Template-Type: ReDIF-Article 1.0 Author-Name: Jinhua Zhao Author-Email: jzhao@msu.edu Author-Workplace-Name: Department of Economics; Department of Agriculture, Food and Resource Economics; Environmental Science and Policy Program, Michigan State University, East Lansing, MI 48824, USA; Institute for Advanced Studies, Shanghai University of Finance and Economics, Shanghai 200433, China Title: Environmental Economics and Policy: Two Way Learning between China and the Rest of the World Journal: Frontiers of Economics in China Pages: 1-5 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0001-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:1-5 Template-Type: ReDIF-Article 1.0 Author-Name: Larry Karp Author-Email: karp@berkeley.edu Author-Workplace-Name: Agricultural and Resource Economics Department, University of California, Berkeley. Berkeley,CA 94720-3310, USA Title: Overlapping Generations and Environmental Policy: An Introduction Abstract: A small but growing body of literature uses overlapping generations (OLG) models to study environmental policy for long-lived problems such as climate change. An OLG model, unlike the infinitely lived representative agent model, distinguishes between impatience with respect to one’s own future utility, and attitudes toward successors' utility. I discuss the problem of time inconsistency, the role of Markov perfection, and show that a class of OLG models can be studied using methods developed to analyze models of non-constant discounting. An example illustrates the techniques and determines the conditions underwhich, in equilibrium, there is under-investment or over-investment in natural capital. Classification-JEL: C73, D62, D63, D64, H41, Q54 Keywords: overlapping generations, climate policy, time consistency, Markov perfection,under-investment Journal: Frontiers of Economics in China Pages: 6-24 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0002-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:6-24 Template-Type: ReDIF-Article 1.0 Author-Name: S. S. Rabotyagov Author-Email: rabotyag@uw.edu Author-Workplace-Name: School of Forest Resources, University of Washington, Seattle, WA 98195-2100, USA Author-Name: A. Valcu Author-Email: amvalcu@iastate.edu Author-Name: C. L. Kling Author-Email: ckling@iastate.edu Author-Workplace-Name: Department of Economics, Iowa State University, Ames, IA 50011, USA Author-Name: T. Campbell Author-Email: tdc@iastate.edu Author-Name: P. W. Gassman Author-Email: pwgassma@iastate.edu Author-Workplace-Name: Centre for Agriculture and Rural Development, Iowa State University, Ames, IA 50011, USA Author-Name: M. Jha Author-Email: mkjha@ncat.edu Author-Workplace-Name: College of Engineering, North Carolina A&T State University, Greensboro, NC 27411, USA Title: An Improved Reverse Auction for Addressing Water Quality in Agricultural Watersheds Using Coupled Simulation-Optimization Models Abstract: 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. Classification-JEL: C78, D44, Q25 Keywords: water quality, multiobjective optimization, reverse auctions, cost-effectiveness, agricultural nonpoint-source pollution, simulation-optimization approaches Journal: Frontiers of Economics in China Pages: 25-51 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0003-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:25-51 Template-Type: ReDIF-Article 1.0 Author-Name: Ujjayant Chakravorty Author-Email: ujjayant.chakravorty@tufts.edu Author-Workplace-Name: Department of Economics, Tufts University, Medford, MA 02155-6722, USA Author-Name: Marie-Helene Hubert Author-Email: marie-helene.hubert@univ-rennes1.fr Author-Workplace-Name: CREM, University of Rennes I, 35042 Rennes Cedex 7, France Author-Name: Michel Moreaux Author-Email: michel.moreaux@tse-fr.eu Author-Workplace-Name: Toulouse School of Economics, 31015 Toulouse Cedex 6, France Title: Land Allocation between Food and Energy Abstract: Many countries are promoting biofuels as a substitute for scarce oil. This paper develops a dynamic model of land allocation between food and energy and shows how the model can be calibrated using standard optimization techniques. Some possible implications of the trade-offs between food and energy are discussed. Specifically, we show that the effect of mandates is mainly felt through increased land conversion, which increases indirect carbon emissions. Crude oil prices do not decrease significantly because of leakages. Classification-JEL: N50, Q18, Q38, Q42 Keywords: biofuel, food, energy, land allocation, mandate Journal: Frontiers of Economics in China Pages: 52-69 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0004-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:52-69 Template-Type: ReDIF-Article 1.0 Author-Name: Maximilian Auffhammer Author-Email: auffhammer@berkeley.edu Author-Workplace-Name: Agricultural and Resource Economics Department, University of California, Berkeley. Berkeley,CA 94720-3310, USA; National Bureau of Economic Research (NBER) Title: Cooling China: The Weather Dependence of Air Conditioner Adoption Abstract: 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. Classification-JEL: Q4 Keywords: climate change, air conditioning, weather Journal: Frontiers of Economics in China Pages: 70-84 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0005-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:70-84 Template-Type: ReDIF-Article 1.0 Author-Name: Chih-Chen Liu Author-Email: ccliu@nuk.edu.tw Author-Workplace-Name: Department of Applied Economics, National University of Kaohsiung, Kaohsiung 81148, Taiwan, China Author-Name: Joseph A. Herriges Author-Email: jaherrig@iastate.edu Author-Name: C. L. Kling Author-Email: ckling@iastate.edu Author-Workplace-Name: Department of Economics, Iowa State University, Ames, IA 50011, USA Author-Name: Silvia Secchi Author-Email: ssecchi@siu.edu Author-Workplace-Name: Department of Agribusiness Economics, Southern Illinois University, Carbondale, IL 62901, USA Author-Name: Joan I. Nassauer Author-Email: nassauer@umich.edu Author-Workplace-Name: School of Natural Resources and Environment, University of Michigan, Ann Arbor, MI 48103, USA Author-Name: Daniel J. Phaneuf Author-Email: dphaneuf@wisc.edu Author-Workplace-Name: Department of Agricultural and Applied Economics, University of Wisconsin, Madison, WI 53706, USA Title: A Comparison of Value Elicitation Question Formats in Multiple-Good Contingent Valuation Abstract: This paper provides a convergent validity test of two types of multinomial choice questions vis-à-vis a dichotomous choice question by formally testing whether these stated preference elicitation question formats provide comparable welfare estimates. In particular, a dichotomous choice question, a traditional multinomial choice question, and a modified multinomial choice question suggested by Carson and Groves (2007) were applied in split samples to assess the influence of the informational and incentive properties on the respondents’ annual willingness to accept compensation for adopting costly conservation practices in agriculture that benefit the environment. Our findings suggest that the two multinomial choice question formats elicit a similar mean willingness to accept distributions, but they are both different from a standard dichotomous choice question. Further, the willingness to accept distributions derived from the multinomial choice question formats are more dispersed than those from the dichotomous choice question. Classification-JEL: C78, Q24 Keywords: stated preference, choice experiment, dichotomous choice, incentive compatibility, multinomial choice Journal: Frontiers of Economics in China Pages: 85-108 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0006-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:85-108 Template-Type: ReDIF-Article 1.0 Author-Name: Jijun Tan Author-Workplace-Name: Research Institute for Economics and Management, Southwest University of Finance and Economics, Chengdu 610074, China Author-Name: Jinhua Zhao Author-Email: jzhao@msu.edu Author-Workplace-Name: Department of Economics; Department of Agriculture, Food and Resource Economics; Environmental Science and Policy Program, Michigan State University, East Lansing, MI 48824, USA; Institute for Advanced Studies, Shanghai University of Finance and Economics, Shanghai 200433, China Title: The Value of Clean Air in China: Evidence from Beijing and Shanghai Abstract: We estimate the willingness to pay (WTP) of Beijing and Shanghai residents for improving the air quality of the two cities from their levels prior to the 2008 Beijing Olympic Games to the level achieved during the Olympics. The data are obtained from a contingent valuation study conducted through face-to-face interviews in June 2008 in Beijing and Shanghai prior to the Beijing Olympics, during which time there was intensive debate about Beijing’s air quality. Residents in both cities are willing to pay more when they are more exposed to air pollution, when their disposable income increases, and when they have stronger beliefs that public opinion plays an important role in government policy making. Beijing residents are willing to pay more than Shanghai residents, due possibly to Beijing’s poorer air quality. Overall, aggregate WTP for air quality improvement accounts for about 0.53% of the 2008 GDP in Beijing and 0.22% of the 2008 GDP in Shanghai. Classification-JEL: K32, Q25 Keywords: contingent valuation, Beijing Olympic Games, air quality Journal: Frontiers of Economics in China Pages: 109-137 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0007-9 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:109-137 Template-Type: ReDIF-Article 1.0 Author-Name: Madhu Khanna Author-Email: khanna1@illinois.edu Author-Workplace-Name: Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign. Urbana, IL 61801, USA Author-Name: Yuan Liao Author-Email: liao26@illinois.edu Title: Globalization and Voluntary Environmental Management in Developing Countries Abstract: 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. Classification-JEL: Q56 Keywords: voluntary programs, ISO 14001, public disclosure programs, foreign direct investment, export-oriented firms Journal: Frontiers of Economics in China Pages: 138-163 Volume: 9 Issue: 1 Year: 2014 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0008-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:1:p:138-163 Template-Type: ReDIF-Article 1.0 Author-Name: Hongtao Guo Author-Workplace-Name: Bertolon School of Business, Salem State University, Salem, MA 01970, USA Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-Workplace-Name: Department of Economics, Boston College, Chestnut Hill, MA 02467, USA Title: A Note on Covariance Matrix Estimation in Quantile Regressions Abstract: This note discusses some issues related to bandwidth selection based on moment expansions of the mean squared error (MSE) of the regression quantile estimator. We use higher order expansions to provide a way to distinguish among asymptotically equivalent nonparametric estimators. We derive approximations to the (standardized) MSE of the covariance matrix estimation. This facilitates a comparison of different estimators