This paper empirically analyzes the factors affecting personal income in urban China using survey data of the “Preference and Life Satisfaction Survey” conducted by the Global COE project of Osaka University from 2009 to 2013. We consider education level as an endogenous variable, and both ordinary least squares (OLS) regression and instrumental variable (IV) regression are performed. We find a number of factors, such as sex, age, education, and marriage that significantly affect personal income. In addition, differences between different occupations are also investigated.
The research examines the role of market expansion and international labor division in the British Industrial Revolution from the perspective of globalization. The research shows that British cotton textile output in pieces grew 275 times from the 1770s to the mid-1850s and documents that such growth would never have happened without a vast overseas market for the supply of raw cotton and the sale of products. The paper argues that the continuous and dramatic expansion of overseas markets allowed the British cotton industry to expand greatly without hitting the ceiling of marginal returns, leading not only to the great expansion of production, but also to technological and institutional innovations, and that international labor division made it possible for the industry to import ample amounts of raw cotton and export large amounts of cotton textiles. In contrast, foreign demand for Chinese cotton textiles increased significantly in the late 18th and early 19th centuries, but accounted for only 0.3% of production capacity, which was too little to lift the law of diminishing marginal returns and to induce either technological or institutional changes. As a result, only Smithian growths could be achieved through optimal resource utilization and specialization in production.
Entering year 2020, the Chinese economy was struck by the COVID-19 outbreak. The unprecedented pandemic, entangled with the already elevated complexities in the nation’s internal environment and external surroundings, aggravated its economic outlook. Internal factors including severe education mismatch in China’s labor force, its vanishing demographic dividend, the declined purchasing power of its middle-income groups, risen leverage ratio of households and enterprises, and soared local government debt reinforced to weaken China’s domestic demand. External factors, especially uncertainty in the China-US relation in the face of the re-shaping global value chain, dragged world economic recovery and thus China’s exports and imports. This summary report highlights some major challenges and opportunities faced by the nation under its new development strategy that stresses internal circulation of domestic economy aided by its interaction with the globe. Our analyses based on IAR-CMM model provide a unified framework for addressing China’s short-, medium-, and long-term issues in an internally coherent manner. Looking into year 2021, our benchmark projection reports an 8.4% annual real GDP growth rate. Alternative scenario analyses and policy simulations are conducted to assess the impacts of potential downside risks and the corresponding policy options for ensuring implicit targets. Through the lens of these analyses, we conclude that a refocus on effective management of internal demand, while deepening structural reforms on supply side and advancing orderly opening up, can help smooth the internal and external circulations of the Chinese economy to achieve high-quality development.
By means of a literature review, this paper strives to provide some clarity on the much-debated relationship between product market competition and firms’ incentives to innovate. It shows that in the literature there does not exist a robust relationship between competition and incentives to innovate. Therefore, it would be futile to continue the debate over whether competition stimulates or hinders innovation. A more useful approach is to make a distinction between pre-innovation competition and post-innovation competition, as it provides a way for reconciling many of the seemingly contradictory findings from the literature. Another important insight from the literature is that the relationship between competition and innovation depends on the source of increased competition.
In 2020, China proposed a new development paradigm centered on domestic circulation with a "dual circulation" model in which domestic circulation and international circulation promote each other. This new paradigm reflects a clear understanding of China's development trend that saw its share of exports in the GDP declining steadily since 2006. However, the new paradigm does not necessarily mean that China should change its past policy of fully utilizing domestic and international markets and resources in economic development. Because of large economies of scale in modern manufacturing sector, China should continue to make full use of international markets.
With the rapid urbanization and mass internal migration in China during the past several decades, the population of children who migrate with their parents to the cities has now reached over 35 million. The education of migrant children poses significant challenges to China’s hukou based education system. In this paper, we first review the policy developments and descriptive studies related to migrant children’s education to offer a comprehensive view of the issue. We then provide in-depth examination of several important quantitative literatures, including the effect of parental migration on children’s education, schooling choices of migrant children and their impacts on school performance, peer effects of migrant children in urban public schools. Overall, although considerable progress has been made regarding migrant children’s education in China, more fundamental policy reforms are necessary to improve the quality of migrant children’s education at the compulsory education level and beyond.
