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Hongbin Li
Working Papers

Entrepreneurial Reluctance: Talent and Firm Creation in China

Chong-En Bai, Ruixue Jia, Hongbin LI, Xin Wang
National Bureau of Economic Research (NBER) , 2021
The theoretical literature has long noted that talent can be used in both the entrepreneurial and non-entrepreneurial sectors, and its allocation depends on the reward structure. We test these hypotheses by linking administrative college admissions data for 1.8 million individuals with the universe of firm registration records in China. Within a college, we find that individuals with higher college entrance exam scores – the most important measure of talent in this context – are less likely to create firms, but, when they do, their firms are more successful than those of their lower-score counterparts. Additional survey data suggest that higher-score individuals enjoy higher wages and are more likely to join the state sector. Moreover, the score-to-firm creation relationship varies greatly across industry, according to the size of the state sector. These findings suggest that the score is positively associated with both entrepreneurial ability and wage-job ability but higher-score individuals are attracted away by wage jobs, particularly those of the state sector.
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Policy Briefs

Tracking China's Economic Path

Hongbin Li, Scott Rozelle
2021
Stanford scholars are setting and expanding research agendas to analyze China’s economic development and its impact on the world. The newly launched Stanford Center on China’s Economy and Institutions — co-directed by SIEPR senior fellows Hongbin Li and Scott Rozelle — is supporting their work. In this SIEPR Policy Brief, Li and Rozelle outline the research underway by the new center's affiliates.
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Working Papers

Just Above the Exam Cutoff Score: Elite College Admission and Wages in China

Ruixue Jia, Hongbin Li
National Bureau of Economic Research , 2021
A burgeoning literature has documented the importance of elite colleges. Yet, little is known about access to elite education and its labor market implications in China, a country that produces one in every five college graduates in the world. College admission in China is governed by a single exam—the national college entrance exam, and the government sets admission cutoff scores for elite colleges. We examine the impacts of scoring above the elite-tier cutoff on a student's access to elite colleges and wage outcomes after graduation, using the discontinuity around the cutoff score. By employing hand-collected survey data, we find that scoring above the cutoff not only increases the chance of entering an elite college but also raises a young person's first-job wages after graduation. We also find that those just above the cutoff have peers with higher scores and better social networks than those below the cutoff, but it is less clear whether the two groups use their time differently in college.
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Journal Articles

The Performance of State-Owned Enterprises: New Evidence from the China Employer-Employee Survey

Hong Cheng, Hongbin Li, Tang Li
Economic Development and Cultural Change , 2021
Drawing on data from a random sample of manufacturing firms collected in 2016 for the China Employer-Employee Survey (CEES), we examine differences in measures of productivity and financial returns between state-owned enterprises (SOEs) and private firms in China. The summary statistics show that labor productivity and total factor productivity are generally higher at SOEs than at private firms, but the productivity advantage of SOEs can mostly be explained by the higher levels of human capital of their workers, greater market power, and better management. Furthermore, SOEs’ advantage in productivity exists only in industries with higher SOE concentrations. In contrast, measures of financial returns—return on assets and return on equity—are lower for SOEs than for private firms. We believe that these results may reflect the fact that SOEs generally have easier access to capital, human capital, and markets than other types of firms in China.
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Working Papers

Pandemics, Global Supply Chains, and Local Labor Demand: Evidence from 100 Million Posted Jobs in China

Hanming Fang, Chunmian Ge, Hanwei Huang, Hongbin Li
National Bureau of Economic Research , 2020
This paper studies how the COVID-19 pandemic has affected labor demand using over 100 million posted jobs on one of the largest online platforms in China. Our data reveals that, due to the effects of the pandemic both in China and abroad, the number of newly posted jobs within the first 13 weeks after the Wuhan lockdown on January 23, 2020 was about one third lower than that of the same lunar calendar weeks in 2018 and 2019. Using econometric methods, we show that, via the global supply chain, COVID-19 cases abroad and in particular pandemic-control policies by foreign governments reduced new job creations in China by 11.7%. We also find that Chinese firms most exposed to international trade outperformed other firms at the beginning of the pandemic but underperformed during recovery as the Novel Coronavirus spread throughout the world.
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Journal Articles

