Template-Type: ReDIF-Article 1.0 Author-Name: Justin Yifu Lin Author-Email: justinlin@worldbank.org Author-Workplace-Name: The World Bank, Washington, DC 20433, USA Author-Name: Binkai Chen Author-Email: chenbinkai@gmail.com Author-Workplace-Name: School of Economics, Central University of Finance and Economics, Beijing 100083, China Title: Urbanization and Urban-Rural Inequality in China: A New Perspective from the Government*s Development Strategy Abstract: This paper offers a novel explanation for the lower urbanization rate and great urban-rural inequality in China. Our study reveals that, heavy-industry-oriented development strategy will result in lower urbanization rate and higher urban-rural inequality. The greater the degree of heavy-industryoriented development strategy is, the lower the urbanization rate is, and the higher the urban-rural inequality is. From a dynamic perspective, heavy-industryoriented development strategy reduces the capital accumulation rate, which results in a slower progress of urbanization and a highly persistent urban-rural inequality. The higher the degree of heavy-industry-oriented development strategy, the slower the progress of urbanization, and the longer the urban-rural inequality will last. This mechanism can potentially explain the lower urbanization rate and higher urban-rural inequality in China under a unified framework. Classification-JEL: O11, O14, D31 Keywords: development strategy, urbanization, urban-rural inequality Journal: Frontiers of Economics in China Pages: 1-21 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0119-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:1-21 Template-Type: ReDIF-Article 1.0 Author-Name: Omar Masood Author-Email: omar@uel.ac.uk Author-Workplace-Name: Business School, University of East London, Docklands Campus, University Way, London E16 2RD, UK Author-Name: Bruno S. Sergi Author-Email: bsergi@unime.it Author-Workplace-Name: Business School, University of Messina, Messina 98122, Italy Title: China*s Banking System, Market Structure, and Competitive Conditions Abstract: This paper presents an empirical assessment of the market structure and the competitive conditions of the Chinese banking sector. We applied the Panzar-Rosse H-statistic on the data collected from a panel including 16 most significant Chinese banks for the period 2004每2007. Equilibrium tests and the competitive conditions tests were applied on the data. From the pooled regression in the whole period, we found that the banking sector in China for 2004每2007 was monopolistically competitive. We also show that the Chinese banks were not able to achieve high records of profitability in monopolistically competitive markets. Classification-JEL:G21, D43, C51 Keywords: Panzar-Rosse H-statistic, regression, equilibrium tests, competition Journal: Frontiers of Economics in China Pages: 22-35 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0120-x File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:22-35 Template-Type: ReDIF-Article 1.0 Author-Name: Guoqing Zhao Author-Email: zhaogq@ruc.edu.cn Author-Workplace-Name: School of Economics, Renmin University of China, Beijing 100872, China Author-Name: Zhongyuan Zhang Author-Email: zhangzhy@ruc.edu.cn Author-Workplace-Name: School of Economics, Renmin University of China, Beijing 100872, China Title: Does Method Selection Matter? A New Look at FDI and Human Capital in Chinese High-Tech Industries Abstract: Using the data that comes from China Statistical Yearbook on High Technology Industry, this paper examines the human capital accumulation, the R&D expenditure and the FDI externality effects on the productivity improvement of Chinese high-tech industries. Our empirical results suggest that the effects of FDI and human capital accumulation on technological progress depend in part on the adopted approaches. We believe that the dynamic model dominates the static model estimates. This paper finds little evidence in support of technological spillovers from FDI and indicate that the technological progresses are mainly rooting in human capital accumulation other than technology spillover induced by FDI in Chinese high-tech industry. Classification-JEL: C31, O41, R11 Keywords: human capital, R&D expenditure, FDI, total factor productivity (TFP), dynamic method Journal: Frontiers of Economics in China Pages: 36-54 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0121-9 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:36-54 Template-Type: ReDIF-Article 1.0 Author-Name: Junjiang Li Author-Email: lijj@jlu.edu.cn Author-Workplace-Name: School of Economics, Jilin University, Changchun 130012, China Author-Name: Lei Hou Author-Email: lei.hou@lrz.uni-muenchen.de Author-Workplace-Name:School of Economics, Jilin University, Changchun 130012, China Author-Name: Jiarui Zhang Author-Email: jiarui.zhang@campus.lmu.de Author-Workplace-Name: Department of Economics, University of Munich, Munich 80539, Germany Title: Capital Endowment, Credit Constraint and FDI: Analysis Based on Heterogeneous Firms Abstract: To examine the