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Frontiers of Economics in China

, Volume 6 Issue 2

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The Impact of Job Mobility on Earnings Growth of Migrant Workers in Urban China
Qian Huang
Front Econ Chin. 2011, 6 (2): 171-187.
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Using survey data on migrant workers in urban China, this paper carries out a positive study on the impact of inner-industrial and inter-industrial job shifts on earnings growth of migrant workers. Results show that low human capital, low employment grades and low income are the most important reasons for migrant workers to switch jobs. The migrant workers who are young, unmarried new entrants with low level of education, no training and low income tend to change their jobs within the industry. And those who have high income and who find their jobs by themselves are more likely to switch jobs inter-industrially. Inner-industrial job switches have a significant positive impact on earnings growth of low-income migrant workers and a significant negative one on that of high-income migrant workers. Moreover, inter-industrial shifts have a significant negative impact on earnings growth of migrant workers of all income levels. The inner cause for the positive effect of inner-industrial shifts lie in the fact that the cumulative effect of years of service within enterprises is not obvious while continuing engagement in the same type of job within an industry will lead to accumulation of qualifications, which has a significant augmentation effect on earnings of migrant workers.

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Effective Factor Endowments, Trade Openness and Income Distribution in China
Xiaodong Lu, Guowei Cai
Front Econ Chin. 2011, 6 (2): 188-210.
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This paper studies the empirical relationship among factor endowment, trade openness and individual income distribution. Using panel data, we show that factor endowment characters, to some extent, explains income gap in China. First, land and Capital intensive provinces have a more equal income distribution while human capital and labor-intensive provinces have a less equal income distribution. Second, Trade openness has a significant effect on China’s income distribution; the interaction between a special endowment and openness has different effect on income distribution; we also show that FDI, economy development, unemployment and reform have considerable negative effect on income distribution. Our results are robust to various kinds of test.

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Intellectual Property Rights Protection and Recorded Music Sales—Focus on 26 OECD Countries Panel Data
Xingle Long
Front Econ Chin. 2011, 6 (2): 211-228.
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This thesis mainly studies the relationship between intellectual property rights protection and recorded music sales by use of 26 OECD countries panel data from 2000 to 2007. Following Png and Wang (2006), the production equation of recorded music is developed. Meanwhile, the author introduces other independent variables such as per capita GDP, employment rate and R&D, population and economic openness. The econometric methods consist of two way fixed effects method, Arellano-Bond dynamic panel-data estimation and dynamic panel-data estimation, one-step difference GMM (generalized method of moments) by use of Stata 10.0. The findings are as followings: Intellectual property rights (IPRs) protection exerts positive effect on recorded music sales, and the influencing coefficient is at the range of 0.815 to 0.915. Meanwhile, economic openness also has positive influence. The studying results suggest that IPRs protection can reinforce the sale of recorded music, and it is very urgent to enhance IPRs protection.

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Factor Function Characteristics and Origin of Economic Growth of China
Zhiqing Dong, Linhui Wang, Jia Sun
Front Econ Chin. 2011, 6 (2): 229-248.
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The paper makes an empirical study on factor contribution and its stage variation characteristics during 1952–2005 and 1978–2005 in China. GMM and OLS tests show that the robustness and significance level of the institution, the physical capital and human capital’s contributions are much higher than other factors, and 70% of economic growth is boosted by the capital and the labor input. Factor contribution decomposition and TFP growth indicate trade has the most remarkable influence on economic growth. The state space model finds that physical capital, human capital, technological progress, finance, trade and institution have different effects on economic growth in different periods. Namely, factor contribution does have the characteristics of stage variation.

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Effect of Local Government Expenditure on the Ratio of Output to Capital: Evidence from Panel Data at China’s Provincial Level
Tao Jin, Jianhui Zhang
Front Econ Chin. 2011, 6 (2): 249-270.
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This paper divides the expenditure of local government into the productive and nonproductive expenditure for revealing the effect of local government’s expenditure on output-capital efficiency through model and empirical analysis. In general, the elasticity of productive expenditure is more than that of nonproductive in a developing country. Therefore, the drawing effect of productive expenditure on economic growth is more than nonproductive one. However, the positive drawing effect of local government’s expenditure on the ratio of output to capital can be displayed only if the expenditure is within a reasonable scale. When the public expenditure has surpassed the limit, there will be a negative influence. Through our empirical analysis on current Chinese economic data, it shows that the positive drawing effect of local government productive expenditure on the ratio of output to capital is remarkable; however, the positive effect of expenditure on economic construction is critically small. In some areas, the government expenditure behavior has indirectly become the economic intervention and it reveals the negative effect and low efficiency in high speed of economic growth. It is imperative for Chinese government to improve the efficiency of economic growth by adjusting the expenditure structure of local government.