This paper attempts to investigate comprehensively, a “U”-shaped relationship between income inequality and crime rates in China after building a cost-benefit analysis model, by using time series data from 1981–2012 and panel data from 1999–2012. The empirical results show that: firstly, in the time series model, the U-shaped relationships between inequality and the total crime rate and rates of various crimes except from smuggling, are very significant in the period of 1981–2012, secondly, the panel threshold models show that inequality and crime tend to be correlated positively with each other during 1999–2012, because the inequality level during this period is much higher than the turning points of inequality estimated in the time series models, although three regions with different development levels are located in different parts of a U-shaped curve between inequality and crime.
As developed economies have substituted away from manufacturing towards services, so too have developing countries—to an even greater extent. Such sectoral change may be premature for economies that never fully industrialised in the first place. This article presents evidence that countries with smaller manufacturing sectors substitute away from manufacturing to a larger extent, suggesting a trade channel through which falling international relative prices of manufacturing lead price-taking developing economies to substitute accordingly.
From the 1970s, the global currency system has two features: the use of one or a few sovereign currencies as the global reserve asset and the floating exchange rate regime between major currencies. This paper points out that the costs of the dollar’s use as an international reserve currency exceed the benefits for both the US and the rest of the world. These costs include the exporting of American manufacturing as a byproduct of its current account deficit needed to supply its currency to the rest of the world. In addition to the detriment to trade from unpredictable exchange rate fluctuations, the termination of the U.S. obligation to redeem its currency for gold also removed an important restraint on deficit financing for the US and many other countries in the short-run, thus promoting excessive leverage that was a major contributor to the 2008 financial crisis. The paper suggests replacing several main countries’ currencies in international reserves with a real Special Drawing Right (SDR) issued according to currency board rules.
The paper discusses the effects of the digital economy on high-quality urban development and its mechanism. Theoretically, the digital economy can empower high-quality development by boosting entrepreneurial vitality. Empirically, the paper measures the overall level of the digital economy and high-quality development of the 222 Chinese cities at and above the prefecture level during 2011–2016, depicts the entrepreneurial vitality of the cities with the microscopic data of the business registration information and makes quantitative analysis on this basis. The result shows: Digital economy has remarkably improved high-quality development and this conclusion still exists after the robustness test selecting historical data as the instrumental variables and the Broadband China pilot policy as the quasi experiment. The analysis of the mechanism of action indicates that encouraging public entrepreneurship is an important mechanism of the digital economy to release the dividend of high quality development. Finally, thanks to the threshold model and the spatial model, it is found that the positive effect of the digital economy has the characteristics of nonlinear increment and spatial spillover of the “marginal effects.” The research of the paper stimulates the reasons for high-quality development and the understanding of the effects, mechanisms and regional differences of high-quality development empowered by the digital economy.
This paper examines what determines the offer price for a ChiNext IPO and discusses how we can improve the current “Chinese-style” bookbuilding process. We establish that the ChiNext IPO underwriter relies upon the institutional investors to discover the issuer’s intrinsic value (in the form of a preliminary price), and that the same underwriter adjusts the preliminary price to establish the final offer price, based on its assessment of the institutional investors’ motivations. Since the underwriter does not have discretionary power in new share allocation, this “Chinese-style” bookbuilding process contains certain pitfalls from an information asymmetry standpoint. The institutional investors mainly use “simple and direct” variables that do not adequately reflect the issuer’s true intrinsic value to develop the preliminary price, while the underwriter adjusts that price downward to establish the offer price to clear the market, as a measure to counter a perceived free-rider issue among the institutional investors. This process, in effect, contributes to initial IPO underpricing and causes principal-agent conflicts between the underwriter and the issuer. We argue that such a pricing inefficiency could be improved by an innovative “bookbuilding plus price discretionary auction” process, which is a combination of the modified OpenIPO and Taiwan-style auctioned IPO approaches.
Despite the lack of political accountability, ancient autocracies maintained a level of monetary stability that rivals modern democracies. This paper hypothesizes that it is the threat of counterfeiting that has constrained currency debasement. Unwilling to share seigniorage with counterfeiters, who are active only if currency is debased, the government refrains from debasement unless in extreme fiscal situations. To document the facts, we build a database of historical Chinese copper coins that covers the period from the Qin dynasty (221 BC–207 BC) to the Republic of China. We also use the introduction of the steam press in late Qing China as a natural experiment to test the theory. The steam press produced coins of fine patterns that counterfeiters were unable to mimic. As the theory predicts, the removal of the threat of counterfeiting triggered the most serious debasement in the history of the Qing dynasty (1644–1912).