at the second order level, where differences do occur and depend on the bandwidth choice. A method of bandwidth selection is defined by minimizing the second order effect in the mean squared error. Classification-JEL: C14 Keywords: bandwidth selection, expansion, quantile regression Journal: Frontiers of Economics in China Pages: 165-173 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0009-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:165-173 Template-Type: ReDIF-Article 1.0 Author-Name: Wei Hu Author-Workplace-Name: Division of Human Resources, Ministry of Education of PRC, Beijing 100816, China Author-Name: Feng Li Author-Email: sf666@139.com Author-Workplace-Name: School of Securities and Futures, Southwest University of Finance and Economics, Chengdu 610074, China Author-Name: Li Gan Author-Workplace-Name: Department of Economics, Texas A&M University, College Station, TX 77843, USA Title: Does China’s National College Entrance Exam Effectively Evaluate Applicants? Abstract: Based on micro-level student data from one Chinese academic institution, we study the validity of the national college entrance exam from the perspective of student performance in college and employment prospects after graduation. We find that the current college entrance exam could reflect the students’ learning ability to a certain degree, providing a relatively valid evaluation. Demonstration of well-rounded development ability should be an important factor in the evaluation system. Based on our empirical results, we give some suggestions for college entrance exam reform. Classification-JEL: C25, I28 Keywords: national college entrance exam, evaluation validity, empirical analysis Journal: Frontiers of Economics in China Pages: 174-182 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0010-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:174-182 Template-Type: ReDIF-Article 1.0 Author-Name: Hua Wang Author-Workplace-Name: Development Research Group, The World Bank, Washington, DC 20433, USA Author-Name: Jie He Author-Email: Jie.HE@USherbrooke.ca Author-Workplace-Name: Département d’économique, Université de Sherbrooke, Sherbrooke, QC J1K2R1, Canada Title: Estimating the Economic Value of Statistical Life in China: A Study of the Willingness to Pay for Cancer Prevention Abstract: This paper reports the results of a Contingent Valuation (CV) study on cancer prevention where Multiple-Bounded Dichotomous Choice (MBDC) questions are asked of rural residents in China about their willingness to pay (WTP) for a hypothetical cancer vaccine which is expected to be effective for one year. The WTP data are analyzed with region-, age- and gender-specific cancer morbidity and mortality risk statistics; an upper and lower bound of the Value of a Statistical Life (VSL) are then estimated. The estimated VSL is between 481 and 814 thousand yuan (or 58 and 98 thousand US dollars) at 2000 constant prices, which is compatible with the results of previous studies. Classification-JEL: Q51, J17, N35 Keywords: cancer vaccine, contingent valuation, WTP, MBDC format, VSL, rural China Journal: Frontiers of Economics in China Pages: 183-215 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0011-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:183-215 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: Intermediate Inputs and External Economies Abstract: Is the degree of external economies (at the industry level) higher than the degree of internal increasing returns (at the firm level)? If so, what is the exact source of this difference? In the general equilibrium model in which firms producing final goods choose the degree of specialization of their technologies, external economies arise from the usage of intermediate inputs and the existence of internal increasing returns. It is frequently assumed that increasing returns are absent at the firm level while present at the industry level. In this model, the existence of increasing returns at the firm level is necessary for the existence of external economies at the industry level. We show that the degree of external economies increases with the level of linkage effects. However, a higher linkage effect does not always lead firms to choose more specialized technologies. Classification-JEL: F10, L10, R10 Keywords: external economies, internal increasing returns, linkage effects, choice of technology, oligopolistic competition Journal: Frontiers of Economics in China Pages: 216-239 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0012-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:216-239 Template-Type: ReDIF-Article 1.0 Author-Name: Liguo Lin Author-Email: lin.liguo@mail.shufe.edu.cn Author-Name: Lan Yao Author-Email: yao.lan@mail.shufe.edu.cn Author-Workplace-Name: School of Economics; Key Laboratory of Mathematical Economics (MOE), Shanghai University of Finance and Economics, Shanghai 200433, China Title: Inspections and Information Disclosure: Quality Regulations with Incomplete Enforcement Abstract: 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. Classification-JEL: G18, K42 Keywords: food safety, information disclosure, quality regulation, incomplete enforcement Journal: Frontiers of Economics in China Pages: 240-260 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0013-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:240-260 Template-Type: ReDIF-Article 1.0 Author-Name: Hao Chen Author-Email: hchen1987@163.com Author-Workplace-Name: Institute of International Economy, University of International Business and Economics, Beijing 100029, China Author-Name: Jianwei