Health, Education, and Welfare Programs in China

July 5-7, 2012
Roger Gordon of the University of California, San Diego, Organizer

Shuang Zhang, Cornell University

Long-term Effects of In Utero Exposure to Land Reform on Academic Performance in China

The 1978-84 land reform in China replaced collectivized farming with more autonomous household farming, and this economic liberalization is widely documented to have increased rural household income and reduced poverty. Shuang Zhang examines the effect of prenatal exposure to the land reform on academic performance as captured by college entrance exam scores. Using each test taker's year of birth and county in infancy, matched to the year the land reform started in his/her county for 1,068 counties, Zhang finds that high school students born just after the first post-reform harvest perform better on college entrance exams, especially in math, and are more likely to be admitted by first-tier and top-ranked colleges. These effects are substantially stronger for boys than girls. The findings suggest that it might be beneficial to target income to the prenatal period and that "pro-growth" policies can lay the foundation for human capital accumulation.

Hui He, Kevin XD Huang, and Sheng-Ti Hung, University of Hawaii

Are Recessions Good for Your Health? When Ruhn Meets GHH

Hui He, Kevin Huang, and Sheng-Ti Hung document several important business cycle properties of health status and health expenditures in the United States. They find that health expenditures are pro-cyclical while health status is counter-cyclical. They then develop a stochastic dynamic general equilibrium model with endogenous health accumulation and four distinct features: 1)both medical expenditures and leisure time are used to produce health stock; 2) health enters into the production function; 3) the depreciation rate of the health stock negatively depends on working hours; and 4) health enters into the utility function. After calibrating the model to the U.S. economy, they show that it can jointly rationalize the counter-cyclicality of health status and the pro-cyclicality of medical expenditure. They also investigate the relative importance of each feature in affecting the business-cycle properties of health status, and find that the joint presence of the time channel and the production channel is crucial in replicating the counter-cyclicality of health status.

Shuang Zhang

Mother's Education and Infant Health: Evidence from Closure of High Schools in China

Exploiting exogenous variation in women's exposure to the wholesale closure of rural high schools in China immediately after the Cultural Revolution, from 1977 to 1984, Shuang Zhang examines the effect of maternal education on infant health. Combining data from the 1992 Chinese Children Survey with county-level data on the year the school closures began, this study focuses on rural women born three months apart yet differently affected by the closures of high schools within the county. The results show a decline of 22.5 percent in high school completion for women aged 17 years and 9 months by the first quarter of the first year of the school closures. The author also finds that one more year of maternal high school education has no effect on prematurity, low birth weight, neonatal mortality, or infant mortality.

Karthik Muralidharan, University of California, San Diego and NBER

Is There a Doctor in the House? Absent Medical Providers in India

Analyzing a five-year long randomized evaluation of group and individual teacher pay-for-performance programs that were implemented across a large representative sample of government-run rural primary schools in the Indian state of Andhra Pradesh, Karthik Muralidharan finds consistently positive and significant impacts of the individual teacher incentive program on student learning outcomes across all durations of program exposure. Students who completed their full five years of primary school under the program performed significantly better than those in control schools. These students also scored higher in science and social studies tests, even though there were no teacher incentives on these subjects. The group teacher incentive program also had positive (and mostly significant) effects on student test scores, but the effects were smaller than those of the individual incentive program, and were not significant at the end of primary school for the cohort exposed to the program for five years.

Gordon G Liu, Jay Pan, and Chen Gao, Peking University

Separating Government Regulatory Roles from Operational Functions by Public Hospitals for Greater Supply Capacity

Separating government regulatory roles from operational functions by public hospitals for greater supply capacity? Using city-level data and the difference-in-difference (DD) model method, Gordon Liu, Jay Pan, and Chen Gao estimate the changes in health care supply in response to the policy reform regarding the operation and regulation of public hospitals in China. They find that the pure reform effect led to an increase of 41 percent in the number of doctors and 42 percent in the number of health workers per 10,000 people in Weifang city from 2006 through 2008. For Shuzhou city and data from 2005 through 2008, the reform-led increase was 60 percent for hospital beds and 36 percent for health workers per 10,000 people. Moreover, the magnitude of this impact increases over time.

Chen Gao, Fei Xu, and Gordon G Liu, Peking University

Payment Reform and Changes in Health Care in China

Chen Gao, Fei Xu, and Gordon Liu estimate the primary effects of a health care payment reform -- including a capitation experiment and a supplementary open enrollment policy -- in Changde city, Hunan Province, China. Relying on the longitudinal Urban Resident Basic Medical Insurance Household Survey and data for the period 2008-10, they find that the payment reform reduced inpatient out-of-pocket costs by almost 20 percent, reduced the out-of-pocket cost ratio by 9.5 percent, and reduced the length of stay by 17.5 percent. However, there was little difference in total inpatient costs, the drug cost ratio, treatment effects, and patient satisfaction between the Fee-For-Service and the capitation models. The authors conclude that the payment reform in Changde decreased the financial burden of in-hospital patients and improved hospital efficiency, without compromising the quality of care or the responsiveness to patients.