impact of capital endowment and credit constraint on firms* FDI decisions, we build a model of investment portfolio based on heterogeneous firms setup. We find that financial factors matter for firms* internationalization. More capital endowment or less credit constraint lowers cutoff productivity for firms to do FDI. Classification-JEL: F23, G11, G32 Keywords: capital endowment, credit constraint, FDI, heterogeneous firms, productivity Journal: Frontiers of Economics in China Pages: 55-75 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL:http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0122-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:55-75 Template-Type: ReDIF-Article 1.0 Author-Name:Hongmei Zhao Author-Email: hongmeizhao@nankai.edu.cn Author-Workplace-Name: Institute of Econometrics and Statistics, School of Economics, Nankai University, Tianjin 300071, China Author-Name: Vincent Hogan Author-Email: vincent.hogan@ucd.ie Author-Workplace-Name: School of Economics, University College Dublin, Dublin 4, Ireland Title: Measuring the NAIRU 〞 A Structural VAR Approach Abstract: This paper calculates the NAIRU for the US in a framework that allows inflation and unemployment to be jointly endogenous. We define the NAIRU as being the component of actual unemployment that is uncorrelated with inflation in the long run. We use a structural VAR to estimate the NAIRU and core inflation simultaneously and with greater precision than most of the previous literature. Our results show that the NAIRU fell dramatically at the end of the 1990s from 6.7% before 1997 to 5.2% afterwards. Classification-JEL: E24, E25, E31 Keywords: NAIRU, inflation, unemployment, VAR Journal: Frontiers of Economics in China Pages: 76-91 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0123-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:76-91 Template-Type: ReDIF-Article 1.0 Author-Name: Vivekanand Jayakumar Author-Email: vjayakumar@ut.edu Author-Workplace-Name: Sykes College of Business, University of Tampa, Tampa, FL 33606, USA Author-Name: Barbara Weiss Author-Email: bweiss@spiipe.org Author-Workplace-Name: St. Petersburg Institute of International Political Economy, St. Petersburg, FL 33701, USA Title: Global Reserve Currency System: Why Will the Dollar Standard Give Way to a Tripolar Currency Order? Abstract:The recent financial crisis highlighted some of the underlying defects in the dollar-based reserve system. This paper argues that the era of the US hegemonic stability and unipolarity, which provided the foundation for the dollar*s sustenance as the pre-eminent global reserve currency, has already peaked and the global economy of the future will revolve around a multipolar order. The rise of China, along with other emerging markets, is rapidly redrawing the traditional Western dominated global economic system. The structural challenges facing the American economy along with the extraordinary expansion of Federal Reserve*s balance sheet and the explosion of the US government debt will diminish the attractiveness of the dollar standard going forward. Our analysis suggests that a tripolar currency order〞consisting of the dollar, the yuan and the euro〞will replace the dollar standard in the coming decades. Classification-JEL: F33, F41, F55, F59 Keywords: international monetary order, international currency, dollar, yuan Journal: Frontiers of Economics in China Pages: 92-130 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0124-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:92-130 Template-Type: ReDIF-Article 1.0 Author-Name: E Xie Author-Email: sdcyxe@sina.com Author-Workplace-Name:School of economics, Shandong University, Jinan 250100, China Title: Income-Related Inequalities of Health and Health Care Utilization Abstract: By utilizing the China Health and Nutrition Survey (CHNS) data, this paper examines the extent of deviations in terms of horizontal equity in the field of China*s health and medical community, i.e., that those in equal demand ought to be treated equally, and computes the contribution of income in health inequality and utilization inequality of health care. The main conclusions are: There is pro-rich inequality in health and utilization of health care; income contribution to inequality of health care utilization accounts for 0.13每0.2; insurance also enlarges the inequality of health care utilization; health inequality in rural area is larger than that of in urban area; and both rural and urban health inequality are increasing. From 1991 to 2006, income changes in urban districts and rural area account for 7.08% and 13.38% respectively of raising inequality of rural and urban health. Classification-JEL: I10, I18 Keywords: health inequality, inequality in health care utilization, income, concentration index, Oaxaca decomposition Journal: Frontiers of Economics in China Pages: 131-156 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL:http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0125-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:131-156 Template-Type: ReDIF-Article 1.0 