The spread of Western economics in modern China is a content-rich historical event which has taken more than a century. A complete understanding of this event depends on the analysis and summary of its features. This paper suggests that the spread of Western economics in modern China exhibits five main features: openness, periodicity, applicability, localization and limitation. Openness reflects the active attitude of Chinese scholars to learning and propagating Western economics. Periodicity reflects the changes in its effectiveness and focus over time. Applicability reflects its goal of promoting the development of Chinese economics and providing policy applications for China’s economic growth. Localization of Western economic theories in China follows the trend of selected introduction and modification according to local situations. And limitation is inevitable because of the many difficulties facing the spread of Western economics during early modern times. Furthermore, this spread has a profound impact on China which is embodied in its features: it promotes the establishment of Chinese modern economics, provides appropriate examples for the modernization and evolution of Chinese society, and promotes transformation of the traditional economic system in China.
This article examines (i) how retailers position private label products, (ii) why private labels are sold in some product categories but not in others, and why some national brand products may have difficulty in accessing retailers’ shelves, (iii) why some private label products are positioned as ”premium” brands, and (iv) how consumers’ surplus and totalwelfare are affected by private labels. We find that private label positioning leads to less differentiation in product category, which structurally changes a retailer’s product line in return. Consumer welfare and total welfare are lower.
Industry interaction is becoming an important approach to promoting high-quality economic development. In this paper, the multi-sector general equilibrium model is developed to clarify the theoretical mechanism among industry interaction, structure transformation, and high-quality economic development; the empirical tests are carried out based on the provincial panel data from 2000 to 2017; and the empowerment paths for digital technologies are explored to drive high-quality economic development. The findings are as follows. (1) The industry interaction can promote high-quality economic development in China on the whole, but it shows a significant imbalance and a healthy two-way promotion mode have not been formed. (2) The impact of industry interaction on high-quality economic development is significantly heterogeneous at the sector and regional levels. (3) The current unhealthy industry interaction may widen the productivity gap between manufacturing and service sectors, and transform China’s economic into service-oriented structure, thus leading the economic development to a vicious circle of “low efficiency to low-end servitization and further to lower efficiency,” and hindering the sustainability of high-quality economic development. (4) Digital technologies can break the development dilemma and achieve high-quality economic development by alleviating structural contradictions, boosting healthy industry interaction, and narrowing the productivity gap among sectors. The conclusions provide empirical evidence for the government to promote the integration of advanced manufacturing and modern service sectors and achieve high-quality economic development.
One of the major adaptation mechanisms to climate change is increased demand for cooling via the air conditioning of indoor environments. China’s demand for air conditioners has displayed explosive growth since 1995. This paper provides estimates of the income and short run weather sensitivity of air conditioner adoption across urban areas for 29 Chinese provincial entities. We show that the adoption decision displays significant income and weather sensitivity in the short run, with adoption being higher the year following a hot summer.
A network approach is proposed to analyze the formation of cross-holdings and anti-competitive implications. Our approach is motivated by the bilateral arrangement of passive ownership between Microsoft and Apple in 1997. We provide a complete characterization of pairwise stable cross-holdings for a model of Cournot oligopoly with a homogeneous product. Our results strengthen the competitive implications of endogenous cross-holdings in Cournot oligopoly found in the literature.
This paper studies airlines’ competitive behavior in the U.S. airline industry, focusing on 2014 data. I use a structural model to estimate demand and test several supply models, including noncooperative competition, perfect collusion, and tacit coordination. There are three different types of tacit coordination, formed by multimarket contact, common ownership, and codeshare agreement, respectively. I find that the model that fits the data best is a tacit coordination model with coalitions between airlines with at least 30% of their markets overlapped and using price rather than quantity as the strategic variable. I further analyze the consumer welfare loss, each carrier’s profit gains, and changes in market variables due to the tacit coordination.
This paper studies the impact of an increase in higher education tuition on intergenerational mobility in China. We develop a theoretical model for the parental decision about the investment on education of children to illustrate the impact from the perspective of borrowing constraint. We consider the Chinese college tuition and subsidy reform around 1986 as a quasi-natural experiment for identifying the policy effect of the reform on intergenerational educational mobility by using the data from the census of 2000 and the China Family Panel Studies (CFPS). We find that an increase in the education burden induced by the reform of college tuition has reduced intergenerational educational mobility, and it is more noticeable in regions with a relatively higher increment in the tuition fee. Our results are robust with consideration of the co-residence bias, government investment in elementary education, and the higher education expansion.
