Essays on Development Economics in China

Abstract

The rapid rise of China in recent decades presents a unique and attractive context for contributing and testing theories in development economics. Beneath the remarkable growth, there seems to be a "helping hand" from the government to direct and facilitate the development. In my doctoral thesis, I employ rigorous applied econometrics methods to investigate topics in development economics from two major events: the Wenchuan earthquake in 2008 and the implementation of the Targeted Poverty Alleviation program in 2015.

Chapters 1 and 2 both study the Wenchuan earthquake in 2008, one of the most destructive earthquakes in modern China. In Chapter 1, I use county-level panel data from 2003 to 2019 to reveal the variation in the earthquake effect over time, as the largest economic setback takes place in 2008. However, the economic recovery in the following years drives severely affected counties to catch up with non-severely affected counties at the end of the sample period. I also find that the average effect of the Wenchuan earthquake causes a decline of 12% in GDP per capita for those severely affected counties, despite that the method tends to ignore the post-earthquake recovery. Consequently, the economic suffering from the earthquake is considered as short-term.

In Chapter 2, I use the exogenous exposure to the 2008 Wenchuan earthquake and the age of students at the time of the disaster to estimate its impact on educational attainment. The findings reveal that students younger than 15 years old in severely affected counties experience a reduction of 0.36 years in schooling, equivalent to a 3.7% decline. I propose one mechanism to explain this outcome: the protective role of compulsory education, which helps prevent early dropouts but ends after junior high school. In summary, this analysis provides insights into how natural disasters can disrupt human capital formation of young students.

Chapter 3 shifts the focus to the government-led Targeted Poverty Alleviation program by evaluating its impact on urban-rural income inequality in China. Income inequality is defined as the ratio of the urban net income to the rural net income, both in per capita form. The main finding suggests that the program leads to a 3.8% reduction in the urban-rural income ratio in poverty counties, compared with non-poverty counties, which implies a discernible convergence in income levels. I discuss that the significant increase in rural income per capita, improved rural employment, and more government spending largely contribute to the narrowing urban-rural inequality in poverty counties.