Wage Differential between Rural Migrants and Urban Workers in the People's Republic of China

Hong Cheng, Dezhuang Hu, Hongbin Li
Asian Development Review , 2020
Using a recently constructed dataset that draws on the China Employer–Employee Survey, this paper provides new evidence on the earnings gap between rural migrant and urban manufacturing workers in the People's Republic of China. When we only control for province fixed effects, we find that rural migrant workers are paid 22.3% less per month and 32.2% less per hour than urban workers. We find that the gap in hourly earnings is larger than the gap in monthly earnings because rural migrant workers tend to work an average of 5.6% more hours per month than urban workers. Using these data, we also find that 87.4% of the monthly earnings gap and 73.9% of the hourly earnings gap can be attributed to differences in the individual characteristics and human capital levels of rural migrant and urban workers. Furthermore, we find that this unexplained earnings gap varies among different groups of workers. The earnings gap is much larger (i) for workers in state-owned enterprises than in nonstate-owned enterprises, (ii) for college-educated workers than workers with lower levels of educational attainment, and (iii) in Guangdong province than in Hubei province.
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Journal Articles

The Rise of Robots in China

Hong Cheng , Ruixue Jia , Dandan Li, Hongbin Li
Journal of Economic Perspectives , 2019
China is the world's largest user of industrial robots. In 2016, sales of industrial robots in China reached 87,000 units, accounting for around 30 percent of the global market. To put this number in perspective, robot sales in all of Europe and the Americas in 2016 reached 97,300 units (according to data from the International Federation of Robotics). Between 2005 and 2016, the operational stock of industrial robots in China increased at an annual average rate of 38 percent. In this paper, we describe the adoption of robots by China's manufacturers using both aggregate industry-level and firm-level data, and we provide possible explanations from both the supply and demand sides for why robot use has risen so quickly in China. A key contribution of this paper is that we have collected some of the world's first data on firms' robot adoption behaviors with our China Employer-Employee Survey (CEES), which contains the first firm-level data that is representative of the entire Chinese manufacturing sector.
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Journal Articles

Land Reform and Sex Selection in China

Douglas Almond , Hongbin Li, Shuang Zhang
Journal of Political Economy , 2019
China’s land reform in 1978–84 unleashed rapid growth in farm output and household income. In new data on reform timing in 914 counties, we find an immediate trend break in the fraction of male children following the reform. Among second births that followed a firstborn girl, sex ratios increased from 1.1 to 1.3 boys per girl in the 4 years following reform. Larger increases are found among families with more education. The land reform estimate is robust to controlling for the county-level rollout of the One Child Policy. Overall, we estimate land reform accounted for about 1 million missing girls.
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Journal Articles

Unequal Access to College in China: How Far Have Poor, Rural Students Been Left Behind?

Hongbin Li, Prashant Loyalka, Binzhen Wu, Jieyu Xie, Scott Rozelle
The China Quarterly , 2018

In the 1990s, rural youth from poor counties in China had limited access to college. After mass college expansion started in 1998, however, it was unclear whether rural youth from poor counties would gain greater access. The aim of this paper is to examine the gap in college and elite college access between rural youth from poor counties and other students after expansion. We estimate the gaps in access by using data on all students who took the college entrance exam in 2003. Our results show that gaps in access remained high even after expansion.

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Journal Articles

Fertility, Household Structure, and Parental Labor Supply: Evidence from China

Rufei Guo, Hongbin Li, Junjian Yi , Junsen Zhang
Journal of Comparative Economics , 2018
This study examines the effects of fertility on household structure and parental labor supply in China. To solve the endogeneity problem, we use a unique survey on households with twin children and a comparison group of non-twin households. The ordinary least squares estimates show a negative correlation between fertility and parental labor supply in rural China. Using twinning as a natural experiment, we do not find evidence on the negative effects of fertility on parental labor supply. By contrast, we find that the twinning-induced increase in fertility significantly enhances the coresidence of grandparents in rural China. We suggest that the negative effects of fertility on parental labor supply are mitigated by the childcare provided by grandparents in rural China. We also find that fertility does not induce coresidence of grandparents in urban China. Our results have important implications for population and public childcare policies.
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Journal Articles