Author-Name: Feng Lou Author-Email: loufeng@cass.org.cn Author-Workplace-Name: Institute of Quantitative & Technical Economics, Chinese Academy of Social Sciences, Beijing 100732, China Author-Name: Xuesong Li Author-Email: xsli@cass.org.cn Author-Workplace-Name:Institute of Quantitative & Technical Economics, Chinese Academy of Social Sciences, Beijing 100732, China Title: An Empirical Analysis of Income Disparity and Consumption in China Abstract:Using China*s provincial data from 1991 to 2005, this paper analyzes the impact of urban income disparity on their consumption based on static and dynamic panel data models and state space model. The GMM and Kalman Filter methods are used in the estimation and the variables such as income and price are controlled. The empirical results show that the elasticity of permanent income to consumption is much higher than that of temporary income; and the impact of income disparity on consumption is negative and substantial. A rise of 0.01 in the absolute value of Gini coefficient will cause a reduction of 0.35% in consumption on average. The effects fluctuate with the change of economic structure, consumption expectation and economic cycle. In the beginning years of 1990s, it is positive to enlarge income disparity moderately for consumption. It is the year of 1996 that the negative effect first appears in China. During 1998每2004, an increase of 0.01 to the absolute value of Gini coefficient will result in the reduction of consumption to fluctuate between 0.37% and 0.54%. In order to enlarge domestic demand and promote consumption, the focus should be the improvement of permanent income instead of temporary income, and the vigorous policies to reduce income disparity. Classification-JEL: C33, E25, H55 Keywords: income disparity, consumption, panel data analysis, state space model Journal: Frontiers of Economics in China Pages: 157-170 Volume: 6 Issue: 1 Year: 2011 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0126-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:157-170 Template-Type: ReDIF-Article 1.0 Author-Name: Qian Huang Author-Email: lucash@126.com Author-Workplace-Name: School of Economics, Nankai University, Tianjin 300071, China Title: The Impact of Job Mobility on Earnings Growth of Migrant Workers in Urban China Abstract: 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. Classification-JEL: E24, E25, N3 Keywords: migrant workers.job mobility.earnings growth Journal: Frontiers of Economics in China Pages: 171-187 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL:http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0127-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:171-187 Template-Type: ReDIF-Article 1.0 Author-Name: Xiaodong Lu Author-Email: nkxiaodong@126.com Author-Workplace-Name:Lingnan College, Sun Yat-sen University, Guangzhou 510275, China Author-Name: Guowei Cai Author-Email: zsucai@126.com Author-Workplace-Name: Lingnan College, Sun Yat-sen University, Guangzhou 510275, China Title: Effective Factor Endowments, Trade Openness and Income Distribution in China Abstract: 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. Classification-JEL: F2, F15, D3 Keywords: income distribution, factor endowments ,trade openness Journal: Frontiers of Economics in China Pages: 188-210 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0128-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:188-210 Template-Type: ReDIF-Article 1.0 Author-Name: Xingle Long Author-Email:longxingle@163.com Author-Workplace-Name: Department of International Trade, Chungnam National University, Daejeon 305-764, Republic of Korea Title: Intellectual Property Rights Protection and Recorded Music Sales〞Focus on 26 OECD Countries Panel Data Abstract: 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. Classification-JEL: L82, O32, O34 Keywords: intellectual property rights protection, recorded music sales, two way fixed effects method, Arellano-Bond dynamic panel-data estimation, GMM Journal: Frontiers of Economics in China Pages: 211-228 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0129-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:211-228 Template-Type: ReDIF-Article 1.0 Author-Name: Zhiqing Dong Author-Email: dongzq@jlu.edu.cn Author-Workplace-Name: Center for Quantitative Economics, Jilin University, Changchun 130012, China Author-Name: Linhui Wang Author-Email: linhuiwang73@sina.com Author-Workplace-Name: School of Economics, Northeast Normal University, Changchun 130117, China Author-Name: Jia Sun Author-Email: sunjiamakesit@hotmail.com Author-Workplace-Name: Economic Department, Changchun Taxation College, Changchun 130117, China Title: Factor Function Characteristics and Origin of Economic Growth of China Abstract: The paper makes an empirical study on factor contribution and its stage variation characteristics during 1952每2005 and 1978每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. Classification-JEL: O11, O16, O43 Keywords: factor contribution,economic growth ,comparative empirical study Journal: Frontiers of Economics