There has been much discussion of the sources of China’s growth slowdown but little formal econometric analysis of this question. Chen and Groenewold (2019) show that the slowdown was primarily supply-driven, but they stopped short of identifying specific supply variables. This paper extends their analysis and distinguishes several potential supply components: labor supply, productivity, and capital accumulation. Our results confirm their main conclusion that supply dominates the explanation of the slowdown. A model with two supply factors (labor supply and productivity) reveals that both components contribute to the slowdown, although productivity makes the greater contribution. However, when capital stock is added to the model, the decline in the capital accumulation rate becomes an important factor in the growth slowdown, to some extent replacing the effects of both labor supply and productivity.
Based on the Chinese General Social Survey 2006 and 2008 data, this paper assesses the influence of the family planning policy on the qualitative development of children using education attainment and individual income of only children versus children with siblings as parameters. Our results show the following: (1) only children are better-educated than their counterparts with siblings; (2) only children earn higher income in comparison to their counterparts with siblings; (3) the income and education gaps between girls with and without siblings are greater than those between boys; (4) the education gaps between only children and children with siblings are greater for those born in the 1970s, but the income difference between only children and children with siblings is only significant for those born in the 1980s; and (5) the income and education gaps between only children and children with siblings are higher in urban regions. Results indicate that families with only one child invest more resources in children’s quality under the family planning policy, which is consistent with the “quantity–quality trade-off” theory proposed by Gary Becker.
In this paper we design a compensation mechanism for the relocated households in the process of New-Type Urbanization in China. Based on the theories of dynamic rent spatial separation, bid-rent and non-renewable resource exploitation, we give a theretical look at how the current compensation mechanism shapes the welfare of relocated households. Firstly, land rent growth has a spatial difference and the growth rate of the marginal location rent is much higher than that of the mature site. Secondly, there is a demolition championship contest under the sole static money compensation, which can easily lead to land urbanization faster than population urbanization. Thirdly, in the long run the welfare loss of the household is mainly due to the absence of a dynamic compensation mechanism. Furthermore, we design a dynamic compensation mechanism based on the establishment of an asset securitization capital pool, which could be an alternative scheme in the process of New-Type Urbanization.
This paper discusses the benefits of investment in skills in China. We highlight the achievements China has made over time in human capital investments and the new challenges that have emerged as the country develops. To fuel China’s further economic growth and social developments, it is essential to take a more holistic view on skill investments. We suggest policies that promote both economic efficiency and social mobility.
In this paper, we examine the price discovery process and volatility spillover effects in informationally linked futures markets. Using synchronous trading information from the Shanghai Futures Exchange (SHFE), the New York Mercantile Exchange (NYMEX), and the London Metal Exchange (LME) for copper futures from 2000 to 2012, we show that the cointegration relationships of these futures markets changed during 2006–2008. The results indicate that there is a bidirectional relationship in terms of price and volatility spillovers between the LME and NYMEX and the SHFE, with a stronger effect from the LME and NYMEX to the SHFE (versus the effect from the SHFE to the LME and NYMEX) prior to 2006. Our results also highlight the increasingly prominent role of the SHFE in the price formation process and cross-volatility spillover effects since 2008. Finally, we show that volatility spillover has important implications for constructing optimized portfolios for copper investors.
This paper studies the cross-regional variation of interest rates in China in the 1930s. Based on county-level data from the Buck (1941) rural surveys, we examine factors that may have influenced rural interest rates in pre-1949 China. Since the quality of institutions that define property rights and facilitate contract enforcement is important for such transactions as land tenancy arrangements, we treat land tenancy rate (or percentage of owner-farmers) as a proxy for institutional quality. Contrary to the popular belief among historians and economists that usury or high interest rates caused persistent poverty, we find that while the monopoly-exploitation hypothesis has little explanatory power, a region’s institutional quality and income level are persistent and significant determinants of interest rates. Thus, poverty is a key driver of high rates of interest. Economic growth and the development of market institutions are crucial for lowering high interest rates and combating usury.
By using household survey data, this paper examines the effect of legal knowledge, a proxy for farmers’ ability to protect their land, on agricultural development in rural China. The Ordinary Least Square (OLS) estimation results indicate that legal knowledge in a household raises agricultural production. Further, once the production effect of legal knowledge is controlled for, the objective measure of land expropriation has no production effect. These results survive for alternative measures of legal knowledge and subsample analysis. A two-stage least squares strategy further confirms that the effect of legal knowledge on farm production is causal. A preliminary channel analysis suggests that the impact of legal knowledge on farm production works mainly through farmyard manure investments and labor incentives.