Human Capital and China’s Future Growth

Hongbin Li , Prashant Loyalka , Scott Rozelle, Binzhen Wu
Journal of Economic Perspectives , 2017
In this paper, we consider the sources and prospects for economic growth in China with a focus on human capital. First, we provide an overview of the role that labor has played in China's economic success. We then describe China's hukou policy, which divides China's labor force into two distinct segments, one composed of rural workers and the other of urban workers. For the rural labor force, we focus on the challenges of raising human capital by both increasing basic educational attainment rates as well as the quality of education. For the urban labor force, we focus on the issues of further expanding enrollment in college education as well as improving the quality of college education. We use a regression model to show the typical relationship between human capital and output in economies around the world and demonstrate how that relationship has evolved since 1980. We show that China has made substantial strides both in the education level of its population and in the way that education is being rewarded in its labor markets. However, as we look ahead, our results imply that China may find it impossible to maintain what appears to be its desired growth rate of 7 percent in the next 20 years; a growth rate of 3 percent over the next two decades seems more plausible. Finally, we present policy recommendations, which are rooted in the belief that China continues to have substantial room to improve the human capital of its labor force.
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Journal Articles

Skill Complementarities and Returns to Higher Education: Evidence from College Enrollment Expansion in China

Hongbin Li, Yueyuan Ma, Lingsheng Meng, Xue Qiao, Xinzheng Shi
China Economic Review , 2017
We find that the increased supply of college graduates resulting from college enrollment expansion in China increases college premiums for older cohorts and decreases college premiums for younger cohorts. This finding is inconsistent with the canonical model that assumes substitution among workers of different ages. We subsequently build a simple model that considers complementarities among workers of different ages and different skill levels. Our model predicts that the college premium of senior workers increases with the supply of young college graduates when skill is a scarce resource. The model's predictions are supported by empirical tests.
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Journal Articles

The Retirement Consumption Puzzle Revisited: Evidence from the Mandatory Retirement Policy in China

Hongbin Li, Xinzheng Shi, Binzhen Wu
Journal of Comparative Economics , 2016
Using data from China's Urban Household Survey and exploiting China's mandatory retirement policy, we use the regression discontinuity approach to estimate the impact of retirement on household expenditures. Retirement reduces total non-durable expenditures by 19%. Among the categories of non-durable expenditures, retirement reduces work-related expenditures and expenditures on food consumed at home but has an insignificant effect on expenditures on entertainment. After excluding these three components, retirement does not have an effect on the remaining non-durable expenditures. It suggests that the retirement consumption puzzle might not be a puzzle if an extended life-cycle model with home production is considered.
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Journal Articles

How Do Exchange Rate Movements Affect Chinese Exports: A Firm-Level Investigation

Hongbin Li, Hong Ma , Yuan Xu
Journal of International Economics , 2015
This paper provides first-hand firm-level evidence on Chinese exporters' reaction to RMB exchange rate movements. We find that the RMB price response to exchange rate changes is very small, indicating relatively high exchange rate pass-through into foreign currency denominated prices, while the volume response is moderate and significant. Furthermore, exporters with higher productivity price more to market, though the pass-through is still very high. Other sources of heterogeneity, such as import intensity, distribution costs, income level of the destination countries, and foreign ownership also matter. Moreover, RMB appreciation reduces the probability of entry as well as the probability of continuing in the export market.
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Journal Articles

The Retirement Consumption Puzzle in China

Hongbin Li , Xinzheng Shi, Binzhen Wu
American Economic Review , 2015
Using data from China's Urban Household Survey and exploiting China's mandatory retirement policy, we use the regression discontinuity approach to estimate the impact of retirement on household expenditures. Retirement reduces total non-durable expenditures by 20 percent. Among the categories of non-durable expenditures, retirement reduces work-related expenditures and expenditures on food consumed at home but has an insignificant effect on entertainment expenditures. After excluding these three components, retirement does not have an effect on the remaining non-durable expenditures. It suggests that the retirement consumption puzzle might not be a puzzle if a life-cycle model with home production is considered.
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Journal Articles

