Template-Type: ReDIF-Article 1.0 Author-Name: Zhiqi Chen Author-Email: zhiqi.chen@carleton.ca Author-Workplace-Name: Department of Economics, Carleton University, Ottawa, K1S 5B6, Canada Title: Introduction to the Special Issue in Honor of Richard A. Brecher Abstract: Classification-JEL: Keywords: Journal: Frontiers of Economics in China Pages: 1-4 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0001-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:1-4 Template-Type: ReDIF-Article 1.0 Author-Name: Alan V. Deardorff Author-Email: alandear@umich.edu Author-Workplace-Name: Ford School of Public Policy, University of Michigan, Ann Arbor, MI 48109, USA Title: Local Import Competition in a Lumpy Country Abstract: This paper examines the effects of a fall in the price of an imported good in a region of a country that is specialized in producing that good. The context is a ※lumpy country§ model in which factors are unable to move between locations, although in this case I assume that only labor is immobile, and that the other factor, capital, is perfectly mobile between regions. With mobile capital, the lumpy-country equilibrium can be anywhere in the factor-price equalization set, but my focus is on a region that initially produces only one good, on the border of that set. When the price of that good falls due to import competition, it would be possible for both factors to reallocate partially into production of the other good, but I assume instead that some capital simply leaves the region, so that it continues to produce only the same good that it did before. The result of this is a fall in the real wage of labor, just as under Stolper-Samuelson assumptions. I then look at production also of a non-traded good, and find that the same import competition that cheapened the traded good also cheapens the nontraded good. The result is that the region shrinks, losing capital and producing less of both goods unless the substitution in favor of the nontraded good expands its consumption out of a smaller income. Classification-JEL: F1, F11, F2 Keywords: import competition, lumpy country, nontraded good Journal: Frontiers of Economics in China Pages: 5-14 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0002-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:5-14 Template-Type: ReDIF-Article 1.0 Author-Name: John Douglas Wilson Author-Email: wilsonjd@msu.edu Author-Workplace-Name: Department of Economics, Michigan State University, East Lansing, MI 48824, USA Author-Name: Ilkay Yilmaz Author-Email: ilkayyilmaz@mersin.edu.tr Author-Workplace-Name: Department of Economics, Mersin University, Ciftlikkoy, Yenisehir 33342, Mersin, Turkey Title: Free-Trade Agreements in a Model of Trade, Migration and Politics Abstract: This paper uses a probabilistic voting model to investigate voting for a free-trade agreement between a labor-abundant country and a capital-abundant country. Migration from the labor-abundant country to the capital-abundant country increases the probability of a free-trade agreement, with lower migration costs leading to more migration and a higher free-trade probability. On the other hand, if a lower probability of free trade is caused by an increased voter bias against free-trade candidates, then there is less migration. A dynamic extension of the model is also investigated. Classification-JEL: F13, F22 Keywords: free trade, migration, Heckscher-Ohlin, labor-abundant, capital- abundant Journal: Frontiers of Economics in China Pages: 15-31 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0003-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:15-31 Template-Type: ReDIF-Article 1.0 Author-Name: Ngo Van Long Author-Email: ngo.long@mcgill.ca Author-Workplace-Name: Department of Economics, McGill University, Montreal, Quebec, H3A 2T7, Canada Author-Name: Maxwell Tuuli Author-Email: maxwelltuuli@uvic.ca Author-Workplace-Name: Peter B. Gustavson School of Business, University of Victoria, Victoria, BC V8P 5C2, Canada Title: Offshoring and Reshoring: The Roles of Incomplete Contracts and Relative Bargaining Power Abstract: This paper demonstrates that an increase in bargaining power of Northern firms relative to that of their Southern contractors can trigger reshoring if the North- South wage differential is moderate, such that only industries with a high share of unskilled labor find outsourcing profitable. However, such an increase in Northern bargaining power can increase offshoring if the wage differential is so high that even industries with a low share of unskilled labor also offshore. Classification-JEL: D23, F12, F14, F21, F23, L22, L23 Keywords: incomplete contracts, bargaining power, offshoring, reshoring Journal: Frontiers of Economics in China Pages: 32-51 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0004-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:32-51 Template-Type: ReDIF-Article 1.0 Author-Name: Tatsuo Hatta Author-Workplace-Name: Asian Growth Research Institute, 11-4 Otemachi, Kokurakita, Kitakyushu 803-0814, Japan Title: Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback Abstract: A duty drawback is an export subsidy determined as a percentage of the tariffs paid on the imported inputs used in its production. This paper examines the revenue-constrained optimal tariff structure in a small open economy including a duty drawback as a trade policy tool. This paper has two main aims. First, we show that the revenue-constrained optimal combination of tariff and duty drawback for a given revenue level is not unique. Second, we show that if the optimal import tariff rates are all positive when the duty drawback rate is zero, then the optimal import tariff rates are always positive when the duty drawback is positive. Classification-JEL: F11, F13, H21 Keywords: revenue-constrained optimal tariff, duty drawback, export subsidy, uniformity Journal: Frontiers of Economics in China Pages: 52-67 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0005-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:52-67 Template-Type: ReDIF-Article 1.0 Author-Name: Sven W. Arndt Author-Email: sarndt@cmc.edu Author-Workplace-Name: Robert Day School of Economics and Finance, Claremont McKenna College, Claremont, CA 91711, USA Title: Global Value Chains, Horizontal Intra-Industry Trade and the Heterogeneous Firm