in China Pages: 229-248 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0130-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:229-248 Template-Type: ReDIF-Article 1.0 Author-Name: Hongbo Cai Author-Email: hongbocai@bnu.edu.cn Author-Workplace-Name: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China Author-Name: Xiangjun Zhang Author-Workplace-Name: School of Mathematical Sciences, Beijing Normal University, Beijing 100875, China Title:Off-Shoring and Labor Productivity: Evidence from China Abstract: 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. Classification-JEL: F02, F14 Keywords: off-shoring, material off-shoring, service off-shoring, labor, productivity, industrial sector Journal: Frontiers of Economics in China Pages: 271-289 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0132-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:271-289 Template-Type: ReDIF-Article 1.0 Author-Name: Juan Yang Author-Email: yangjuan@bnu.edu.cn Author-Workplace-Name: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China Author-Name: Shi Li Author-Workplace-Name: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China Title: The Impact of Rustication on Sent-Down Cohorts* Income Abstract: 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. Classification-JEL: D31, O15, P24 Keywords: Cultural Revolution, sent-down, income distribution Journal: Frontiers of Economics in China Pages: 290-310 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0133-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:290-310 Template-Type: ReDIF-Article 1.0 Author-Name: Yue Shen Author-Email: shenyuel@xjtu.edu.cn Author-Workplace-Name: School of Economics & Finance, Xi*an Jiaotong University, Xi*an 710049, China Author-Name: Youjun Xu Author-Email: xu.you.jun@stu.xjtu.edu.cn Author-Workplace-Name: School of Economics & Finance, Xi*an Jiaotong University, Xi*an 710049, China Author-Name:Jingming Hao Author-Email: jingminghao@gmail.com Author-Workplace-Name: School of Economics & Finance, Xi*an Jiaotong University, Xi*an 710049, China Title: Strategic Incentive in Mixed Oligopoly Abstract: 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. Classification-JEL: D43, L13, L21 Keywords: delegation, market share, relative performance, partial privatization Journal: Frontiers of Economics in China Pages: 311-326 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0134-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:311-326 Template-Type: ReDIF-Article 1.0 Author-Name: Wenpu Li Author-Email: wpli@xmu.edu.cn Author-Workplace-Name: Center for Macroeconomic Research, Xiamen University, Xiamen 361005, China Author-Name: Min Gong Author-Email: mgong@xmu.edu.cn Author-Workplace-Name: Center for Macroeconomic Research, Xiamen University, Xiamen 361005, China Title: China*s Growth Model and Structural Unbalance in the Open Economy Abstract: 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. Classification-JEL: F43, N1, O47, R11 Keywords: uneven expenditure, structure of national income, extensive pattern of economic growth, economic structural adjustment Journal: Frontiers of Economics in China Pages: 327-344 Volume: 6 Issue: 2 Year: 2011 Month: June File-URL:http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0135-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:2:p:327-344 Template-Type: ReDIF-Article 1.0 Author-Name: Guoqiang Tian Author-Email: gtian@tamu.edu Author-Workplace-Name: Department of Economics, Texas A&M University, College Station, TX 77843, USA School of Economics and Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China Title: On Deep-Rooted Problems in China*s Economy Abstract: China*s economy is currently at a crossroad leading to two different directions. One is to further deepen the reform, concentrate on crucial aspects and relax control over details, govern by non-intervention and let the market play an increasing role and lead the economy; while the other is to enhance the state sector with weakening the private sector, and let the government play a greater role and lead the economy. Which direction should China head for? The answer would undoubtedly be the former. As such, this paper argues that there does not exist the so-called ※China Model§ and attributes the deep-seated problems caused by those misconceptions in China*s economy to three pairs of ※over-emphasis§ versus ※under-emphasis§, namely, over-emphasis on the government versus under-emphasis on the market, over-emphasis on enriching state versus under-emphasis on enriching the people, and over-emphasis on development versus under-emphasis on public service. Moreover, in regard to how to solve these problems, the paper proposes to further advance the two fundamental transformations of government functions: (1) to transform from a development-oriented government to a service-oriented government, and (2) to transform from an omnipotent government to a limited government. Classification-JEL: E61, O20 Keywords: government versus market, enriching state versus enriching the people, development versus public