Xiangjun Ma

This paper studies the residential segregation effects on educational attainment of children from regional migrant families in China. We find that if migrant families live in segregated communities with fewer local residents, the school dropout rate of the children living with their parents in the host cities is higher and their high school enrollment rate is lower. We employ a unique set of nationwide survey data of regional migrants in China in 2012 and 2013 that comprises more than 150,000 individuals in each year. We first use the ratio of migrants over the total population residing in a community to measure segregation. When the ratio increases by 10%, the school dropout rate of migrant children increases by 4.7% from the mean value. Secondly, we identify segregation from the housing type of the migrant family. When they reside in the dorms provided by their employers or in the workplace, they will also be surrounded by many migrant colleagues. We find that living in such places increases the “not‐going‐to‐high‐school rate” of migrant children by 35% from the mean value. Our subsample analysis indicates that the segregation effects only exist in the samples of male migrant children and rural hukou families.

Firms that import intermediate goods choose between outsourcing and vertical integration. When corporate tax rates differ between the home country and the foreign country, the possibility of shifting income and reducing overall tax payments through transfer pricing makes integration more attractive than outsourcing. This paper develops an incomplete-contracting model in which an international firm facing tax rate differentials chooses whether or not to internalize intermediate transactions in order to trade off production efficiency and tax minimization. By shifting economic activities across borders, an integrated multinational enterprise establishes a proper transfer price and reaches the optimal profit-splitting arrangement that maximizes its total after-tax profit. This paper finds that cross-country differences in corporate tax rates and product intangibility play important roles in affecting firms’ internalization decision. Empirical analysis employing the US data also supports the theoretical findings. The positive correlation of the integration level of US firms and tax rate differentials between the US and foreign countries remains in the sample excluding tax havens.