Abstract: This paper examines global value chains at the level of the heterogeneous firm. The context is a world of horizontal intra-industry trade, characterized by imperfect competition and product differentiation at the firm level. Standard microeconomic tools are employed to assess the effects of inter-firm dissimilarities in both demand and supply on firms* responses to changes in trade policy. In this set-up, dissimilarities in firm characteristics play roles similar to factor endowments and technology differences in traditional trade models. When cross-border production sharing (※fragmentation§) is introduced into this framework, those differences in firm characteristics determine the degree to which individual firms will enter into production networks. In this context, horizontal and vertical intra-industry trade elements interact in their effects on firm decisions. Traditional comparative advantage considerations still govern the choice of off-shored activities, while direct competition between imports and exports expands the range of possible outcomes. Finally, it is shown that cross-border production sharing reduces the sensitivity of firms to variations in exchange rates, matching a phenomenon that has been observed in traditional country-level models. Classification-JEL: D21, D43, F11, F12, F31 Keywords: heterogeneous firms, global value chains, intra-industry trade, intra-product, specialization, exchange-rate elasticities Journal: Frontiers of Economics in China Pages: 68-82 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0006-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:68-82 Template-Type: ReDIF-Article 1.0 Author-Name: Henry Y. Wan Jr. Author-Email: hyw1@cornell.edu Author-Workplace-Name: Department of Economics, Cornell University, Ithaca, NY 14853, USA Title: Involuntary Unemployment: An Expository Note Abstract: This note is an effort to view the research program of Brecher and his co-workers to deploy tax incentives against involuntary unemployment in the broader context; on both the equity-efficiency trade-off in political economy, and the dual economic structure in the theoretic foundations of market equilibrium. Classification-JEL: E24, J64 Keywords: involuntary unemployment, efficiency wage, wage rigidity Journal: Frontiers of Economics in China Pages: 83-92 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0007-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:83-92 Template-Type: ReDIF-Article 1.0 Author-Name: Zhiqi Chen Author-Email: zhiqi.chen@carleton.ca Author-Workplace-Name: Department of Economics, Carleton University, Ottawa, Ontario, K1S 5B6, Canada Author-Name: Marcel C. Voia Author-Email: marcel.voia@carleton.ca Author-Workplace-Name: Department of Economics, Carleton University, Ottawa, Ontario, K1S 5B6, Canada Title: Short-Term and Long-Term Margins of International Trade: Evidence from the Canada-Chile Free Trade Agreement Abstract: We investigate the impact of the Canada-Chile Free Trade Agreement (CCFTA) on Canadian exports to Chile, particularly the dynamic effects of the agreement on extensive and intensive margins of trade. Consistent with the literature, we find that the extensive margin effects occurred later than the intensive margin effects and became more prominent in the long-term. Surprisingly, the intensive margin effects died off in the long-term. A theoretical model is constructed to show that our results can arise in a standard setting of intra-industry trade. Classification-JEL: F12, F13 Keywords: preferential trade agreements, margins of international trade, Canada-Chile trade, nonparametric decompositions, regression discontinuity Journal: Frontiers of Economics in China Pages: 93-115 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0008-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:93-115 Template-Type: ReDIF-Article 1.0 Author-Name: Churen Sun Author-Email: sunchuren@gmail.com Author-Workplace-Name: Department of Economics, Southwestern University of Finance and Economics, Chendu 611130, China Author-Name: Zhihao Yu Author-Email: zhihao.yu@carleton.ca Author-Workplace-Name: Department of Economics, Carleton University, Ottawa, Ontario, K1S 5B6, Canada Author-Name: Tao Zhang Author-Email: neotaoism@aliyun.com Author-Workplace-Name: International Business School, Shanghai University of International Business and Economics, Shanghai 201620, China Title: Agglomeration and Firm Export Abstract: Using Chinese manufacturing data between 1998 and 2007, this paper investigates the impact of agglomeration on firm*s export behavior. It is found that the agglomeration of manufacturing industries in China over this period increases firm*s export probability as well as its export volume, and the impact is larger for more efficient firms. However, the impact on firm*s export volume depends on the degree of agglomeration. When the degree of agglomeration is low, an increase in agglomeration would expand firm*s export volume but the impact will be diminishing and even turns negative if the degree of agglomeration is already very high. Classification-JEL: F12, R12 Keywords: agglomeration, firm export Journal: Frontiers of Economics in China Pages: 116-132 Volume: 13 Issue: 1 Year: 2018 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0009-9 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:116-132 Template-Type: ReDIF-Article 1.0 Author-Name: Joseph E. Stiglitz Author-Email: jes322@columbia.edu Author-Workplace-Name: Business School, Graduate School of Arts and Sciences (Department of Economics) and School of International and Public Affairs, Columbia University, New York, NY 10027, USA Title: Rethinking Globalization in the Trump Era: US-China Relations Abstract: The global economic and political order that was created in the aftermath of World War II is under attack by President Donald Trump. In this article, Nobel Prize Laureate Joseph Stiglitz discusses the scope for protectionist actions by President Trump and suggests how countries such as China could and should respond. In particular, he proposes a set of ten principles that should guide China*s response, principles designed to enhance a more stable and efficient multi-polar system of global governance that can contribute to a stronger global economy. Classification-JEL: F13, F14, F42, F43 Keywords: US-China relations, globalization, international trade Journal: Frontiers of Economics in China Pages: 133-146 Volume: 13 Issue: 2 Year: 2018 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0010-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:2:p:133-146 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; Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Lei Ning Author-Email: ninglei107@126.com Author-Workplace-Name: Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Guoqiang Tian Author-Email: gtian@mail.shufe.edu.cn Author-Workplace-Name: School of Economics and Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China; Department of Economics, Texas A&M University, College Station, TX 77843, USA Title: Conquering China*s Unbalanced and Inadequate Development: Macroeconomic Outlook, Policy Simulations, and Reform Implementation〞A Summary of Annual SUFE Macroeconomic Report (2017每2018) Abstract: Leaving year 2017 China*s macroeconomy is continuously characterized by unbalanced and inadequate development. Whereas some aggregate indicators have shown improvement over the year, the cumulative growth rates in consumption and fixed asset investment have continued their downward trajectories. Worsening income inequality and resource misallocations, both between secondary and tertiary industries, and within the latter, pose serious challenges, let alone the systemic risk associated with the flourishing shadow banking system, rapid credit growth and debt overhang that weigh on the Chinese economy like the Sword of Damocles. This summary report highlights both the status quo and the consequences of the unbalanced and inadequate development embodied in China*s persistently distorted economic structure, and the role of deepening reforms of the institutions and governance in resolving the problems. Our analyses based on IAR-CMM model provide a unified framework for addressing China*s short-, medium-, and long-term issues in an internally coherent manner. Looking into year 2018, our benchmark projection of real GDP growth rate is 6.7% (6.41% using more reliable rather than the official data). Alternative scenario analyses and policy simulations are conducted to reflect various aspects of the economic challenges in the short to long runs. Through the lens of these analyses we conclude that rule-of-law based and market-oriented structural reforms should continue to hold a center stage in China*s transition from a phase of high-speed but unbalanced growth, to a stage of balanced and adequate high-quality development. Classification-JEL: E01, E17, E27, E37, E47 Keywords: unbalanced and inadequate development, macroeconomic outlook, alternative scenario, policy simulation, systemic risk, reform Journal: Frontiers of Economics in China Pages: 147-170 Volume: 13 Issue: 2 Year: 2018 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0011-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:2:p:147-170 Template-Type: ReDIF-Article 1.0 Author-Name: Gaowang Wang Author-Email: gaowang.wang@sdu.edu.cn Author-Workplace-Name: Center for Economic Research, Shandong University, Jinan 250013, China Author-Name: Heng-fu Zou Author-Email: hzoucema@gmail.com Author-Workplace-Name: China Economics and Management Academy, Central University of Finance and Economics, Beijing 100081, China Title: The Effects of Macroeconomic Policies in a Mercantilist Economy Abstract: By introducing money and foreign exchange in the Zou (1997) model of mercantilism, the paper shows the effects of macroeconomic policies in mercantilist economies. It is shown that in the long run, consumption and foreign asset accumulation increases as a result of stronger mercantilist sentiments, permanent increases in the consumption tax, increases in the monetary growth rate and purchases of foreign bonds. In the short run, however, macroeconomic disturbances including the mercantilist sentiments, the monetary growth rate, and the consumption tax have negative effects on current consumption and positive effects on current foreign asset accumulation, while purchasing foreign bonds has positive effects on both current consumption and current foreign asset accumulation. The theoretical explorations may provide a theoretical structure for hoarding international reserves and export-led growth strategy utilized by emerging market economies. Classification-JEL: E52, F31, F41 Keywords: foreign asset accumulation, mercantilism, money, macroeconomic policies Journal: Frontiers of Economics in China Pages: 171-195 Volume: 13 Issue: 2 Year: 2018 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0012-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:2:p:171-195 Template-Type: ReDIF-Article 1.0 Author-Name: Yongmei Hu Author-Email: huym0718@bnu.edu.cn Author-Workplace-Name: Faculty of Education, Beijing Normal University, Beijing 100875, China Author-Name: Yun Xing Author-Email: xingyun@mail.bnu.edu.cn Author-Workplace-Name: College of Education, Northwest Normal University, Lanzhou 730070, China Title: Does the Entrepreneurship of the Parents Affect the Opportunities of their Offspring*s Entrepreneurship? Empirical Analysis Based on the CGSS 2010每2013 Data Abstract: The whole society is paying close attention to ※entrepreneurship,§ which urges researchers to find an explanatory perspective relatively independent and with causality on the intergenerational transfer of entrepreneurship. Based on the data of the Chinese General Social Survey (short for CGSS) during the years 2010每2013, this paper analyzes how parents* entrepreneurship affects the probability of their offspring*s entrepreneurship, and the results show that compared with the offspring of parents who did not start their own business, those whose parents did are more likely to choose to start their own business. In view of historical facts such as the ※lay-off wave§ during China*s transformation into a market economy, we use ※the annual number of unemployed back to work,§ a provincial-level indicator, in the 1990s as an instrumental variable to correct possible endogenous problems. We find that parents* entrepreneurship has significant positive effects on the probability of their offspring*s entrepreneurship, which may result from the informal transfer of human capital and wealth from parents to their offspring. Classification-JEL: J2, J6, L2 Keywords: entrepreneurial opportunities, instrumental variable regression, lay-offs, intergenerational transfer Journal: Frontiers of Economics in China Pages: 196-222 Volume: 13 Issue: 2 Year: 2018 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0013-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:2:p:196-222 Template-Type: ReDIF-Article 1.0 Author-Name: Yongyou Li Author-Email: liyy@zufe.edu.cn Author-Workplace-Name: School of Finance and Taxation, Zhejiang University of Finance and Economics, Hangzhou 310018, China Title: Asymmetric Decentralization, Intergovernmental Transfers, and Expenditure Policies of Local Governments Abstract: Although China*s asymmetric fiscal decentralization system has been criticized for many years, there have been few studies giving direct evidence of its negative incentives on local government spending policies. By introducing the mechanism of asymmetric decentralization and fiscal transfers to the objective function of local government, this paper studies the incentive effects of asymmetric decentralization and fiscal transfers on spending policies of local governments, and uses the provincial panel data to carry out an empirical test. The conclusion shows that the asymmetric decentralization significantly weakens the incentives of local government to increase social expenditure, and as a solution to asymmetric decentralization, fiscal transfers fail to play a good role. Due to the relatively large income effect, the financing mechanism of fiscal transfers not only significantly reduces the incentives of local government to provide social public goods, but also weakens the constraint effect of fiscal competition on expenditure policies of local governments because of the increase in the relative cost. Although the distribution mechanism of fiscal transfers has a significant positive incentive to local government in regions where the net inflow of fiscal resources is more than zero, because of common pooling effects, the comprehensive effects of fiscal transfers in the distribution of incentives of local governments to provide social public goods are negative in all regions. Classification-JEL: H11, H71 Keywords: asymmetric decentralization, intergovernmental transfers, incentive mechanism, expenditure policies Journal: Frontiers of Economics in China Pages: 223-248 Volume: 13 Issue: 2 Year: 2018 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0014-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:2:p:223-248 Template-Type: ReDIF-Article 1.0 Author-Name: Yan Liu Author-Workplace-Name: Guanghua School of Management, Peking University, Beijing 100871, China Author-Name: Qingqing Zong Author-Email: zong.qingqing@mail.shufe.edu.cn Author-Workplace-Name: School of Public Economics and Administration, Shanghai University of Finance and Economics, Shanghai 200433, China Title: Agricultural Roots in Intergenerational Transfers in China Abstract: Economists have been interested in the motivations of intergenerational transfers, for different motivations affect the effectiveness of anti-poverty public transfers. However, one*s motivation is largely shaped by culture and social conventions. This paper sheds light on the influence of rice cultivation in intergenerational transfers in China. This is also the first time that economists consider cultural factors in the study of intergenerational transfers. Cultivating rice requires elaborate irrigation systems and large amounts of labor input so that rice farmers have to cooperate extensively with their neighbors, which has gradually shaped people*s value to be more inter-dependent. Based on micro-level data from CHARLS and sub-national rice data from China, our empirical results show strong evidence that individuals from rice regions are more likely to provide economic support for their parents. A one-percentage point increase in the share of rice in the total grain planting area will raise transfer incidence by 0.2每0.4 percentage points, and rice region residents transfer on average 300每400 yuan more in 2011 and about 1,000 yuan more in 2013 to their parents than those from wheat regions. Meanwhile they are more inclined to rely on their adult children for elderly support. Urban citizens are less affected. Using instrumental variable estimation, we are able to prove the effect is causal. With future continued deepening of population aging in China, relying on children for old age support may become more and more unrealistic, the government needs to coordinate the relationship between public transfer and private transfer to ensure the quality of life for the elderly. Classification-JEL: Z100, D130, D310 Keywords: intergenerational transfer, rice culture, interdependent Journal: Frontiers of Economics in China Pages: 249-280 Volume: 13 Issue: 2 Year: 2018 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0015-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:2:p:249-280 Template-Type: ReDIF-Article 1.0 Author-Name: Yuying Jin Author-Email: jyyshang@mail.shufe.edu.cn Author-Workplace-Name: R&D Administration, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Dong Zhao Author-Email: remember1027@163.com Author-Workplace-Name: School of International Business Administration, Shanghai University of Finance and Economics, Shanghai 200433, China Title: Does Over-credit Stimulate Corporate Investment? Evidence from Listed Companies in China Abstract: We define and quantify for the first time over-credit at the firm level, which refers to the case in which the amount of bank credit that a firm obtains exceeds its expenditure on corporate investment for the year. Then, we explore how over-credit affects corporate investment to determine whether credit expansion in China is consistent with the principle of finance serving the real economy. The results show that over-credit promotes firm investment, and this effect was enhanced by the housing boom. However, the effect of the property market reversed after 2012, owing to China*s economic transition from a quantitative to a structural mismatch between supply and demand. Finally, we explore how over-credit affects the capacity utilization ratio and whether it has aggravated the overcapacity problem in China. The results show that over-credit reduces firms* capacity utilization ratio. This finding