We study the impact of the COVID-19 pandemic shock on household consumption in China. Using household survey data, we find that the proportion of liquidity-constrained households increases quickly, but the constraint levels vary across distinct groups. We build a heterogeneous agent life cycle incomplete market model to analyze the long-run and short-run effects of the pandemic shock. The quantitative results reveal a slow recovery of consumption due to three reasons: hiking unemployment rate, declining labor productivity, and worsening income stability. The hiking unemployment rate plays the key role in households’ consumption reduction since it simultaneously leads to a negative income effect and upsurging precautionary saving motives. Our paper highlights the importance of maintaining a stable labor market for faster recovery.
China’s export performance is marked by large regional disparities which affect trade patterns at the national level. This paper uses data from input-output tables to estimate the comparative advantage of Chinese provinces in the three main economic sectors over the period 1992–2007. In contrast to existing studies, we include the services sector in the analysis and construct not only indices of revealed comparative advantage for overall trade, but also bilateral indices for interprovincial trade. The results indicate that West and Central China have a comparative advantage in agriculture/mining, coastal provinces in manufacturing, and metropolitan provinces in services. However, interprovincial trade exhibits a more complex pattern. Regression analysis identifies labor endowments as the key determinant of comparative advantage in total trade, while physical capital is the driving force in domestic trade. Human capital and government spending have a positive effect, whereas industrial loans and taxes, along with provincial trade barriers, impair comparative advantage.
In light of the relationship and the current disconnection between science & technology (S&T) innovation and industrial innovation in China, it is necessary to put forward and emphasize the concept of industrialized innovation. Industrialized innovation is the bridge and intermediation between S&T innovation and industrial innovation, which is not only a concept, but also a mechanism and combination force. There are two ways to achieve industrialized innovation: through industry-university-research coordination and through technology entrepreneurship. The meaning of industry-university-research coordination is not about coordination among industry, university and research sectors in an institutional sense; rather it is about the coordination of the functions of cultivation and development in new industries, new technologies, and new talents of industrialized innovation. The incentive mechanism for industrialized innovation should motivate not only innovation but also coordination. Technology entrepreneurship is the industrialization of new technology through business start-ups, which occurs beyond the stage of incubation and development of new technology. The capital of technology entrepreneurship is the set consisting of knowledge capital manifested through technological innovation, human capital manifested through entrepreneurs, and physical capital in the form of venture capital. While physical capital is indispensable, knowledge capital and human capital play the decisive role in technology entrepreneurship. The industrialization of technological innovation involves two requirements: one is to enable the new technology industry to achieve a large scale rapidly, and the other is to fully realize the potential value of the new technology. Both requirements are reliant on effective innovation in business models.
The paper discusses the diffusion of new technologies from the perspective of the classical economists and Schumpeter. After a comparison of the pre- and post-technical change long-period positions of the economy, we illustrate the process of transition between the two in terms of a two-sector model. Next, we turn to a system with joint production. The fact that some products may be “bads” that need to be disposed of leads to a study of systems of production-cum-disposal. Finally, we investigate the selection pressure innovations exert on incumbent firms. An important message is that technical change cannot generally be studied within a partial framework of the analysis.
Using a unique set of data on fund use by China’s listed companies, this paper examines how macroeconomic uncertainty works on corporate investment. The study shows that macroeconomic uncertainty affects corporate investment behavior through the three channels of external demand, liquidity demand and long-term fund demand. However, the result is influenced by expectations and can differ across firms depending on their economic cycle, shareholder character, industrial character and the financial constraints they are exposed to. Specifically, high macroeconomic uncertainty can weaken the positive roles of these channels, especially those of external demand and liquidity demand, in driving corporate investment. During economic upturns, the effect of these channels is the most evident among state-owned firms, manufacturing firms and low cash dividend firms. The lessons from this study are that macroeconomic policies should be leveraged taking account of the channels through which economic shocks find their way, and monetary policies have to be implemented by targeting microscopic fund demand.
Digital economy, a new driving force for China’s economic development, creates a good opportunity for rural revitalization. This paper begins with a theoretical analysis of the impact of the digital economy on rural revitalization. Based on panel data from 30 provinces and cities in China from 2011 to 2018, as well as measurement-based digital economy development Index and rural revitalization index, the empirical test is conducted of the driving effect, mechanism and heterogeneity of digital economy on rural revitalization. Results show that the digital economy has a significant driving effect on rural revitalization, a conclusion that still holds even after taking into account endogenous problems and conducting a series of robustness tests. Technological innovation and human capital constitute the important mechanism for the digital economy to drive rural revitalization. Furthermore, the digital economy has a spatial spillover effect on rural revitalization, that is, it can promote rural development in neighboring areas. As regards various dimensions of rural revitalization, the digital economy can significantly promote ecological livability, civilized rural style, effective governance and prosperity. But its impact on the industrial boom is yet to appear. The western region enjoys more digital economy dividends in rural revitalization are more significant than central and eastern regions. Rural revitalization requires the government to deepen the integration of the digital economy and agriculture and implement a differentiated digital economy development strategy.
