect of the LTCI pilot policy in China on household income. The results demonstrate that LTCI leads to a significant increase in household income level in pilot areas, and the mechanism of this effect lies in the fact that the LTCI pilot policy exerts an income-increasing impact by crowding out family care and creating job opportunities, which is manifested in the extension of labour hours and the expansion of employment channels. This effect is more pronounced in households that face increased risks in income loss and medical payments. A more detailed analysis reveals that the risk diversification function of the LTCI pilot policy has a profound distributional effect and can effectively reduce the urban-rural, inter-group and regional income gap. In short, the paper provides policy inspiration to promote the construction of the social security system and achieve the strategic goal of common prosperity.
Key words
social security system / common prosperity / long-term care insurance / household income
Individual Income Tax Reform and Labour Supply: A Study Based on Adjustment Costs and Benefits
Wang Chunchao, Feng Dawei, Zhang Zhixin
Abstract
This paper analyses the impact of the 2011 and 2018 individual income tax reforms on labour supply in China, exploring the role that adjustment costs and benefits for workers play in individual labour behavioural decision-making. The study reveals that the 2011 individual tax reform increased the individual labour supply, and its labour incentive effects are significantly heterogeneous across gender, age and educational groups, while adjustment costs vary among different groups. On the other hand, adjustment costs weaken workers’ behavioural responses to the reform. Finally, the contrasting study indicates that the impact of adjustment costs on workers in the 2018 individual tax reform is even broader compared to that in the 2011 reform. The paper suggests that when the government implements the individual income tax reform, it should comprehensively and accurately consider the adjustment costs and benefits for workers, optimise tax and employment policies, and continuously unleash the potential of labour supply.
Key words
individual income tax reform / labour supply / adjustment costs / bunching approach
County-Level New Urbanization and Employment Quality of Rural Migrants
Zhou Chuang, Zheng Xugang, Xu Wenli
Abstract
The county is the important space in the construction of new urbanization and is a key factor in promoting the orderly urbanization of rural migrants. This paper utilizes the quasi-natural experiment of new urbanization pilot projects, along with data from the China Migrants Dynamic Survey and the staggered difference-in-differences method, to examine the effect of county-level new urbanization on the employment quality of rural migrants. The findings indicate that the new urbanization pilot projects at the county level have significantly enhanced the employment quality of rural migrants. These pilot projects “empower” rural migrants externally by enhancing access to public services and internally by reinforcing their sense of identity, ultimately leading to improved employment quality. The impact of improving employment quality is more significant in counties experiencing less financial pressure, and it is particularly effective in improving employment quality of the new generation rural migrants and rural migrants with a high school education or higher. The research conclusions of this paper offer micro-level evidence supporting the implementation of policies aimed at achieving high-quality full employment and promoting new urbanization.
Key words
new urbanization / employment quality / rural migrants / staggered difference-in-differences