indicates that excessive credit expansion has exacerbated the overcapacity problem in China. Classification-JEL: E52, G31, G32 Keywords: over-credit, corporate investment, capacity utilization ratio Journal: Frontiers of Economics in China Pages: 281-311 Volume: 13 Issue: 2 Year: 2018 Month: June File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0016-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:2:p:281-311 Template-Type: ReDIF-Article 1.0 Author-Name: Debin Ma Author-Email: d.ma1@lse.ac.uk Author-Workplace-Name: Department of Economic History, London School of Economics and Political Science, London, WC2A 2AE, UK Author-Name: Cong Liu Author-Email: liu.cong@mail.shufe.edu.cn Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Title: Money, Finance and Commerce in Chinese History: An Introduction with Reference to the Special Issue Abstract: Classification-JEL: Keywords: Journal: Frontiers of Economics in China Pages: 313-321 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0017-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:313-321 Template-Type: ReDIF-Article 1.0 Author-Name: Yi Xu Author-Email: xuyi1840@163.com Author-Workplace-Name: College of Historical Culture and Tourism, Guangxi Normal University, Guilin 541001, China Author-Name: Bas van Leeuwen Author-Email: bas.vanleeuwen1@googlemail.com Author-Workplace-Name: International Institute of Social History, Royal Netherlands Academy of Arts and Sciences, Amsterdam, 1019AT, Netherlands Author-Name: Jan Luiten van Zanden Author-Email: j.l.vanzanden@uu.nl Author-Workplace-Name: Department of Economic and Social History, Utrecht University, Utrecht, 3512BS, Netherlands Title: Urbanization in China, ca. 1100每1900 Abstract: This paper presents new estimates of the development of the urban population and the urbanization ratio for the period spanning the Song and late Qing dynasties. Urbanization is viewed, as in much of the economic historical literature on the topic, as an indirect indicator of economic development and structural change. The development of the urban system can therefore tell us a lot about long-term trends in the Chinese economy between 1100 and 1900. During the Song, the level of urbanization was high, also by international standards〞the capital cities of the Song were probably the largest cities in the world. This remained so until the late Ming, but during the Qing there was a downward trend in the level of urbanization from 11每12% to 7% in the late 18th century, a level at which it remained until the early 1900s. In our paper we analyse the role that socio每political and economic causes played in this decline, such as the changing character of the Chinese state, the limited impact of overseas trade on the urban system, and the apparent absence of the dynamic economic effects that were characteristic for the European urban system. Classification-JEL: N15, N95, O18 Keywords: China, urbanization; Song dynasty; Ming dynasty; Qing dynasty; cities; commercialization Journal: Frontiers of Economics in China Pages: 322-368 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0018-9 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:322-368 Template-Type: ReDIF-Article 1.0 Author-Name: Zhiwu Chen Author-Email: zhiwu.chen@hku.hk Author-Workplace-Name: Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China Author-Name: Kaixiang Peng Author-Email: kaixiangp@qq.com Author-Workplace-Name: School of Economics, Henan University, Kaifeng 475004, China Author-Name: Weipeng Yuan Author-Email: wpyuan12@126.com Author-Workplace-Name: Institute of Economics, Chinese Academy of Social Sciences, Beijing 100836, China Title: Usury, Market Power and Poverty Traps: A Study of Rural Credit in 1930s* China Abstract: This paper studies the cross-regional variation of interest rates in China in the 1930s. Based on county-level data from the Buck (1941) rural surveys, we examine factors that may have influenced rural interest rates in pre-1949 China. Since the quality of institutions that define property rights and facilitate contract enforcement is important for such transactions as land tenancy arrangements, we treat land tenancy rate (or percentage of owner-farmers) as a proxy for institutional quality. Contrary to the popular belief among historians and economists that usury or high interest rates caused persistent poverty, we find that while the monopoly-exploitation hypothesis has little explanatory power, a region*s institutional quality and income level are persistent and significant determinants of interest rates. Thus, poverty is a key driver of high rates of interest. Economic growth and the development of market institutions are crucial for lowering high interest rates and combating usury. Classification-JEL: N25, N35, O16 Keywords: usury; rural credit; monopoly power; poverty trap; tenancy Journal: Frontiers of Economics in China Pages: 369-396 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0019-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:369-396 Template-Type: ReDIF-Article 1.0 Author-Name: Sheng Qian Author-Email: shqian1@hotmail.com Author-Workplace-Name: School of Humanities and Social Science, Hong Kong University of Science and Technology, Hong Kong, China Author-Name: Lemin Wu Author-Email: wulm.03@gmail.com Author-Workplace-Name: School of Humanities and Social Science, Hong Kong University of Science and Technology, Hong Kong, China Title: Who Defended Monetary Stability in a Specie Regime? Evidence from the Chinese History Abstract: Despite the lack of political accountability, ancient autocracies maintained a level of monetary stability that rivals modern democracies. This paper hypothesizes that it is the threat of counterfeiting that has constrained currency debasement. Unwilling to share seigniorage with counterfeiters, who are active only if currency is debased, the government refrains from debasement unless in extreme fiscal situations. To document the facts, we build a database of historical Chinese copper coins that covers the period from the Qin dynasty (221BC每207BC) to the Republic of China. We also use the introduction of the steam press in late Qing China as a natural experiment to test the theory. The steam press produced coins of fine patterns that counterfeiters were unable to mimic. As the theory predicts, the removal