Girl Adoption in China: A Less-Known Side of Son Preference

Yuyu Chen , Avraham Ebenstein , Lena Edlund , Hongbin Li
Population Studies: Journal of Demography , 2015
In 1987, 4 per cent of girls were adopted within China. Why? Unlike infanticide, abandonment rids parents of daughters while preserving the supply of potential brides. In fact, an erstwhile tradition common in Fujian and Jiangxi provinces had parents of sons adopting an infant girl to serve as a future daughter-in-law and household help. Analysing a nationally representative 1992 survey of children, we found that: (1) girl adoptions were concentrated in the above-mentioned provinces; (2) girls were predominantly adopted by families with sons; (3) adopted girls faced substantial disadvantage as measured by school attendance at ages 8–13. In the 1990s, as the sex ratio at birth climbed, were girls aborted rather than abandoned? Observing that in the 2000 census too many girls appear in families with older sons, we estimated that at least 1/25 girls were abandoned in the 1990s, a proportion that in Fujian and Jiangxi may have peaked at 1/10 in 1994.
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Journal Articles

Unequal Access to College in China: How Far Have Poor, Rural Students Been Left Behind?

Hongbin Li , Prashant Loyalka , Scott Rozelle , Binzhen Wu , Jieyu Xie
The China Quarterly , 2015
In the 1990s, rural youth from poor counties in China had limited access to college. After mass college expansion started in 1998, however, it was unclear whether rural youth from poor counties would gain greater access. The aim of this paper is to examine the gap in college and elite college access between rural youth from poor counties and other students after expansion. We estimate the gaps in access by using data on all students who took the college entrance exam in 2003. Our results show that gaps in access remained high even after expansion. Rural youth from poor counties were seven and 11 times less likely to access any college and elite Project 211 colleges than urban youth, respectively. Much larger gaps existed for disadvantaged subgroups (female or ethnic minority) of rural youth from poor counties. We also find that the gaps in college access were mainly driven by rural–urban differences rather than differences between poor and non-poor counties within rural or urban areas.
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Journal Articles

Poverty in China's Colleges and the Targeting of Financial Aid

Hongbin Li , Lingsheng Meng , Xinzheng Shi , Binzhen Wu
China Quarterly , 2013
To examine poverty on China’s campuses, we utilize the Chinese College Students Survey carried out in 2010. With poverty line defined as the college-specific expenditures a student needs to maintain the basic living standard on campus, we find that 22 percent of college students in China are living in poverty. Poverty is more severe among students from the rural or Western parts of the country. The college need-based aid program must be improved because its targeting count error is over 50 percent. Lacking other income sources, poor students rely heavily on loans and working to finance their college education.
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Journal Articles

Evidence on the Impact of Sustained Exposure to Air Pollution on Life Expectancy from China's Hua River Policy

Yuyu Chen, Avraham Ebenstein, Michael Greenstone, Hongbin Li
PNAS , 2013
This paper's findings suggest that an arbitrary Chinese policy that greatly increases total suspended particulates (TSPs) air pollution is causing the 500 million residents of Northern China to lose more than 2.5 billion life years of life expectancy. The quasi-experimental empirical approach is based on China’s Huai River policy, which provided free winter heating via the provision of coal for boilers in cities north of the Huai River but denied heat to the south. Using a regression discontinuity design based on distance from the Huai River, we find that ambient concentrations of TSPs are about 184 μg/m3 [95% confidence interval (CI): 61, 307] or 55% higher in the north. Further, the results indicate that life expectancies are about 5.5 y (95% CI: 0.8, 10.2) lower in the north owing to an increased incidence of cardiorespiratory mortality. More generally, the analysis suggests that long-term exposure to an additional 100 μg/m3 of TSPs is associated with a reduction in life expectancy at birth of about 3.0 y (95% CI: 0.4, 5.6).
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Journal Articles