This paper provides a survey on recent developments in structural changes for high dimensional factor models. Compared with conventional low-dimensional time series, structural changes in factor models are more complicated due to the unobservability of factors and factor loadings. The following topics are covered in this survey: the identification conditions for the structural changes in the factor loadings, different impacts of big and small breaks in factor models, tests for structural changes in the factor loadings of a specific variable, tests for structural changes in the factor loading matrix, joint tests for structural changes in the factor loadings and coefficients in factor-augmented regressions, tests for smooth changes in the factor loadings, estimation of break dates, and model selection in factor models with structural changes via the shrinkage method.
Using cross-sectional data from 853 counties in 11 western China provinces, we employ quantile regression (QR) and instrumental variable quantile regression (IVQR) to investigate the hierarchical effect of fiscal expenditure and agricultural loan on rural residents’ income. We find: (1) the relationship between agricultural loan and income is consistent with the inverted U-shape (Kuznets curve); (2) the coefficient of quantile regression for rural residents’ loan gradually decreases; particularly, the impact on the high-income group is insignificant (at 0.90 quantile); (3) for 0.10 and 0.50 quantile, the increase of fiscal expenditure would hinder rather than promote income growth; (4) the restraining effect becomes more pronounced for the lower groups; in contrast, there is a significant positive relationship between income and fiscal expenditure for 0.90 quantile’s income group. Implications for government policy formulation are propounded accordingly.
Post-reform China has been experiencing two major demographic changes: an increasingly aging population and an extraordinary surge of rural-urban migrants. The question we ask is: are these two demographic changes related? If yes, then, how? The standard view in the migration literature is that the older the migrant, the lower the likelihood of migration. This paper proposes a simple theory of temporary migration for unskilled labor to fit the context of China. Motivated by our model, we then use both cross-sectional micro data and panel macro data to examine the potential impacts of aging on migration. We find that shifts in China’s age distribution have generated significant changes in the country’s migration patterns: migration will shift to closer provinces (probably switching from interprovincial migration to intra-provincial migration) and will concentrate to a few destination provinces.
China’s prevailing hukou (household registration) system and land tenure system seem to be very different in their applications. In fact, they both function to deny the exit right of rural residents from a rural community. Under these systems, rural residents are not allowed to freely exit from collectives if they do not want to lose their entitlements, such as their rights to using collectively owned land and their land-based properties. Farmers are neither allowed to sell their houses to outsiders, nor allowed to sell to outsiders their rights to contracting a piece of land from the collective where their households are registered. For migrant workers from rural areas, it is extremely difficult for them to obtain an urban hukou with all its associated entitlements at an urban locality where they currently work and live. The combined effect of the two systems leads to serious distortions in labor and land markets, resulting in discrimination against migrant workers, sprawling yet exclusive urbanization, housing bubbles, and depressed domestic demand. These distortions further entrench the existing and much widened urban/rural divide. Unless these two systems are thoroughly reformed, the rural residents in Chinese mainland will be trapped in their comparatively much lower income and remain unable to share the gains from the agglomeration effects of urbanization.
Weak capacity to enforce regulations and sanction violators, and an emphasis on economic growth in developing countries has led to concerns about worsening environmental conditions and the potential for these countries becoming pollution havens for multinational corporations. International environmental standards, voluntary programs, and public disclosure programs have gained popularity because they engage market participants in providing incentives for self-regulation and have the potential to substitute for the lack of domestic regulatory capacity. This paper analyzes the motivations for firms to undertake voluntary environmental management and reviews the empirical evidence on the type of firms participating in such initiatives and their effectiveness in improving environmental performance. We also consider the special case of China that has witnessed dramatic globalization following its acceptance into the World Trade Organization and participation by its firms in global supply chains. We conclude with a discussion of the effectiveness of these efforts as a substitute for weak regulatory and civic society pressures in these countries.
This paper demonstrates that an increase in bargaining power of Northern firms relative to that of their Southern contractors can trigger reshoring if the North-South wage differential is moderate, such that only industries with a high share of unskilled labor find outsourcing profitable. However, such an increase in Northern bargaining power can increase offshoring if the wage differential is so high that even industries with a low share of unskilled labor also offshore.