of the threat of counterfeiting triggered the most serious debasement in the history of the Qing dynasty (1644每1912). Classification-JEL: E42, N10 Keywords: debasement; counterfeiting; monetary; stability; copper coin; steam press Journal: Frontiers of Economics in China Pages: 397-435 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0020-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:397-435 Template-Type: ReDIF-Article 1.0 Author-Name: Hongzhong Yan Author-Email: hzhyansx@163.com Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Zhijian Qiao Author-Workplace-Name: Department of History, Amherst College, Amherst, MA 01002, USA Author-Name: Chen Xu Author-Workplace-Name: School of Economics, Minzu University of China, Beijing 100081, China Title: A Multi-Layer System and Its Features: Reconceptualizing the Monetary Regime of Late Qing and Modern China Abstract: This essay aims to reconceptualize the monetary regime of late Qing and modern China as a multilayer system of currencies and examine the features and logics of its operation from the 16th century to early 20th century. We argue that this system consists of a variety of silver and copper currencies, each occupying a particular layer in the structure and each satisfying a specific market demand. Analyzing the production and circulation of copper and silver currencies, we first trace their evolution from the Qing to the Republican era and demonstrate the multi-layer currency structure persisted in China across the modernizing changes that took place at the end of the 19th century. Second, using data drawn from gazetteers, this essay adopts a quantitative approach to empirically examine the mechanism and speed of interactions between the different layers of the monetary market and reveal the operational mechanism of the multi-layer system. We suggest that this multi-layer system, while bringing some efficiency loss, also constituted an effective institutional arrangement that helped to ensure the stability of the Chinese economy in tumultuous times. Classification-JEL: B15, B41, E42 Keywords: late Qing China; modern China; monetary system; market hierarchy; exchange rate; silver coins; copper dollars Journal: Frontiers of Economics in China Pages: 436-457 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0021-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:436-457 Template-Type: ReDIF-Article 1.0 Author-Name: Liuyan Zhao Author-Email: zhly@pku.edu.cn Author-Workplace-Name: School of Economics, Peking University, Beijing 100871, China Author-Name: Yan Zhao Author-Email: zhaoyan@ss.pku.edu.cn Author-Workplace-Name: School of Software & Microelectronics, Peking University, Beijing 100871, China Title: Purchasing Power Parity and Price Fluctuations in China before July 1937 Abstract: In this paper, we provide an empirical investigation of the purchasing power parity (PPP) hypothesis for China before July 1937. Using the monthly data from 1922 to 1937, we find clear and consistent evidence in favor of the purchasing power parity relationship. This naturally leads to the conclusion that the degree of Chinese market integration with the West was substantial before July 1937. These findings offer an empirical interpretation of the rise and fall of the Chinese price level during the Great Depression. It also has further implications of the impact of the American Silver Purchase Act of 1934 and the assessment of the 1935 currency reform on the Chinese economy. Classification-JEL: C32, F31, F41 Keywords: purchasing power parity (PPP); silver standard; market integration; 1935 currency reform; deflation; inflation Journal: Frontiers of Economics in China Pages: 458-483 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0022-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:458-483 Template-Type: ReDIF-Article 1.0 Author-Name: Meng Wu Author-Email: daisywu625@gmail.com Author-Workplace-Name: Institute of Historical Research, University of London, London WC1E 7HU, UK Title: How Did the Chinese Shanxi Merchants Determine the Remittance Fees? Micro Firm Analysis of Rishengchang Abstract: This paper examines the Chinese Shanxi piaohao, arguably the most important Chinese indigenous financial institutions in the 19th century. Concentrating on their business strategy, the study constructs a unique firm level set of data of the Rishengchang piaohao and explores the piaohao*s types of client, silver and drafts it dealt in, branch distributions, and terms to cash drafts. Besides this, this article also designs multiple linear regressions and identifies elements that determined remittance fees. My study reveals that, when establishing a new branch, the Rishengchang took the consideration of business conditions as its priority and gradually expanded from cities at prefecture level to those in counties and towns. A growth of business sites also led to an increase in the types of client, silver and draft it accepted. Moreover, as it developed, the interval for the Rishengchang to cash a draft shortened by half. When estimating the remittance functions, my study found that as the amount of silver being remitted increased, the length of time to cash a draft extended and as the average distance between two branches increased, the Rishengchang would charge more in remittance fees. ※Commoners§ and ※gentry§ would pay more than ※firms,§ while ※other piaohao§ would pay lower remittance fees. The drafts sent by telegram would also be much more expensive than those sent by letters or with papers. As the first detailed study on one of the most important and enduring firms in China, this work not only fills the data void where this subject is concerned, but also delineates the historical change of the piaohao*s clients, drafts, business territories and gives profound insights into the rise of the Shanxi piaohao. Classification-JEL: E32, N85, G21, D22 Keywords: Shanxi piaohao; pricing strategy; remittance; micro firm analysis; financial institution; Chinese native banks Journal: Frontiers of Economics in China Pages: 484-504 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0023-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:484-504 Template-Type: ReDIF-Article 1.0 Author-Name: Jinsong Zhao Author-Email: zhaojs@swufe.edu.cn Author-Workplace-Name: School of Economics, Southwestern