service, government functions Journal: Frontiers of Economics in China Pages: 345-358 Volume: 6 Issue: 3 Year: 2011 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0137-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:3:p:345-358 Template-Type: ReDIF-Article 1.0 Author-Name: Kevin X. D. Huang Author-Email: kevin.huang@vanderbilt.edu Author-Workplace-Name: Department of Economics, Vanderbilt University, Nashville, TN 37235, USA Author-Name: Frank Caliendo Author-Workplace-Name: Department of Economics, Utah State University, Logan, UT 84322, USA Title:Rationalizing Multiple Consumption-Saving Puzzles in a Unified Framework Abstract: Empirical evidence suggests that it may cost time, effort, and resources to implement an optimal consumption-saving plan, although the cost may differ across individuals. This paper explores the implications of such friction. We begin by documenting a series of facts on consumption and savings over the life cycle, each of which goes against the prediction of the standard life-cycle model. While the existing studies demonstrate how various permutations of the benchmark model may help resolve one or another of these puzzles, it appears difficult to jointly rationalize even a small subset of these facts within the existing theories. We then incorporate a feature of costly implementation into the benchmark model and show that the addition of this one feature moves in the right direction in jointly resolving all these puzzles. This friction is the sole and common mechanism in our model for rationalizing this series of facts, as we intentionally abstract from the mechanisms explored in the existing literature that are known to help explain one or another of these facts, in order to isolate the role of costly implementation. The implementation costs in the model are small, yet our results show that the mechanism can be important in complementing the existing theories to help account for these consumption and saving facts in a unified framework. Classification-JEL: C61, D91, E21 Keywords: implementation cost, heterogeneity, consumption, saving, life cycle Journal: Frontiers of Economics in China Pages: 359-388 Volume: 6 Issue: 3 Year: 2011 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0138-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:3:p:359-388 Template-Type: ReDIF-Article 1.0 Author-Name:Jun Chen Author-Email: jun.chen@hrsdc-rhdcc.gc.ca Author-Workplace-Name: Department of Human Resources and Skills Development, Government of Canada, Ottawa K1A 0J9, Canada Author-Name: Zhiqi Chen Author-Email: z_chen@carleton.ca Author-Workplace-Name:Department of Economics, Carleton University, Ottawa K1S 5B6, Canada Title: The Quiet Life of a Monopolist: The Efficiency Losses of Monopoly Reconsidered Abstract: We study the efficiency losses of monopoly in a model where the firm*s total cost of production decreases with the manager*s effort to control cost. In contrast to the existing analyses of oligopolistic and monopolistically competitive markets that find an ambiguous relationship between competition intensity and managerial slack, we demonstrate that, under the same kind of cost condition, monopoly unambiguously reduces effort level and, in the case where ownership and control are separate, magnifies the effects of the moral hazard problem. Furthermore, under an alternative cost condition monopoly raises effort level rather than reducing it. In such a situation the separation of ownership and control may mitigate the productive inefficiency of monopoly. Classification-JEL: L1 Keywords: monopoly, efficiency losses, principal-agent problem Journal: Frontiers of Economics in China Pages: 389-412 Volume: 6 Issue: 3 Year: 2011 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0139-z File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:3:p:389-412 Template-Type: ReDIF-Article 1.0 Author-Name: Jianghuai Zheng Author-Email:zhengjh@nju.edu.cn Author-Workplace-Name: School of Economics, Nanjing University, Nanjing 210093, China Yangtze River Delta Research Center on Economic and Social Development, Nanjing University, Nanjing 210093, China Author-Name: Lili Zhang Author-Workplace-Name: School of Economics, Nanjing University, Nanjing 210093, China Author-Name:Yu Wang Author-Workplace-Name: School of Economics, Nanjing University, Nanjing 210093, China Title: The Underdevelopment of Service Industry in China: An Empirical Study of Cities in Yangtze River Delta Abstract: The service industry in China is underdeveloped, in comparison with not only the past experience of developed countries at the similar level of GDP per capita, but also other similar developing countries at present. We define this deviation of China*s service industry from the development trend in other countries as the ※development deviation puzzle,§ and propose a conceptual framework based on the ※manufacturing cost disease§ hypothesis to understand the reasons behind this puzzle. We test our hypothesis using the data from the urban cluster in Yangtze River Delta. The results indicate that labor productivity growth in service industry is driven by capital investment and the ※development deviation puzzle§ is indeed rooted in the ※manufacturing cost disease.