Chen Author-Email: chenjianwei04@aliyun.com Author-Workplace-Name: MOE-UIBE of Education and Economy Research, University of International Business and Economics, Beijing 100029, China Title: The Gender-Biased Employment Effect of Exports: Evidence from China Abstract: Traditional international trade theories believe export trade has a positive effect on employment, which means exports would increase the level of employment with no difference between genders. Based on enterprise heterogeneity, however, the new-trade theories doubt this conclusion. Using the Chinese industrial enterprise database (2006–2009), this paper re-examines the relationship between export volume and the level of employment, and discusses different effects of exports on the employment of different genders. We find that although exports increase the total level of employment, enterprises’ exports have a prominent negative effect on the employment of women. This proves that it is hard to optimize employment structure through the promotion of foreign trade, even if it improves the overall level of employment. Classification-JEL: C51, E24, F16 Keywords: screening-matching model, enterprise heterogeneity, gender differences Journal: Frontiers of Economics in China Pages: 261-284 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0014-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:261-284 Template-Type: ReDIF-Article 1.0 Author-Name: Qianjin Lu Author-Email: qjlu@fudan.edu.cn Author-Workplace-Name: Department of International Finance, Fudan University, Shanghai 200433, China Title: Weights and Empirical Analysis of RMB Exchange Rate Adjustments with Reference to a Basket of Currencies Following the Exchange Rate System Reform of 2010 Abstract: This paper constructs an RMB/USD exchange rate index and a basket currency exchange rate index. The correlation maximization of the RMB/USD and the basket currency index may determine the weight and quantity of the basket currency. The currency basket indicates that the weight of the USD is highest, whereas that of the GB Pound is the lowest. Our currency basket has a high linear dependence on that of the central bank. We found that the RMB/USD and currency basket indices have a long-term co-integration relationship according to the optimal currency weights. The results of the error-correcting model manifest as the RMB/USD exchange rate deviates from the long-term equilibrium level, wherein 76.3% will be corrected. This paper checks the prediction capacity, which indicates the good fit of the model. By using the Granger causality test the findings show that the People’s Bank of China adjusts the RMB/USD exchange rate with reference to the currency basket. Classification-JEL: F31, F33, F47 Keywords: currency basket, new exchange rate system reform, currency weight and quantity Journal: Frontiers of Economics in China Pages: 285-308 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0015-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:285-308 Template-Type: ReDIF-Article 1.0 Author-Name: Chunjin Chen Author-Email: chenchunjin2009@163.com Author-Workplace-Name: Institute of Economics and Education, Beijing Normal University, Beijing 100875, China Author-Name: Shi Li Author-Email: lishi@bnu.edu.cn Author-Workplace-Name: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China Title: Market Transition and Income Inequality in Urban China: Evidence from Shapley Value Decomposition Abstract: China’s market-oriented reform is expected to strengthen the role of the market in allocating resources, which raises concerns over the impact of market transformation on income distribution and earnings inequality in the past decades. This paper decomposes the sources of inequality based on the newly developed Shapley value approach and examines the contributions of the market, along with other nonmarket factors, to total inequality. Using the China Health and Nutrition Survey data over the period 1989–2009, we find that the income gap between laborers with a higher level of education and those with a lower level has widened since the transformational reforms of the economy. Our results suggest that the largest contribution of changes in income inequality can be attributed to the increase in returns to education, while the relative contributions of the household registration (hukou) system, type of sector ownership, geographic location, and gender to inequality experienced a downward trend between 1989 and 2009. The authors argue that rising income inequality is the consequence of efficiency improvements and an imperfect economic system, and that the market is a decisive force in economic development as it releases competitive signals and creates incentive mechanisms for innovation. Creating a more efficient labor market and increasing investment in human capital, particularly equalizing educational opportunities and improving the quality of education in lagging rural and inland regions to disadvantaged groups, are significant for an equitable distribution of income and sustainable development in the long run. Classification-JEL: D33, H24, O15 Keywords: market transition, income inequality, Shapley value decomposition Journal: Frontiers of Economics in China Pages: 309-337 Volume: 9 Issue: 2 Year: 2014 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0016-9 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:2:p:309-337 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, BCV2S7M8, Canada Title: Quest beyond the Middle Income Status Pages: 339-346 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0017-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:339-346 