University of Finance and Economics, Chengdu 611130, China Author-Name: Hao Pang Author-Email: haopang@pku.edu.cn Author-Workplace-Name: School of Economics, Peking University, Beijing 100871, China Title: Surviving Unstable Property Rights in Early Modern China: A Case Study of Young Brother Bank Abstract: China*s banking industry experienced rapid growth during the free access era from 1911 to 1927. However, the reasons private banks were so successful then remain unclear, particularly when property rights were not well protected due to government intervention. Using archived Young Brother Bank documents, we describe the bank*s development from its founding as a family firm through its reinvention from a partnership into a corporation. We focus on organizational form choice and bank performance in this case study. We find that bankers in early modern China gain political connections by placing influential nonfamily members (often, acquisitive local warlords) on boards of directors because this protects them from the depredations of those warlords. This is a precondition for operating family businesses in unstable political circumstances. Classification-JEL: N2, K2, G3 Keywords: organizational form; family bank; early modern China; property rights; banking industry Journal: Frontiers of Economics in China Pages: 505-530 Volume: 13 Issue: 3 Year: 2018 Month: September File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0024-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:505-530 Template-Type: ReDIF-Article 1.0 Author-Name: James J. Heckman Author-Email: jjh@uchicago.edu Author-Workplace-Name: Center for the Economics of Human Development, University of Chicago, Chicago, IL 60637, USA Author-Name: Shuaizhang Feng Author-Email: shuaizhang.feng@foxmail.com Author-Workplace-Name: Institute for Economic and Social Research, Jinan University, Guangzhou 510632, China Title: China's Investments in Skills Abstract: This paper discusses the benefits of investment in skills in China. We highlight the achievements China has made over time in human capital investments and the new challenges that have emerged as the country develops. To fuel China*s further economic growth and social developments, it is essential to take a more holistic view on skill investments. We suggest policies that promote both economic efficiency and social mobility. Classification-JEL: J24, I21, J61 Keywords: human capital; vocational training; migration; China Journal: Frontiers of Economics in China Pages: 531-558 Volume: 13 Issue: 4 Year: 2018 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0025-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:531-558 Template-Type: ReDIF-Article 1.0 Author-Name: Hongjie Wei Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Yan Sun Author-Email: sunyan@mail.shufe.edu.cn Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Meidi Hu Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Title: Model Selection in Spatial Autoregressive Models with Varying Coefficients Abstract: Spatial autoregressive (SAR) models with varying coefficients are useful for capturing heterogeneous effects of the impacts of covariates as well as spatial interaction in empirical studies, and a wide range of popular models can be seen as its special cases, such as linear SAR models. In this study, we will propose a unified model selection method for the SAR model with varying coefficients to achieve two targets simultaneously: (1) variable selection (eliminate irrelevant covariates), and (2) identification of the covariates with constant effect among the relevant covariates. To do so, we follow the idea of group LASSO to incorporate two penalty functions to simultaneously do model selection and estimation. Monte Carlo experiments show that the proposed method performs well in finite samples. Finally, we illustrate the method with an application to the housing data of Chinese cities. Classification-JEL: C14, C21, C52 Keywords: heterogeneous effects, varying coefficient, spatial dependence, model selection, adaptive group LASSO Journal: Frontiers of Economics in China Pages: 559-576 Volume: 13 Issue: 4 Year: 2018 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0026-2 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:559-576 Template-Type: ReDIF-Article 1.0 Author-Name: Muhammad Zubair Mumtaz Author-Email: zubair@s3h.nust.edu.pk Author-Workplace-Name: School of Social Sciences & Humanities, National University of Sciences & Technology, H-12, Islamabad, Pakistan Author-Name: Zachary Alexander Smith Author-Workplace-Name: Department of Economics, Saint Leo University, Saint Leo, FL 33574, USA Title: The Determinants of Chinese Outward Foreign Direct Investment: A Closer Look Abstract: Over the last fifteen years, China rapidly expanded its outward foreign direct investment (OFDI) through remarkable economic growth and the ※go global§ policy. Chinese firms explored investment avenues especially in developing and emerging countries. As a result, China became the third largest contributor of OFDI. We examine the determinants of Chinese OFDI in 67 countries during the period lasting from 2006 to 2015 using the feasible generalized least square method. We find that the size of the economy, market opportunities, cost advantages due to low wage structure, ease of doing business, country risk, and geographical proximity are the prominent factors leading to changes in Chinese OFDI in developing and emerging economies. We find that China*s investments in different developing and emerging countries are driven by a different set of factors and the determinants of Chinese OFDI vary in low and high per capita income countries. Classification-JEL: F21, F23, O57 Keywords: China; outward foreign direct investment (OFDI); emerging and developing countries; globalization Journal: Frontiers of Economics in China Pages: 577-601 Volume: 13 Issue: 4 Year: 2018 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0027-9 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:577-601 Template-Type: ReDIF-Article 1.0 Author-Name: Fuxiang Wu Author-Email: fxiangwu@nju.edu.cn Author-Workplace-Name: School of Business, Nanjing University, Nanjing 210093, China Author-Name: Wei Duan Author-Workplace-Name: School of Business, Nanjing University, Nanjing 210093, China Title: Asset