§ Our analysis suggests that, to correct the underdevelopment of service industry, the strategy of investment-driven industrialization and urbanization must be changed. Expansion of producer services is important in increasing the intensities of human capital and foreign investment. Classification-JEL: L80, L90, L98 Keywords: service sector, manufacturing sector, cost disease, labor productivity, economic development Journal: Frontiers of Economics in China Pages: 413-446 Volume: 6 Issue: 3 Year: 2011 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0140-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:3:p:413-446 Template-Type: ReDIF-Article 1.0 Author-Name: Kunrong Shen Author-Email: shenkr@nju.edu.cn Author-Workplace-Name:School of Economics, Nanjing University, Nanjing 210093, China Author-Name: Jixiang Yu Author-Email: yvjx@163.com Author-Workplace-Name: Economy and Trade Department, Anhui Science and Technology University, Fengyang 233100, China Author-Name:Jian Li Author-Email: lijiansid@gmail.com Author-Workplace-Name: School of Economics, Nanjing University, Nanjing 210093, China Title: Labor Mobility, Marketization and Urban Income Change: Potential Rural-Urban Harmonization or Not Abstract: Previous literature omitted marketization process, a distinct phenomenon in transitional China, when the relationship between immigrants and indigenous urban income is investigated. We find that (1) marketization is a key factor of rural-urban harmonization; (2) segmentation of labor market has no real effect on urban income change since it may be evaded partly by rural labor; (3) the key determinants of urban income change are the cross effect between marketization and mobility, openness, and government spending; and (4) the marginal effect of immigrants is positive in some regions although it is averagely negative during the sample period. Rural-urban harmonization is totally possible if marketization process continues. Classification-JEL: F22, J31, J61, R0 Keywords: labor mobility, urban income, marketization, segmentation, rural- urban harmonization Journal: Frontiers of Economics in China Pages: 447-463 Volume: 6 Issue: 3 Year: 2011 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0141-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:3:p:447-463 Template-Type: ReDIF-Article 1.0 Author-Name: Yaojun Yao Author-Email: yaoyaojun@163.com Author-Workplace-Name: College of Finance, Zhejiang Gongshang University, Hangzhou 310018, China Title: International Trade and Technological Progress in China: Evidence from Time Series Abstract: Using annual time series data (1983-2007), this paper examines the nexus between international trade and technological progress in China. The time series properties of the data are analyzed by bounds testing approach and vector error-correction model. The empirical results show that, it is not international trade volume and export trade volume but the import trade volume that is cointegrated with total factor productivity. The paper also finds that, in the long run, there is a reciprocal Granger causal relationship between the change of import trade volume and the change of total factor productivity, and in the short run, there is no evidence to support the Granger causality between these changes of the two variables. Classification-JEL: F14, O30, O47 Keywords: international trade, total factor productivity, bounds testing approach, vector error-correction model Journal: Frontiers of Economics in China Pages: 464-478 Volume: 6 Issue: 3 Year: 2011 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0142-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:3:p:464-478 Template-Type: ReDIF-Article 1.0 Author-Name: Hongjin Xiang Author-Email: xhjin2006@163.com Author-Workplace-Name: School of Economy & Trade, Hunan University, Changsha 410079, China Author-Name: Zheng Zhan Author-Workplace-Name: School of Economics and Finance, Xi*an Jiaotong University, Xi*an 710049, China Author-Name: Mingyong Lai Author-Email: laimingyong@126.com Author-Workplace-Name: School of Economy & Trade, Hunan University, Changsha 410079, China Title: The Trade Destruction Effect and Trade Diversion Effect of RMB Appreciation Abstract: This paper examines how Chinese RMB appreciation affects China and its competitor*s exports to the third market at industry level. We develop a two-country competition model to analyze the trade destruction effect and trade diversion effect of RMB appreciation. The theoretical analysis shows that the appreciation of RMB has negative impacts on China*s exports and positive impacts on its competitor*s exports. We then empirically test how the appreciation of RMB to the US dollar affects China*s and India*s textiles and apparel exports to the US from 1995Q1 to 2008Q4. The empirical results show that an 1% appreciation of RMB to US dollar will reduce China*s exports of textiles & apparel to the U.S. by 2.63% and raise the India*s