Template-Type: ReDIF-Article 1.0 Author-Name: Xudong Chen Author-Email: chen.xudong@mail.shufe.edu.cn Author-Workplace-Name: School of Economics and Institute for Advanced Research, Shanghai University of Finance and Economics (SUFE), Shanghai 200433, China; Key Laboratory of Mathematical Economics (SUFE), Ministry of Education Author-Name: Guoqiang Tian Author-Email: gtian@tamu.edu Author-Workplace-Name: School of Economics and Institute for Advanced Research, Shanghai University of Finance and Economics (SUFE), Shanghai 200433, China; Key Laboratory of Mathematical Economics (SUFE), Ministry of Education; Department of Economics, Texas A&M University, USA Title: The Nature and Avoidance of the “Middle Income Trap” Abstract: The “middle income trap” is a significant theoretical and practical issue closely related to the economic and social transition and sustainable development of a country. This paper explores the essence of the “middle income trap” and ways to avoid it. It reveals that the inner nature of the “middle income trap” lies in the institutional transition dilemma, which results essentially from a lack of reasonable and clear definitions of governance boundaries between government and market as well as government and society. This lack of boundaries causes coexistent and interrelated government inefficiency, market distortion/failure and social anomie, leading to a stagnant transition from a factor-driven to an efficiency-driven and further innovation-driven economy. Moreover, this paper proposes that the proper way to avoid the “trap” can be found in the reconstruction of the state governance mode, that is, to transition from a development-oriented and omnipotent government to a public service-oriented and limited government, from factor-driven to efficiency-driven and further innovation-driven development, and from a traditional society to a modern civil society through defining reasonable and clear boundaries between government and market as well as government and society. Thus, reconstruction can establish a state public governance mode featuring the interactive role of government, market and society, and achieve the modernization of state governance systems and capacity. Classification-JEL: H11, P52, Z18 Keywords: middle income trap, institutional transition, state governance mode Journal: Frontiers of Economics in China Pages: 347-369 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0018-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:347-369 Template-Type: ReDIF-Article 1.0 Author-Name: Keun Lee Author-Email: kenneth@snu.ac.kr Author-Workplace-Name: Economics Department, Seoul National University, Seoul 151 746, Korea Author-Name: Shi Li Author-Email: lishi@bnu.edu.cn Author-Workplace-Name: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China Title: Possibility of a Middle Income Trap in China: Assessment in Terms of the Literature on Innovation, Big Business and Inequality Abstract: This paper discusses the possibility of China falling into the so-called middle income trap in terms of three checkpoints: innovation capability, world-class big businesses, and inequality. Based on these criteria, our conclusions are as follows: First, China has increasingly become innovative and thus differs from other middle income countries. Second, China has many successful big businesses, a number disproportionate to its size. Thus, China differs from other middle income countries with few world-class big businesses, and the only qualification is that those big businesses are mostly non- manufacturing firms focused on such areas as finance, energy, and trading. Third, China faces great uncertainty in terms of inequality. Although several signs show that the Kuznets curve will come to represent China, as noted by the gradual reduction of surplus labor and rising wage rates starting in the coastal provinces, the Chinese are now facing new sources of inequality in China, such as wealth (including financial and real estate assets) and non-economic factors (including corruption). Classification-JEL: O1, O3, P5 Keywords: middle income trap, China, big business, innovation, Kuznets, Lewis, inequality Journal: Frontiers of Economics in China Pages: 370-397 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0019-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:370-397 Template-Type: ReDIF-Article 1.0 Author-Name: Nazrul Islam Author-Email: nislam13@yahoo.com Author-Workplace-Name: Department of Economic and Social Affairs, United Nations; International Center for the Study of East Asian Development (ICSEAD), Kitakyushu, Japan Title: Will Inequality Lead China to the Middle Income Trap? Abstract: China has departed from the East Asian development model by letting inequality rise to a high level, which is now contributing to China’s current problems of macroeconomic imbalance, declining efficiency of capital, and rising social tensions. If inequality persists, China may get caught in the “inequality-trap,” which may then lead to the middle income trap (MIT). Fortunately, China still has the levers to pull to reduce inequality and avoid the MIT. Measures along both the “wage route” and the “redistributive route” can be adopted for this purpose. In addition, China may pursue the “cooperative route” to more equitable distribution. Classification-JEL: O1, O4, O5 Keywords: China, middle income trap, inequality trap, inequality, redistribution, cooperatives Journal: Frontiers of Economics in China Pages: 398-437 