Mingming Ma, Binzhen Wu, and Xiaohan Zhong, Tsinghua University

Matching Mechanisms and Matching Quality: Evidence from China

Among the alternative mechanisms that have been used in China to match college applicants with colleges, some provide students an incentive to reveal their true preferences across schools, but others push students to be less ambitious in their reported preferences. Exploiting a rich dataset from a Chinese high school with information on students' reported preference lists and the matching outcomes of their college admissions process, Mingming Ma, Binzhen Wu, and Xiaohan Zhong show that when the mechanism encourages strategic behavior, there is a significant gender difference in matching quality and strategic behavior. Female students were less ambitious in their stated preferences and end up at worse colleges than male students, given their ex-post college entrance exam scores. This gender difference disappears when the mechanism is designed to elicit true preferences.

Belton Fleisher, Ohio State University; Haizheng Li, Georgia Institute of Technology; Shi Li, Beijing Normal University, and Xiaojun Wang, University of Hawaii

Access to Higher Education and Inequality: The Chinese Experience

Belton Fleisher, Haizheng Li, Shi Li, and Xiaojun Wang estimate the selection and sorting effects on private returns to schooling for college graduates during China's reform between 1988 and 2002. They find that there were substantial sorting gains under the traditional system, but they have decreased drastically and are negligible in the most recent data. They take this as evidence of the growing influence of private financial constraints on decisions to attend college, because tuition costs have risen and the relative importance of government subsidies has declined.

Han Li and Jiaxin Xie, Hong Kong University of Science and Technology

Can Conditional Grants Attract Better Students: Evidence from Chinese Normal Universities

Li Han and Jiaxin Xie evaluate a conditional grant program for teaching majors in Chinese normal universities, under which students commit to teaching in their home province upon graduation. The researchers find that the program increased the overall entry scores of students in teaching majors relative to scores of non-teaching majors. However, much of that positive effect arises in the high- and middle-income regions. The high-performing students from low-income regions tend to turn away from teaching majors, perhaps because they are unwilling to commit to returning to their poor hometowns.

Binzhen Wu and Xiaohan Zhong, Tsinghua University

College Admission Mechanism and Matching Quality: An Empirical Study of China

Binzhen Wu and Xiaohan Zhong compare four alternative matching mechanisms between students and colleges that differ in terms of the timing of students' preference submission (pre- or post-exam) and the priority of scores versus stated student preferences in the assignment process. Pre-exam mechanisms compel students to submit their preferences when their exam scores are uncertain. When preferences are given priority, schools admit those with a stronger preference first, in order of their scores. When scores have priority, students with higher scores choose universities first. This paper first shows that the traditional mechanism, with preferences submitted pre-exam and given priority, results in a poorer match between test scores and quality of school. However, if test scores are noisy, then the match between actual academic ability and quality of school could turn out to be better. The authors then use a dataset from a top-ranked school within a university in China, examining changes in the student body in response to changes in the assignment mechanism. Consistent with the theory, they find that the traditional mechanism generated a student body with lower test scores, but similar or even better college academic performance. These findings imply that students with higher academic aptitude or stronger preference for a premier school fare better under the traditional mechanism.

Raj Chetty and John Friedman, Harvard University and NBER, and Jonah Rockoff, Columbia University and NBER

The Long-Term Impacts of Teacher Value-Added and Student Outcomes in Adulthood (NBER Working Paper No. 17699)

Analyzing school district data from grades three-to-eight for 2.5 million children, linked to tax records on parent characteristics and adult outcomes, researchers Raj Chetty, John Friedman, and Jonah Rockoff find that students assigned to high-VA (value added) teachers are more likely to attend college, to attend higher- ranked colleges, to earn higher salaries, to live in better neighborhoods, and to save more for retirement. They are also less likely to have children as teenagers. On average, a single standard deviation improvement in teacher VA in a single grade raises earnings by about 1 percent at age 28. Replacing a teacher whose VA is in the bottom 5 percent with an average teacher would increase the present value of students' lifetime income by more than $250,000 for the average class-room in this sample.

