Binzhen Wu

Income Inequality, Consumption, and Social-Status Seeking

Using the Chinese Urban Household Survey data between 1997 and 2006, we find that income inequality has a negative (positive) effect on household consumption net of education expenditures (savings) even after we control for household income. We argue that people save to improve their social status when social status is associated with pecuniary and non-pecuniary benefits. Rising income inequality can strengthen the incentives of status-seeking savings by increasing the benefit of improving status, and by enlarging the wealth level required for status upgrading. We also find that the negative effect of income inequality on consumption is stronger for poorer and younger people and that income inequality stimulates more education investment, which are consistent with the status-seeking hypothesis.

Health insurance and consumption: Evidence from China’s New Cooperative Medical Scheme

We exploit a quasi-natural experiment arising from the introduction of a health insurance program in rural China to examine how the insurance coverage affects household consumption. The results show that on average, the health insurance coverage increases non-healthcare related consumption by more than 5 percent. This insurance effect exists even for households with no out-of-pocket medical spending. In addition, the insurance effect is stronger for poorer households and households with worse self-reported health status. These results are consistent with the precautionary saving argument. Moreover, the insurance effect varies by household experience with the program. Particularly, the effect is significant only in villages where at least some households have actually obtained reimbursement from the insurance program. Within these villages, the program stimulates less consumption among the new participants than among households that have participated in the program for more than one year.

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

In the 1990s, poor, rural youth in China had limited access to college. After mass college expansion started in 1998, however, it was unclear whether poor, rural youth would gain greater access. The goal of our paper is to examine the gap in college and elite college access between poor, rural youth and other students after expansion. We estimate the gaps in access 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. Poor, rural youth were seven and 11 times less likely to access any college and elite Project 211 colleges than urban youth. Much larger gaps existed for disadvantaged subgroups of poor, rural youth. We also find that the gaps in college access were driven by rural-urban differences rather than differences between poor and non-poor counties within rural or urban areas.

Matching mechanisms and matching quality: Evidence from a top university in China

We compare competing college admission matching mechanisms that differ in preference submission timing (pre-exam, post-exam but pre-score, or post-score) and in matching procedure (Boston (BOS) and serial dictatorship (SD) matching). Pre-exam submission asks students to submit college preferences before entrance exam scores are known, whereas post-score (post-exam) submission removes (reduces) score uncertainties. Theoretical analyses show that although mechanisms with post-score submission or SD matching are ex-post fair and efficient, they are not so ex-ante. Instead, the mechanism with pre-exam submission and BOS matching can be more fair and efficient ex-ante. These hypotheses are supported by empirical test on data from a top school at a top-ranked Chinese university with identification based on temporal and provincial changes. We find that although students admitted under the pre-exam BOS mechanism have lower college entrance exam scores than students admitted through other mechanisms on average, they exhibit similar or even better college academic performance.

Saving Rates of Urban Households in China

Urban household saving rates in China have been rising over time and display a U-shaped age profile. Using micro data, we document how they relate to a number of factors, including household composition, migration history and housing tenure. We then investigate the role of the pension reforms introduced in several years in various provinces and find a response in line with the prediction of the life-cycle model but of different magnitude in different provinces.

Railways and the Local Economy: Evidence from Qingzang Railway

This article empirically examines the causal effect of railway infrastructure on local economic development using the construction of Qingzang railway as a natural experiment. We apply the difference-in-difference method and find that the Qingzang railway significantly stimulated the economy of the counties along its path (railway counties). The local GDP per capita increased by about 33% after the railway had begun to operate. The effect manifested primarily through the positive railway effect on the manufacturing industry. In addition, the effect did not vary significantly with the initial economic status of the railway counties. The GDP per capita of the off-railway counties that are adjacent to the railway counties was not significantly affected.

Effects of pharmaceutical price regulation: China's evidence between 1997 and 2008

This study uses a macro-level data during the period between 1997 and 2008 to evaluate the effects of Chinas pharmaceutical price regulations. We find that the regulations exert short-run effects on pharmaceutical price indexes, reducing them by less than 0.5 percentage points. The effects can be slightly reinforced if the price regulations were to be applied to more medicines. The price regulations fail to reduce household health expenditures and the average profitability of the pharmaceutical industry. Moreover, firms on the break-even point are worse off after the implementation. Finally, although these regulations have no significant effects on the prices of medicinal substitutes or complements, they increase the importation of expensive medicines. These findings are also consistent with consumer perceptions of the pharmaceutical policies, based on the household survey data conducted in 2008.

How Do You Feel? The Effect of the New Cooperative Medical Scheme in China

Abstract In 2003, a public insurance system was introduced in Chinese rural areas. In the meantime, subjective health status improved. We used a unique household longitudinal survey to analyse how the introduction of an insurance system, known as the New Cooperative Medical Scheme (NCMS), has contributed to the change. This health insurance programme was launched sequentially over counties starting in 2003, and households voluntarily chose whether to participate the programme after its launch by the county. These characteristics make it feasible to disentangle two channels of the influence of the NCMS on self-reported health status. One is the insurance effect of the coverage, which can be estimated by comparing the insured households with non-participants in the villages located in counties that have launched the programme (NCMS counties); the other is the general equilibrium effect that affects all residents in the NCMS counties, and can be estimated by comparing non-participants with the non-exposed households. The longitudinal data also allow us to examine how the effect changes with the duration of households’ subscription to the programme. The empirical findings include: first, a positive extensive margin: an individual feels better about his or her health status when covered by the NCMS. However, there is no intensive margin: there is no additional gain in the self-assessment of health status with the individual’s number of years enrolled in the programme. Second, we find a positive general equilibrium effect of introducing the NCMS programme on non-participants in the NCMS county. This effect accumulates over time.

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

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.

Retirement Consumption Puzzle in China

Using data from Chinas Urban Household Survey and exploiting Chinas mandatory retirement policy, we use the regression discontinuity approach to estimate the impact of retirement on household non-durable expenditures. Retirement reduces total non-durable expenditures by about 21 percent. Among the categories of non-durable expenditures, retirement reduces the work-related expenditures and the expenditures on food consumed at home but does not has a significant effect on expenditures on entertainment. After excluding work-related expenditures, expenditures on food consumed at home and expenditures on entertainment, retirement does not have a significant effect on the remained non-durable expenditures. The findings suggest that retirement consumption puzzle might not a puzzle if an extended life-cycle model with home production is considered.