Using a newly built soft power index, we examine whether and how soft power affects Chinese firm-level export to the Belt and Road (B&R) countries from 2000 to 2016. We find that soft power has significantly positive effects on both export value and export product types for the B&R countries. These effects are more pronounced than those for non-B&R countries and differ not only between the "Belt" and the "Road" countries but also regional groups, firm ownerships, modes of trade, and sectors. Further analysis shows that soft power increases the intensive margin of exports by approximately three times that of the extensive margin. Thus, our findings provide a new perspective for understanding both the Belt and Road Initiative (BRI) and the contemporary economic evolution occurring in China.
This paper analyses total factor productivity (TFP) of China’s manufacturing sector and its decomposed indexes, i.e., technological progress and technological efficiency by employing Malmquist productivity index based on the Data Envelopment Analysis (DEA) approach. Using panel data of domestic manufacturing sector in China from 2000 to 2005, we estimate the influences of horizontal and vertical linkages on TFP and its decomposition indexes by controlling R&D and exports indexes of domestic manufacturing sector. The empirical results show that R&D and exports have a positive effect on TFP and that FDI inflows lead to positive spillovers significantly in general mainly through technological progress resulting from backward linkages; however, forward linkages have no technology spillover effect while horizontal linkages promote TFP through technological efficiency which has quite different influencing modes compared to that of backward and forward linkages. The grouping regression results also show that FDI technology spillovers have different conductive mechanisms under different technological levels, industry concentrations and export dependency indexes.
Foreign direct investment (FDI) and foreign remittance have been the main sources of external capital inflows for many developing countries. FDI has been credited as the main driver of rapid economic growth in many Asian countries/regions in recent decades. However, this effect of FDI on long-run economic growth has not been observed in Latin American countries. Now, the question is whether FDI and an increase in foreign remittances in the past two decades have achieved expected positive results in terms of economic growth for emerging economies. This study uses a generalized method of moments (GMM) dynamic panel model to quantify the impacts of FDI and foreign remittances as sources of foreign capital for Asia and Latin America. Our findings suggest that FDI and remittances perform differently in different regions in terms of their impacts on GDP growth. Countries that have specific policies (i.e., industrial policy, domestic content requirement, and export production targets) for FDI are likely to derive more significant benefits from FDI and remittances. Developing countries that are emerging or lagging should learn from the countries with positive outcomes and implement similar policies.
This paper analyzes rural revitalization under the goal of common prosperity. Firstly, on the basis of making clear what common prosperity is in the new era along with its connotation, the connotation of rural revitalization under the goal of common prosperity is systematically delved into six dimensions: subject, motivation, content, path, process, and goal. Secondly, the intrinsic relationship between common prosperity and rural revitalization is examined from the perspectives of rural revitalization, common prosperity, and development. Thirdly, grounded on theoretical analysis, this paper outlines strategic key points for rural revitalization under the goal of common prosperity upon applying designing principles to practice.
The fifth plenary session of the 19th Central Committee of the Communist Party of China (CPC) puts forward the organic combination of the implementation of the domestic demand expansion strategy with the deepening of supply-side structural reform, and scientifically reveals the internal logic of this organic combination and the realization paths, which is of great significance to the implementation of the new development concept and the construction of a new development pattern. First, this paper provides a theoretical explanation for the organic combination of the domestic demand expansion strategy with the supply-side structural reform by analyzing why the traditional policies for expanding domestic demand are ineffective in the new development stage of China. Second, this paper elaborates the internal logic of this organic combination from two aspects. (1) The base point of the domestic demand expansion strategy must be placed under the main line of the supply-side structural reform. (2) The two should be interconnected and are mutually reinforcing, so as to form a higher level of dynamic equilibrium in which the demand leads the supply and the supply creates the demand. Third, this paper analyzes the huge space for the organic combination of the domestic demand expansion strategy with the supply-side structural reform from the perspective of releasing consumption potential and creating new demand, and on that basis proposes the realization paths of their organic combination.