Cheng Yuan and Lei Zhang, Tsinghua University

Public School Spending and Private Substitution in Urban China

Cheng Yuan and Lei Zhang investigate how increases in government spending on public schools affect household spending on education in urban China. They use detailed information about household spending on public school tuition, textbooks, and private tutoring from the 2002-6 Urban Household Survey and focus on households with children in compulsory education (Grades 1-9). Because municipal public education spending in China is exogenous to household preferences, they are able to identify a causal relationship. After controlling for city fixed effects, year-province fixed effects, and a wide range of household and municipal characteristics, they find that increases in public education spending lead to significant decreases in household spending on public school tuition and private tutoring but to no change in spending on textbooks. In addition, while the reduction in household spending on tuition is quite homogeneous across income quintiles, the reduction in household spending on private tutoring comes primarily from the lowest income households. The impact on private tutoring spending differs for metropolitan areas and smaller cities.

Monica Martínez-Bravo, Johns Hopkins University; Gerard Padró i Miquel, London School of Economics, Nancy Qian, Yale University and NBER; and Yang Yao, Peking University

The Effects of Village Elections on Public Goods and Redistribution: Evidence from China(NBER Working Paper No. 18101)

Monica Martínez-Bravo, Gerard Padró i Miquel, Nancy Qian, and Yang Yao investigate the effect of the introduction of elections on public goods and redistribution in rural China. They first collect survey data documenting the history of political reforms and economic policies in 217 villages for the years 1980-2005. Then, to establish causality, they exploit the staggered timing of the introduction of elections. Their results show that elections increase public goods expenditure by 27 percent and increase farmland by 20-27 percent for median village households. The increase in public goods parallels an increase in local taxes; the change in land allocation parallels a reduction in income inequality. Elections also reduce the enforcement of unpopular upper-government policies, such as family planning and the expropriation of village land.

Yuyu Chen and Guang Shi, Peking University; Ginger Zhe Jin, University of Maryland and NBER; and Naresh Kumar, University of Miami

Gaming in Air Pollution Data? Lessons from China

Yuyu Chen, Ginger Zhe Jin, Naresh Kumar, and Guang Shi focus on two regulatory measures that China has adopted to incentivize air quality improvement: publishing a daily air pollution index (API) for major cities since 2000, and linking the API to performance evaluations of local governments. In particular, China defines a day with an API at or below 100 as a "blue sky day." Beginning in 2003, a city with at least 80 percent blue sky days in a calendar year (among other criteria) qualified for the "national environmental protection model city" award. In 2007, the cutoff for the award was increased to 85 percent such days. Using officially reported API data from 37 large cities during 2000-9, the researchers find a significant discontinuity at the threshold of 100 which is more pronounced after 2003. Moreover, model cities were less likely to report an API just above 100 when they were close to the targeted number of blue sky days in the fourth quarter of the year before they won the model city award. In spite of this evidence of manipulation, they still find significant correlation of API with two alternative measures of air pollution: visibility as reported by the China Meteorological Administration and aerosol optical depth (corrected for meteorological conditions) from NASA satellites.

Jie Mao, Lei Zhang, and Jing Zhao, Tsinghua University

Tax Rate and Compliance: Evidence from the Social Security Pension System in China

Jie Mao, Lei Zhang, and Jing Zhao estimate the impact of the payroll tax rate on social security compliance in urban China. For urban employees, the social security system has some features that may induce non-compliance, including a high statutory contribution rate, a weak link between contributions and benefits, and quite weak enforcement by local governments. Taking advantage of the variation in statutory payroll tax rates across cities and over time and with individual data for 2002-6 and firm data for 2004-6, they find that a higher payroll tax rate reduces the probability of participation and reduces the ratio of taxable-salary-to-total-labor-compensation. Large differences in salary reporting elasticity between individual and firm data reflect the fact that firms may not only underreport salary but also may fail to enroll all of their employees in the social security system. Indeed, firms located in regions with a larger migrant population tend to underreport taxable salary more than other firms at any given payroll tax rate. Larger and foreign-owned firms are more likely to comply than domestic private firms.

Douglas Almond, Columbia University and NBER, and Hongbin Li and Lingsheng Meng, Tsinghua University

Son Preference and Early Childhood Investments in China

Has ultrasound diffusion across China changed the pattern of early childhood investments in girls versus boys? By revealing gender prior to birth, ultrasound has enabled the preference for sons to be exercised prior to birth and potentially has increased "fetal origins" damage to Chinese daughters. On the other hand, sex selection by parents with a son preference might lead those choosing not to sex select and thereby bear daughters to make higher investments in girls. Using microdata on investments in children from the 1992 UNICEF Chinese Children Survey conducted by the National Bureau of Statistics, Douglas Almond, Longbin Li, and Lingsheng Meng evaluate changes to prenatal and postnatal investments as captured by place of delivery, early childhood mortality, vaccinations, breastfeeding, and caregiving. Overall, they find the gendered response to ultrasound to be small.

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