Literature streams disagree about the capacity of investment-cash flow sensitivity (ICFS) to measure both investment thirst and financial constraint. We argue that ICFS measures the former but not the latter. Therefore, we use Fazzari et al. 's study (1988) to develop a model to test the relationship between ICFS and financial constraint, but extend that model using Kornai (1979) to include investment thirst. We demonstrate: because the ICFS-financial constraint relationship varies, ICFS cannot measure financial constraint. Conversely, using a natural experiment of China's Four Trillion Stimulus policy, we show ICFS significantly and positively correlates with investment thirst after controlling for financial constraint.
Culture has a substantial effect on the spread of epidemics. A well-known example is the spread of the Ebola virus in western Africa, which was facilitated by the region's unique funeral customs, which require that every participant touch the dead body (Park, 2020;Victory et al., 2015). Traditional culture can thus play a major role in determining epidemic diffusion. Yet there is little research on this issue, and we do not know whether traditional culture promotes epidemic diffusion and whether there are policies that can mitigate the negative effects of culture.Motivated by these considerations, this paper looks at the effects of Chinese clan loyalty, a still-vital cultural tradition in eastern Asia, in increasing the number of COVID-19 cases in 2020. The COVID-19 pandemic is a matter of global concern. A large literature documents the determinants and consequences of the spread of COVID-19. However, little is known about the impacts of informal institutions, for example, clan loyalty, on the rise of COVID-19 cases.Anecdotal evidence suggests that clan loyalty can have a major impact on the spread of COVID-19. Wenzhou is a city in southeastern China with rich clan loyalty and flourishing family enterprises (Chen, 2001). There were 254 COVID-19 cases in Wenzhou by February 10, 2020, due to mass gatherings related to clan dinner parties; this figure represents more than 52.48% of the total number of COVID-19 cases in Wenzhou. This example motivates us to investigate whether a cultural tradition such as clan loyalty, which is associated with the tradition of throwing a dinner party during the Chinese New Year holidays, promotes the spread of COVID-19.As a Chinese cultural tradition, clan loyalty shapes Chinese society. In this culture, individuals are grouped by their consanguinity or common ancestor (Freedman, 1965), and clans memorialize ancestors with pedigrees and clan halls (Peng, 2004).
This paper enriches the misallocation literature by identifying the role of marketization based on China’s manufacturing database. We find that when the effect of misallocation on TFP dispersion is larger than that of market competition, the TFP dispersion of private enterprises tends to increase, misallocation decreases and market competition increases. However, as the dispersion of state-owned enterprises in China decreases, misallocation and market competition both increase.
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