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Off-Shoring and Labor Productivity: Evidence from China
Hongbo Cai, Xiangjun Zhang
Front Econ Chin. 2011, 6 (2): 271-289.
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This paper uses input-output tables to measure material off-shoring, service off-shoring and narrow sense material off-shoring on 33 industries by use of DJ index (Daveri and Jona-Lasinio, 2008), not FH index with “the same proportion assumption” (Feenstra and Hanson, 1996). It estimates the effects of the off-shoring on labor productivity by panel data model. Our results show that, the off-shoring is generally positively associated with labor productivity, and service off-shoring has more significant effect than the material off-shoring. There are some key aspects to be discussed in detail, including: (1) the heavy industry’s material off-shoring increases obviously and service off-shoring declines in recent years, and the former’s contribution to productivity growth is less than the latter; (2) the demand of chemical industry for service off-shoring significantly increases and its positive marginal effect on productivity growth is stronger than the material because of industry transformation and upgrading; and (3) the current intensive material off-shoring of textile, equipment manufacturing industries greatly contributes to productivity growth, while the positive effect from service off-shoring on labor productivity has initially boomed. In conclusion, we provide some suggestions for further development of China’s off-shoring.

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The Impact of Rustication on Sent-Down Cohorts’ Income
Juan Yang, Shi Li
Front Econ Chin. 2011, 6 (2): 290-310.
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We estimate the impact of rustication on sent-down cohorts during the decade period of the Cultural Revolution, relying on econometric methods and policy reviewing. The data used from the Chinese Household Income Project (CHIP) for the years 1995 and 2002 show that the average income of sent-down cohorts is higher than those who were not sent-down, which seems to conflict with the human capital theory that predicts that education increases future expected returns. This paper separates the impact of ability, family background, and policies on intellectual youth and finds that their rustication had a significant negative effect for the sent-down cohorts. Correction for sent-down cohorts’ working experience from the year they went to the countryside decreases the income inequality among low-income sent-down cohorts, and compensates for the negative effects of the sent-down experience.

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Strategic Incentive in Mixed Oligopoly
Yue Shen, Youjun Xu, Jingming Hao
Front Econ Chin. 2011, 6 (2): 311-326.
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This paper develops a two stage game model with two competing firms in a mixed oligopolistic market, a public firm and a private firm, and only the public firm giving its manager an incentive contract. The paper presents three types of public firm owner’s objective function and each objective function corresponds to three types of delegation, either of a profit-revenue type, or of a relative performance, or, finally, of a market share one. In an equilibrium, the public firm owner has a dominant strategy to reward his manager with an incentive contract combining own profits and competitor’s profits. Different from Manasakis et al. (2007), this paper suggests that the dominant strategy of the public firm owner is to reward his manager with a profit-revenue type of contract or a market-share type of contract, that is to say profit-revenue is identical with market-share. Using relative-performance type of contract will move the manager away from the owner’s true objective function when the public firm owner only pursues maximizing the social welfare. The private firm will be crowded out and the public firm is the only producer of the market. Under profits-revenues type of contract, the owner’s objective of maximizing the summation of the profit and consumer surplus leads the manager more aggressive. Different combinations give us different results. By comparing the results, each type of incentive contract is an owner’s best response to his decision.

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China’s Growth Model and Structural Unbalance in the Open Economy
Wenpu Li, Min Gong
Front Econ Chin. 2011, 6 (2): 327-344.
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The Chinese economy has been significantly affected by the global financial crisis. Moreover, a rapid decline in growth rate can be mainly attributed to the expenditure structural unbalance, which takes root in its uneven national income distribution. Furthermore, the uneven national income distribution is the result of the extensive pattern of China’s economic growth in the open economy. The extensive pattern is characterized by labor-intensive export-led growth model. The need for high growth rate and fiscal revenue maximization forces local governments to compete against each other to get FDI by undervaluing production factors, resulting in the extensive pattern of growth. From an institutional point of view, uneven social power between government and public, central government and local governments, capital owners and labor force, and so on, can be viewed as the main reason for the extensive pattern of growth and uneven national income distribution. Low wage, which has been the main factor for the comparative advantage, now turns out to be barriers to boosting domestic demand. The technology lag in the manufacturing industry also has a significant negative impact on improving labor productivity and increasing per capita income. Hence, to deal with the recession, not only quantitative easing, but also structural adjustments are needed.

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