Securitization and Welfare Compensation for House Demolition on New-Type Urbanization in China Abstract: In this paper we design a compensation mechanism for the relocated households in the process of New-Type Urbanization in China. Based on the theories of dynamic rent spatial separation, bid-rent and non-renewable resource exploitation, we give a theretical look at how the current compensation mechanism shapes the welfare of relocated households. Firstly, land rent growth has a spatial difference and the growth rate of the marginal location rent is much higher than that of the mature site. Secondly, there is a demolition championship contest under the sole static money compensation, which can easily lead to land urbanization faster than population urbanization. Thirdly, in the long run the welfare loss of the household is mainly due to the absence of a dynamic compensation mechanism. Furthermore, we design a dynamic compensation mechanism based on the establishment of an asset securitization capital pool, which could be an alternative scheme in the process of New-Type Urbanization. Classification-JEL: F22, F299 Keywords: asset securitization; demolition compensation, New-Type Urbanization Journal: Frontiers of Economics in China Pages: 602-634 Volume: 13 Issue: 4 Year: 2018 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0028-6 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:602-634 Template-Type: ReDIF-Article 1.0 Author-Name: Fang Fang Author-Workplace-Name: School of Public Economics and Administration, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Xuesong Li Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Ximing Chen Author-Workplace-Name: School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Yahong Zhou Author-Email: yahong.zhou@mail.shufe.edu.cn Author-Workplace-Name: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China Title: The Impact of Green Building Labels on the Price of Housing: Evidence from China Abstract: This paper focuses on the willingness to pay for green housing in China. First, we introduce green building related labels in China and briefly discuss the consumers* incentives to buy this kind of building. Second, with the available transaction data in Shanghai, a hedonic regression model is applied to investigate whether or not a price premium in the residential market exists. Furthermore, we use the nonparametric matching model under a treatment framework to see the robustness of our results. The empirical result shows there exists a significant price premium in China. However, the premium does not increase with quality certification tiers. That may imply that homebuyers in China are not sensitive to the differences among green buildings although they are willing to pay a higher price for this newly emerging energy-saving building. And we also give the explanation why this has happened. Classification-JEL: Q2, R2, C5 Keywords: Green Building Evaluation Label (GBEL); hedonic model; treatment effect; matching model; house price Journal: Frontiers of Economics in China Pages: 635-654 Volume: 13 Issue: 4 Year: 2018 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0029-3 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:635-654 Template-Type: ReDIF-Article 1.0 Author-Name: Shangzhou Ji Author-Email: jishzh@suibe.edu.cn Author-Workplace-Name: School of Finance, Shanghai University of International Business and Economics, Shanghai 201620, China Author-Name: George Yungchih Wang Author-Email: wang@soka.ac.jp Author-Workplace-Name: Faculty of International Liberal Arts, Soka University, Tokyo-to, Hachioji-shi Tangi-cho 1-236, Japan Title: Political Connections, Government Regulations and Risk-Taking 〞 Evidence From China Abstract: Sufficient evidence suggests that enterprises under strong government regulations suffer the economic effects of political connections, which not only leads to competitive disadvantages and loss of innovation, but also less willingness to take risks. This paper explores the relationship between political connections and corporate risk-taking behavior in corporate governance. Specifically, in 2008, the Chinese government announced new policies to regulate government officials concurrently holding the positions of independent directors in firms. We sample publicly listed firms in the Chinese A-share market over the period of 2005每2010 and investigate changes in risk-taking behavior due to the new policies. Our findings indicate that a reduction in politically connected independent directors may encourage risk-taking behavior subject to the factors of state ownership, industry regulations, local government control, and corporate characteristics. Classification-JEL: D22, M10, M21 Keywords: political connections; government regulations; risk-taking; independent directors Journal: Frontiers of Economics in China Pages: 655-684 Volume: 13 Issue: 4 Year: 2018 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0030-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:655-684 Template-Type: ReDIF-Article 1.0 Author-Name: Jian Li Author-Email: lijiansid@nju.edu.cn Author-Workplace-Name: School of Economics, Nanjing University, Nanjing 210093, China Author-Name: Yao Lu Author-Workplace-Name: School of Economics, Nanjing University, Nanjing 210093, China Title: Existence and Stability of Steady State in an Augmented Solow Model with Multiple Capital Goods Abstract: This paper relaxes two assumptions on the traditional augmented Solow model: strict concavity of production functions and dual capital goods. It generalizes traditional conclusions of the Solow model by demonstrating that neoclassical properties of a production function are sufficient for the existence and global stability of the steady state in the augmented Solow model with multiple capital goods. Moreover, we prove necessity of essentiality of inputs for a neoclassical production function and generalize the golden rule of capital accumulation. Classification-JEL: C62, O30, O40 Keywords: multiple capital goods; augmented Solow model; essentiality of inputs; steady state; strict concavity Journal: Frontiers of Economics in China Pages: 685-702 Volume: 13 Issue: 4 Year: 2018 Month: December File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0031-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:685-702