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0020-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:398-437 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, CT 06106, USA Author-Name: Jinwu Xiong Author-Email: Xiongjw@mail.tsinghua.edu.cn Author-Workplace-Name: Center for Market and Society, and School of Social Sciences, Tsinghua University, Beijing 100084, China Title: The Hukou and Land Tenure Systems as Two Middle Income Traps—The Case of Modern China Abstract: 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. Classification-JEL: O5, P3, Q15, J7, D3 Keywords: Hukou, land tenure system, middle income trap, monopsony, monopoly Journal: Frontiers of Economics in China Pages: 438-459 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0021-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:438-459 Template-Type: ReDIF-Article 1.0 Author-Name: Yanrui Wu Author-Email: yanrui.wu@uwa.edu.au Author-Workplace-Name: Business School, University of Western Australia, Perth, WA 6009, Australia Title: Productivity, Economic Growth and the Middle Income Trap: Implications for China Abstract: This paper explores the middle income trap (MIT) concept from the perspective of productivity growth. Through the examination of cross-country historical statistics as well as China’s regional data, it sheds light on the debate about whether the Chinese economy can avoid the middle income trap. It should be one of the first papers proposing an analytical framework to address this controversial issue. The findings should have important implications for economic policies guiding China’s development in the coming decades. Classification-JEL: O4, O5 Keywords: productivity, middle income trap (MIT), economic growth, Chinese economy Journal: Frontiers of Economics in China Pages: 460-483 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0022-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:460-483 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, BCV2S7M8, Canada Title: How Green is China’s Path of Catching Up? An International Comparative Evaluation Abstract: China’s rise as a global economic power in recent decades has been achieved with tremendous environmental costs. Has China been an abnormally heavier polluter in its development path? How has pollution accounted for China’s hyper economic growth? This study answers these questions by evaluating the environmental effects of China’s growth using a data set of 61 countries over a period of four decades. The analysis is focused on two pollutant emissions: CO2 emissions, which carry global externalities, and particulate emissions, of which the environmental cost is more domestic. A fractional polynomial (FP) regression model is estimated to project emissions levels per worker based on lagged values of per capita GDP and other variables. It reveals that China’s CO2 emissions have been higher than the projection for most years with an average margin of over 5.3% while its particulate emissions have exceeded projection by an average margin of more than 7.5%. The excessive emissions levels of both pollutants confirm the severity of China’s environmental challenges and indicate great potential for the economy to work for a greener growth pattern. On the other hand, contributions of emissions to multi-factor productivity (MFP) growth are estimated by FP regressions based on a human-capital augmented growth model. The results show opposing trends of CO2 and particulates in their “contributions” to GDP growth, which imply asymmetric incentives to abate the two types of pollution. These findings have important implications for China’s environmental policy making. Classification-JEL: O44, O47, Q56 Keywords: economic growth, environmental damage, pollution Journal: Frontiers of Economics in China Pages: 484-498 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0023-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:484-498 Template-Type: ReDIF-Article 1.0 Author-Name: Derong Zhang Author-Email: derongzhang@126.com Author-Workplace-Name: School of Economics, Xiamen University, Xiamen 361005, China Title: The Mechanism of the Middle Income Trap and the Potential Factors Influencing China’s Economic Growth Abstract: Data from WDI show that developing countries are easily caught in the “middle income trap.” To interpret the mechanism of the “middle income trap,” this paper focuses on: (1) Based on the empirical framework of economic growth, we perform an empirical research on the determinants of economic growth at different income levels and discover that fixed capital investment, FDI and human capital accumulation are the main factors influencing less developed economies while for the upper middle income level and high-income level countries, the engines of economic growth change to institutions and R&D. (2) We discuss the possible reasons why developing countries can have rapid economic growth before reaching the middle income level, but cannot transform growth mechanisms in the middle income level. (3) We classify the factors that have influenced China’s economic growth since the reform and analyze the potential ones for China’s future development. Classification-JEL: O11, O43, E02 Keywords: middle income trap, economic growth, growth mechanisms Journal: Frontiers of Economics in China Pages: 499-528 Volume: 9 Issue: 3 Year: 2014 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0024-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:499-528 Template-Type: ReDIF-Article 1.0 Author-Name: Tan Li Author-Workplace-Name: Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China Author-Name: Larry D. Qiu Author-Email: