Essays in Development, Institutions and Gender

Abstract: This thesis consists of four self-contained essays. In the first essay, me and Johan Lyhagen develop a test of economic convergence or divergence using time series methods. The usefulness of the method is illustrated in an analysis of the growth pattern between Chinese regions in 1952-2007. Comparing all combinations of regional pairs, we find evidence of economic divergence in roughly half of the cases. In the other half, we instead find that regions have grown while maintaining stable income differences. The second essay compares average earnings and productivities of men and women employed in roughly 250,000 Chinese industrial enterprises. Women are found to earn, on average, 12% less than men. This gender wage gap stems entirely from a wage disadvantage for women with less than twelve years of education. For women with more than twelve years of education, the average wage exceeds the average wage of skilled men. The third essay takes as a starting point the situation that ten years after the establishment of China’s Unemployment Insurance (UI) program, coverage is still incomplete owing to large-scale firm evasion. This study draws on a highly representative panel of Chinese firms for 2001-2005 to describe the pattern of firm participation across time, ownership, region, and industrial dimensions. A simple theoretical model is then used to derive the prediction that firms are more likely to provide UI if they operate in tighter labor markets. This prediction receives empirical support, but the effect is quantitatively small. The forth examines the real exchange rates of oil exporting countries. In a simple theoretical model, strong institutions insulate real exchange rates from oil price volatility by generating a smooth pattern of fiscal spending of oil revenue over the price cycle. Empirical tests on a panel of 33 oil-exporting countries provide evidence that countries with high bureaucratic quality and strong and impartial legal systems have real exchange rates that co-move less with the oil price.