Empirical Essays on Development Economics in China

Title of dissertation: EMPIRICAL ESSAYS ON DEVELOPMENT ECONOMICS IN CHINA Lingsheng Meng, Doctor of Philosophy, 2010 Dissertation directed by: Professor Mark Duggan Department of Economics My dissertation is composed of three essays on Development Economics in China. The first chapter, co-authored with Hongbin Li, evaluates the impact of the 8-7 Plan, the second wave of China’s poverty alleviation program, on rural income growth at the county level over the period 1994-2000. Since program participation was largely determined by whether a county’s pre-program income fell below a given poverty line, a regression discontinuity approach is employed to estimate causal effects of the program. Using a panel dataset, we find that the 8-7 Plan resulted in a gain of about a 26 percent increase in rural income for the counties which were treated. Our empirical results also suggest an important role for initial endowments in the path towards economic development. The second chapter examines the question: How much of the increase in the sex ratio (males to females) at birth since the early 1980s in China is due to increased prenatal sex selection? I answer this question by exploiting the differential introduction of diagnostic ultrasound throughout China during the 1980s, which significantly reduced the cost of prenatal sex selection. The improved local access to ultrasound technology is found to have resulted in a substantial increase in the sex ratio at birth. Furthermore, this effect was driven solely by a rise in the sex ratio of higher order births, especially following births of daughters. I estimate that the local access to ultrasound increased the fraction of males by 1.3 percentage points for second births and by 2.4 percentage points for third and higher order births. Using the annual birth rate at the county level as a proxy for local enforcement of the One Child Policy, the effects of ultrasound are found to be stronger for individuals under tighter fertility control. These findings suggest that the current trend in skewed sex ratios in China is significantly influenced by prenatal sex selection. Several robustness checks indicate that these results are not driven by preexisting differential trends. The third chapter, co-authored with Douglas Almond and Hongbin Li, explores the gender bias in parental investment in children’s health in China. Where the fraction of male births is abnormally high, heterogeneity in son preference would suggest that parents of sons may have a stronger son preference than parents of daughters. Child sex may have become a stronger signal of parental sex preferences over time as the cost of sex selection has declined and sex ratios at birth have increased. In this chapter, we consider whether ultrasound diffusion changed the pattern of early childhood investments in girls versus boys. If parental investments (like sex ratios) respond to parental sex preferences, postnatal investments in girls should increase with the diffusion of ultrasound and increased prenatal sex selection. In contrast, the prediction for investments prior to birth is ambiguous. For pregnancies carried to term, ultrasound revealed sex as much as six months prior to delivery, enabling gender discrimination in in utero investments. In contrast, sex selective abortions would tend to increase in utero investments in girls through preference sorting. We evaluate these competing predictions using microdata on investments in children using the 1992 Chinese Children Survey. We find no effect of ultrasound access on the gender difference in postnatal investments. In contrast, we find early neonatal mortality of girls increased relative to boys with ultrasound access. As neonatal mortality tends to reflect pregnancy conditions, we infer that prenatal investments for girls carried to term may have fallen relative to boys once fetal sex was revealed. EMPIRICAL ESSAYS ON DEVELOPMENT ECONOMICS IN CHINA