exports of textiles & apparel to the U.S. by 2.71%. Classification-JEL: F14, F31 Keywords: RMB appreciation, trade destruction effect, trade diversion effect, cointegration Journal: Frontiers of Economics in China Pages: 479-493 Volume: 6 Issue: 3 Year: 2011 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0143-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:3:p:479-493 Template-Type: ReDIF-Article 1.0 Author-Name: Chunrong Ai Author-Email: chunrongai@hotmail.com Author-Workplace-Name: School of Statistics and Management, Shanghai University of Finance and Economics, Shanghai 200433, China; Department of Economics, University of Florida, Gainesville, FL 32611, USA Author-Name: Meixia Meng Author-Workplace-Name: School of Statistics and Management, Shanghai University of Finance and Economics, Shanghai 200433, China Title: A Locally Linear Estimation of Regression Discontinuity Abstract: In this paper, we propose a locally linear estimation of a regression discontinuity model. The proposed estimator is applicable to evaluation of the effectiveness of the program treatment, and it improves upon the existing literature by providing not just the treatment effect at discontinuity but also insight of the treatment effect on those near discontinuity. Under some familiar conditions, we establish the consistency and asymptotic normality of the proposed estimator. We also provide an easy to compute consistent covariance matrix. Classification-JEL: C14, C22 Keywords: Regression discontinuity, treatment effect, local linear, consistency, asymptotic normality Journal: Frontiers of Economics in China Pages: 495-506 Volume: 6 Issue: 4 Year: 2011 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0144-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:4:p:495-506 Template-Type: ReDIF-Article 1.0 Author-Name: Guanzhong James Wen Author-Email: james.wen@trincoll.edu Author-Workplace-Name: Department of Economics, Trinity College, Hartford CT06106, USA Title: Why Was China Trapped in an Agrarian Society? An Economic Geographical Approach to the Needham Puzzle Abstract: 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. Classification-JEL: N15, O31, R12 Keywords:Needham puzzle, geographical endowment, Heckscher-Ohlin model Journal: Frontiers of Economics in China Pages: 507-534 Volume: 6 Issue: 4 Year: 2011 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0145-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:4:p:507-534 Template-Type: ReDIF-Article 1.0 Author-Name: Ding Lu Author-Email: ding.lu@ufv.ca Author-Workplace-Name: Department of Economics, University of the Fraser Valley, Abbotsford, BC V2S 7M8, Canada Title: Transition of China*s Growth Pattern Abstract: China has achieved hyper economic growth in the past three decades. The achievement, though spectacular, is nothing incomprehensible to modern economic theories. A number of characteristic factors, short-term or long-term, have been favorable to fast growth. The market-oriented reforms that started thirty years ago have installed the preconditions for the economy to benefit from these factors. As China rises to the rank of middle-income countries, some conditions that used to support fast economic growth are now undergoing profound changes. These changes have important implications on capital formation and productivity growth, the two major drivers of growth. With the era of hyper economic growth coming to its end, the growth pattern of the Chinese economy is in transition. That calls for a transformation of government*s role in the economy to answer the challenges of this transition. Classification-JEL: J21, O11, O12 Keywords: economic growth, transition, labor, capital, TFP, China Journal: Frontiers of Economics in China Pages: 535-555 Volume: 6 Issue: 4 Year: 2011 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0146-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:4:p:535-555 Template-Type: ReDIF-Article 1.0 Author-Name: John Berdell Author-Email: qdong@depaul.edu Author-Workplace-Name: Department of Economics, College of Commerce, DePaul University, Chicago, IL 60604, USA Author-Name: Qi Hong Dong Author-Workplace-Name: Department of Economics, College of Commerce, DePaul University, Chicago, IL 60604, USA Title: Developmental Aspects of China*s Trade Pattern: The Role of Imported Intermediate Goods Abstract: This paper studies the relationship between China*s trade and its economic development. More than two centuries ago Adam Smith argued that it is the use of imported intermediate goods that constitutes the vector through which openness improves productivity. Imported intermediate goods can relieve what would otherwise be key constraints allowing faster growth, together with better human development. While China*s trade reform is often related to its productivity growth, there has been remarkably little attention to the relationship between imports and productivity growth at the industry-sectoral level. Our paper examines the sector-specific impact of intermediate goods utilizing a time series for the share of imported intermediate