larryqiu@hku.hk Author-Workplace-Name: Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China Title: IPR, Trade, FDI, and Technology Transfer Abstract: In this survey, we discuss how intellectual property rights (IPR) protection in the South affects trade flows, foreign direct investment (FDI) flows, and technology transfers from the North to the South. We also discuss optimal IPR policies and their effect on innovation. Our discussion covers both theoretical studies and empirical evidence. This survey is both comprehensive and critical. It aims to give readers the current state of IPR and globalization literature. Some issues have been studied more thoroughly, whereas for others the surface has only been scratched upon. This survey gives readers a clearer picture of the literature and may help them find future research topics. Classification-JEL: F0, F1 Keywords: IPR, trade, FDI, technology transfer Journal: Frontiers of Economics in China Pages: 529-555 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0025-9 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:529-555 Template-Type: ReDIF-Article 1.0 Author-Name: Paul Armstrong-Taylor Author-Email: parmstro@hnc.nju.edu.cn Author-Workplace-Name: Hopkins-Nanjing Center, Nanjing University, Nanjing 210093, China Title: Effects of Trade and Financial Links on the Transmission of GDP Growth Abstract: Using panel analysis of quarterly data from 14 developed countries between 1980 and 2012, I examine the channels by which GDP growth transmission has taken place, and how the transmission of growth has varied with time and global growth. I find that countries with large, open banking sectors and trade deficits tend to transmit growth more strongly than other countries. Transmission effects seem to have become stronger over time and are stronger in periods of slow economic growth. Classification-JEL: F14, F36, F44, F65, G15 Keywords: trade links, financial links, contagion, financial crises, global recessions Journal: Frontiers of Economics in China Pages: 556-572 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0026-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:556-572 Template-Type: ReDIF-Article 1.0 Author-Name: Zhi Su Author-Email: cloudsusie1@163.com Author-Workplace-Name: International School of Economics and Management, Capital University of Economics and Business, Beijing 100070, China Title: Chinese Online Unemployment-Related Searches and Macroeconomic Indicators Abstract: Official monthly unemployment data is unavailable in China, while intense public interest in unemployment requires timely and accurate information. Using data on web queries from lead search engines in China, Baidu and Google, I build two indices measuring intensity of online unemployment-related searches. The unemployment-related search indices identify a structural break in the time series between October and November 2008, which corresponds to a turning point indicated by some macroeconomic indicators. The unemployment- related search indices are proven to have significant correlation with Purchasing Managers’ Employment Indices and a set of macroeconomic indicators that are closely related to changes in unemployment in China. The results of Granger causality analysis show that the unemployment-related search indices can improve predictions of the macroeconomic indicators. It suggests that unemploy- ment-related searches can potentially provide valuable, timely, and low-cost information for macroeconomic monitoring. Classification-JEL: C53, E27, E37, J64 Keywords: macroeconomic monitoring, Baidu Index, Google Trends, unemploy- ment-related search indices Journal: Frontiers of Economics in China Pages: 573-605 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0027-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:573-605 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: International Trade with Increasing Returns in the Transportation Sector Abstract: In this general equilibrium framework, the transportation sector is modeled as a distinct sector with increasing returns. A more advanced technology has a higher fixed cost but a lower marginal cost of production. Even with both manufacturing firms and transportation firms engaged in oligopolistic competition and optimally choosing their technologies, the model is tractable and results are derived analytically. Technology adoptions in the manufacturing sector and transportation sector are reinforcing, and multiple equilibria may exist. Firms choose more advanced technologies and the prices decrease when the size of the population is larger. Classification-JEL: F10, O14, R40 Keywords: transportation costs, international trade, the choice of technology, increasing returns, strategic complementarity Journal: Frontiers of Economics in China Pages: 606-633 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0028-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:606-633 Template-Type: ReDIF-Article 1.0 Author-Name: Guan Gong Author-Email: ggong@mail.shufe.edu.cn Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Hongmei Wang Author-Email: hongmeiwang@unmc.edu Author-Workplace-Name: College of Public Health, University of Nebraska Medical Center, Omaha, NE 68198-4350, USA Author-Name: Lingli Xu Author-Email: lingli.xu@shu.edu.cn Author-Workplace-Name: School of Economics, Shanghai University, Shanghai 200444, China Title: The Risks and Dynamics of Health Care Expenditures in Urban China: An Illustration in Kunshan City Abstract: This paper examines the individual financial risk of health care expenditures over time