Family Ties and Organizational Design: Evidence from Chinese Private Firms

Hongbin Cai, Hongbin Li, Albert Park , Li-An Zhou
Review of Economics and Statistics , 2013
Analyzing data from a unique survey of managers of Chinese private firms, we investigate how family ties with firm heads affect managerial compensation and job assignment. We find that family managers earn higher salaries and receive more bonuses, hold higher positions, and are given more decision rights and job responsibilities than nonfamily managers in the same firm. However, family managers face weaker incentives than professional managers, as seen in the lower sensitivity of their bonuses to firm performance. Our findings are consistent with the predictions of a principal-agent model that incorporates family trust and endogenous job assignment decisions.
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Journal Articles

Prenatal Sex Selection and Missing Girls in China: Evidence from the Diffusion of Diagnostic Ultrasound

Yuyu Chen , Hongbin Li , Lingsheng Meng
Journal of Human Resources , 2013
How much of the increase in sex ratio (male to female) at birth since the early 1980s in China is attributed to increased prenatal sex selection? This question is addressed by exploiting the differential introduction of diagnostic ultrasound in the country during the 1980s, which significantly reduced the cost of prenatal sex selection. We find that the improved local access to ultrasound technology has resulted in a substantial increase in sex ratio at birth. Our estimates indicate that roughly 40 to 50 percent of the increase in sex imbalance at birth can be explained by local access to ultrasound examinations.
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Journal Articles

Entrepreneurship, Private Economy, and Growth: Evidence from China

Hongbin Li, Zheyu Yang , Xianguo , Haifeng Zhang , Junsen Zhang
China Economic Review , 2012
This paper examines the impact of entrepreneurship on economic growth by using a panel data set of 29 provinces in China over 20 years. Two indicators of entrepreneurship are defined and introduced into the traditional growth regression framework that is estimated using the system generalized method of moments. We also use the ratio of staff and workers of state-owned enterprises and per capita sown land area as the instrumental variables to identify the causal effect of entrepreneurship on economic growth. Our results suggest that entrepreneurship has a significant positive effect on economic growth and this finding is robust even after we control for other demographic and institutional variables. Our study provides some evidence that may be used as a basis for evaluating the effect of China’s policy on private business which has been increasingly relaxed since the late 1970s.
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Journal Articles

Estimating Returns to Education Using Twins in Urban China

Hongbin Li , Pak Wai Liu, Junsen Zhang
Journal of Development Economics , 2012
This paper empirically estimates the return to education using twins data that the authors collected from urban China. Our ordinary least-squares estimate shows that one year of schooling increases an individual's earnings by 8.4%. If we use a within-twin fixed effects model, the return is reduced to 2.7%, but rises to 3.8% after the correction of measurement error. These results suggest that a large portion of the estimated returns to education is due to omitted ability or the family effect. We further investigate why the true return is low and the omitted ability bias high, and find evidence showing that it may be a consequence of China's education system, which is highly selective and exam oriented. More specifically, we find that high school education may mainly serve as a mechanism to select college students, but as a human capital investment per se it has low returns in terms of earnings. In contrast, both vocational school education and college education have a large return that is comparable to that found in the United States.
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Journal Articles

Early Commitment on Financial Aid and College Decision Making of Poor Students: Evidence from Randomized Evaluation in Rural China

Chengfang Liu, Linxiu Zhang, Renfu Luo, Scott Rozelle, Brian Sharbono, Jennifer Adams, Yaojiang Shi, Ai Yue, Hongbin Li, Xiaobing Wang, Thomas Glauben
Economics of Education Review , 2011

Many educational systems have struggled with the question about how best to give out financial aid. In particular, if students do not know the amount of financial aid that they are receive before they make a decision about where to go to college and what major to study, it may distort their decision.

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Journal Articles

Community Service, Social Responsibility and Educational Performance in Rural China's Middle Schools: Evidence from a Case Study of Northwest China

Renfu Luo, Yaojiang Shi, Linxiu Zhang, Chengfang Liu, Hongbin Li, Scott Rozelle, Brian Sharbono
Journal of Moral Education , 2011

The overall goal of this paper is to try to understand in the context China’s middle school education system what is the tradeoff between community service and educational performance. In addition, we seek to understand some of the other effects of participation in community service activities. When students participate in community service, does their self-esteem rise and/or self-efficacy rise? Finally, we also want to know if students participate in community service activities will their sense of social responsibility rise.

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