goods in each sector derived from our model calculations. Our study indicates that imported intermediate goods are playing an important role in the growth of Chinese productivity. Classification-JEL: F15, O19, F23, L60 Keywords: intermediate goods, vertical specialization, total productivity growth, international linkages to development Journal: Frontiers of Economics in China Pages: 556-567 Volume: 6 Issue: 4 Year: 2011 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0147-z File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:4:p:556-567 Template-Type: ReDIF-Article 1.0 Author-Name: Yuanyuan Chen Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Shuaizhang Feng Author-Email:shuaizhang.feng@gmail.com Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Title: Parental Education and Wages: Evidence from China Abstract: This paper investigates the relationship between parents* education and children*s wage using two nationally representative data sets in China. Controlling for other things, both father*s and mother*s education are positively correlated with children*s wage. Nevertheless, returns to father*s education are lower in more market-oriented segments of the economy, including coastal regions, the non-state sector, and the later period of the reform era (post-1992), while the opposite is true for mother*s education. We argue that this new empirical evidence is consistent with the story that father*s education mainly indicates family connections useful for locating a better-paying first job, while mother*s education primarily captures unmeasured ability. Classification-JEL: J30, J62, J42 Keywords: parental education, wages, family connections, unmeasured ability Journal: Frontiers of Economics in China Pages: 568-591 Volume: 6 Issue: 4 Year: 2011 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0148-y File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:4:p:568-591 Template-Type: ReDIF-Article 1.0 Author-Name: Jingkui Zhou Author-Email: zjk2004@nankai.edu.cn Author-Workplace-Name: Institute of Economics, School of Economics, Nankai University, Tianjin 300071, China Title: Climate Change, Health and Migration in Urban China Abstract: In this paper, I empirically investigate the effect of climate change on health and migration in China. Using urban survey data sets from different Chinese cities, I find that an increase in female morbidity is associated with current high temperature change, especially for the symptom of frailty; past hot weather is related to the exacerbation of health problems in women, and the effect on females is larger than that on males who migrate from rural areas to cities; past temperature change is also correlated with a higher probability of chronic symptoms for females. I also find that migration preference from a rural area to a city is correlated with avoiding exposure to hot weather shocks, which shows a regressive tendency. Finally, the migration preferences of male residents who migrate from one city to another city are not associated with the effects of past low temperature changes on health Classification-JEL: R23, I18, Q54 Keywords: climate change, temperature change, health, migration Journal: Frontiers of Economics in China Pages: 592-615 Volume: 6 Issue: 4 Year: 2011 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0149-x File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:4:p:592-615 Template-Type: ReDIF-Article 1.0 Author-Name: Haiwen Zhou Author-Email: hzhou@odu.edu Author-Workplace-Name: Department of Economics, Old Dominion University, Norfolk, VA 23529, USA Title: Confucianism and the Legalism: A Model of the National Strategy of Governance in Ancient China Abstract: The Confucian school emphasizes family value, moral persuasions, and personal relations. Under Confucianism, there is a free-rider issue in the provision of efforts. Since national officials are chosen through personal relations, they may not be the most capable. The Legalist school emphasizes the usage of incentives and formal institutions. Under the Legalism, the ruler provides strong incentives to local officials which may lead to side effects because some activities are noncontractible. The cold-blood image of the Legalism may alien citizens. By exploiting the paternalistic relationship between the ruler and the ruled under Confucianism and the strength of institution-building under the Legalism, the ruler may benefit from a combination of Confucianism approach and the Legalism approach as the national strategy of governance. As each strategy has its pros and cons, which strategy of is optimal depends on factors such as the minimum enforceable level of public service and the level of institution building costs. Classification-JEL: N45, H10, A10 Keywords: Confucianism, Legalism, national strategy of governance, ancient China, incentive provision, culture Journal: Frontiers of Economics in China Pages: 616-637 Volume: 6 Issue: 4 Year: 2011 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0150-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:6:y:2011:i:4:p:616-637