Along with the changes in China’s development stage and internal and external conditions, sci-tech innovation has become the core driving force for China’s high-quality economic development in the new era. From the perspective of finance-driven technological progress, this paper constructs an endogenous growth DSGE model to analyze the relationship between financial resource allocation, technological progress, and economic growth. This study proves the counter-cyclicality of technological innovation in China, and finds that the allocation of financial resources between enterprises’ productive investment and innovation investment can affect economic growth by changing the scale of factor inputs and technological progress rate, and that there is a see-saw relationship between these two effects, with the latter dominant. On that basis, this paper explains the dynamic transmission mechanism among finance, technology and economy. During the economic expansion period, enterprises expand their production scale, financial resources provide more support to productive investment, with less support to innovation investment, thus the technological progress rate goes down; and during the economic contraction period, enterprises reduce their production scale, financial resources cut support to productive investment and turn to innovation investment, so technological progress rate goes up. The implications of this study on policy are as follows: when faced with new contradictions and challenges in the current development stage, China should get a grip on the new development pattern, seize new opportunities, further deepen financial reforms, optimize the financial resource allocation mechanism, encourage innovation investment, and give full play to the role of equity markets in supporting corporate R&D and innovation. Meanwhile, coupling with prudent and moderate macro-control policies, China should provide a positive macro-environment for corporate innovation, stimulate corporate on innovation demand, promote technological progress, and boost high-quality economic development.
This paper argues that before the world started to globalize, the differences in the geographical endowments that different population faced were the most important constraints to their long-term production and consumption. The paper uses this central hypothesis to explain the sharp contrast between the flourishing Song and the stagnant Ming and Qing. During the Song dynasty, despite the fact that China lost a significant amount of arable land to invading nomads as its population peaked, China witnessed a higher urbanization level, more prosperous commerce and international trade, and an explosion of technical inventions and institutional innovations. However, after having significantly improved its man-to-land ratio in the period after the Song China only found itself induced deeper into the agrarian trap, resulting in reduced urbanization, withering foreign trade, a declining division of labor, and stagnant in technology.
Empirical research on the effect of family size on child education is complicated by the endogeneity of family size. This study exploits plausibly exogenous changes in family size caused by China’s population control policy to estimate the causal relationship between family size and child education outcomes. The results show that, compared to an only child, a person with an additional sibling will have an approximate seventeen percentage points lower likelihood of completing middle school in China. Separate regressions across individual characteristics reveal that much of this negative effect appears to be driven by the cohorts born in earlier years after the policy, and children with the highest birth order within a family.
As nutrients and sediment in agricultural watersheds continue to degrade water quality, attention is increasingly given to reverse auctions to cost-effectively address these pollutants. Typically, reverse auctions include a selection process which depends on both the monetary bid and a ranking of the environmental benefit, where the latter is often approximated using simple models, such as the Universal Soil Loss Equation (USLE). When the environmental objective is to improve water quality, the cost-effectiveness of such ranking methods cannot always be assured since simple models may poorly approximate the effects on downstream water quality. In this paper, we introduce an alternative reverse auction approach that takes advantage of richer watershed process models and optimization tools that are now much more commonly available. This “improved” reverse auction allows decision-makers to better consider the cost-effective assignment of conservation practices and to address water quality or other environmental objectives. In a spatially detailed simulation, we demonstrate how this approach can improve the design of a reverse auction for the Raccoon River Watershed in Iowa, and estimate the potential gains from using the simulation-optimization approach relative to simpler ranking methods for selecting bids. We also point out that simple bid ranking schemes may not yield sufficient nutrient reductions to achieve water quality goals but bids are easily selected to achieve any feasible water quality improvement in the “improved” auction process.
The weak enforcement and monitoring systems employed in China (e.g., insufficient inspection resources and negligible fines for noncompliance) are widely blamed for the growing unrest over food safety in the country. Given this development, we consider a model where quality inspection performed by agencies is a means of disclosing information on product quality. We analyze the price-quality equilibrium scheme and show that a higher probability of inspection leads to lower price premiums attached to qualified products. We further investigate the welfare effect of minimum quality standards and inspection efforts and show that they should be complementary. We finally suggest that a state dependent inspection strategy, such as not inspecting those firms that have previously been found to be noncompliant, will enhance social welfare.
Health insurance lowers the medical financial burden of the insured through a risk-sharing mechanism, and more importantly, reduces the motivation for precautionary saving. This paper explores the relationship between health insurance coverage and household financial portfolios. We choose 2002 urban China as a case study when the health insurance system had a problem of limited adverse selection. Using data from the 2002 Chinese Household Income Project Survey, we find that health insurance coverage influences households’ preference for financial assets, especially for the risky financial assets. These effects become more pronounced as the coverage rate of health insurance in the family increases. Our results are consistent with precautionary saving theory which suggests that future expenditure risk could affect household asset portfolios. Therefore, development of social security or a health insurance system could effectively promote the development of financial markets, especially riskier aspects of financial markets.