in urban China, using longitudinal health expenditure data from 2005 to 2007 in Kunshan City, Jiangsu Province, China. We find that the stochastic process of log total health care expenditures is well represented by the sum of an AR(3) process and a white noise process. Simulating this model, we find that the urban health insurance system protects enrollees from the risk of catastrophic health care expenditures by bearing the majority of the health care expenditures. However, out-of-pocket health care expenditures represents a considerable risk to an individual’s financial status. Classification-JEL: I11, I18, H75 Keywords: out-of-pocket expenditures, financial risk, urban health insurance system, China Journal: Frontiers of Economics in China Pages: 634-660 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0029-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:634-660 Template-Type: ReDIF-Article 1.0 Author-Name: Ling Feng Author-Email: feng.ling@mail.shufe.edu.cn Author-Workplace-Name: School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Yizhong Guan Author-Email: yizhong_guan@163.com Author-Workplace-Name: Risk Management Department, Industrial and Commercial Bank of China, Shanghai Municipal Branch, Shanghai 200120, China Author-Name: Zhiyuan Li Author-Email: zhyli@mail.shufe.edu.cn Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Title: Bank Credit, Firm Entry and Exit, and Economic Fluctuations in China Abstract: This study explores how a worsening bank credit quality affects firms’ entry and exit decisions (i.e., changes in the extensive margin), and how the extensive margin variation amplifies the transmission of financial and technological shocks to the real economy. Using a vector autoregression (VAR) model, our empirical evidence indicates that deteriorating Chinese bank credit conditions have a significant negative influence on net firm entry to the market. To explore the potential mechanism behind the stylized fact, we establish a dynamic stochastic general equilibrium (DSGE) model featuring fixed production costs, loss-related bank credit quality shocks and an endogenous balance sheet constraint which restricts the aggregate credit supply by the level of the banks’ net worth. Model simulations indicate that the interaction of financial constraints and the extensive margin variation amplifies the impact of bank credit shocks on the real economy. When banks experience loss-related financial shocks, bank credit tightens, which increases firms’ external financing costs. When the firms’ expected income is not sufficient to cover the fixed production cost, some firms exit from or stop entering the market. As a result, the economy displays a severe recession and a slow recovery. Classification-JEL: E32, G21, L1 Keywords: bank credit, financial constraint, firm extensive margin Journal: Frontiers of Economics in China Pages: 661-694 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0030-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:661-694 Template-Type: ReDIF-Article 1.0 Author-Name: Xiaoli He Author-Workplace-Name: School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China; School of Economics and Management, Tianjin University of Science and Technology, Tianjin 300457, China Author-Name: Hongwu Wang Author-Email: lzwhw2000@126.com Author-Workplace-Name: School of Economics and Management, Tianjin University of Science and Technology, Tianjin 300457, China Author-Name: Haoran Pan Author-Workplace-Name: School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China Title: Energy Consumption, Economic Development and Temperature in China: Evidence from PSTR Model Abstract: Since the 1980s, the Chinese economy has developed rapidly, with an average annual growth rate around 10%. Energy consumption in China has greatly increased as well. This paper investigates the relationship between energy consumption, economic development and temperature in China by adopting provincial panel data from 1990 to 2011. Different from existing studies, in this paper, we use a panel smooth transition regression (PSTR) model to estimate the non-linearity relationship. Four different threshold variables including two lagged endogenous variables and two important exogenous variables have been considered. We find that energy intensity and the ratio of gross capital formation are suitable for the non-linearity model. The estimated elasticities of time dynamic indicate that energy consumption is income inelastic and temperature inelastic. Elasticities of real income at first increase and then decrease, however, elasticities of temperature gradually increase after the year 1993. Last of all, we propose some policy implications. Classification-JEL: C5, O1, Q4 Keywords: energy consumption, economic development, panel smooth transition regression model Journal: Frontiers of Economics in China Pages: 695-712 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0031-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:695-712 Template-Type: ReDIF-Article 1.0 Author-Name: Margaret Li Seeley Author-Email: margaret.mengxi.li@gmail.com Author-Workplace-Name: Brigham Young University Title: Hong Yinxing (洪银兴), The China Path to Economic Transition and Development (经济转型与发展之中国道路), Chinese-English bilingual version, trans. Xiao-huang Yin (尹晓煌). Beijing: Higher Education Press, 2014. ISBN 978-7-04-039235-7. 520pp. ¥89.00. Journal: Frontiers of Economics in China Pages: 713-715 Volume: 9 Issue: 4 Year: 2014 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0032-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:713-715