China Economic Quarterly Vol.14, No.3


 date:2015-6-5 8:26:00 source:BiMBA         

China Economic Quarterly

Vol.14          No.3

April 2015

CONTENTS

Papers

Is Chinas Monetary Quantitative Rule Invalid

………………………………………………………………………………Jilin  Wu     Erhua  Zhang 827

Experimental Economics Bridging to Real World: The Literature Review of Field Experiments

……………………………………………………………………………………Jun Luo     Dingding Wang     Hang Ye     Yefeng Chen 853

Special Economic ZonesComparative Advantageand Industrial Structural Transformation

……………………………………………………………………………Lixing Li     Guangjun Shen 885

Farm to MarketDynamics of Food Price in China

…………………………………………………………………………………isheng Yang     Juan Xu 911

The Study of Health Insurance on Households’  Portfolio Choice in Urban and Rural China

…………………………………………………………Qin Zhou     Yan Yuan     Wenbin Zang 931

Determinants of Crude Oil PricesDriven by Financial Speculations or Chinas Demands

………………………………………………………………………………Lihui Tian     Dekai Tan 961

A Study on Risk Premium and Commodity Futures Pricing: Based on the Perspective of Oil Scarcity

……………………………………………………………………Xuewen Zhang     Wensong Sun 983

The Chinas Electricity Structural Reforms and Indusial Growth19992010

……………………………………………………………………………………Rukai Gong 1005

Imports and Firms  ProductivityEvidence from China

………………………………………………Jie Zhang     Wenping Zheng     Zhiyuan Chen 1029

City Size and Labor ProductivityAre Chinese Cities Too Small?—Based on Chinese City-level Data Analysis

………………………………………………Jing Liang     Qinghua Zhang     Liutang Gong 1053

Productivity Advantages in Cluster RegionsAgglomeration or Selection

…………………………………………………………Haiyang Liu     Yuhai Liu     Peng Yuan 1073

County Administrated by Province ReformFiscal Decentralization and Peoples WelfareA Difference-in-Differences Estimation

………………………………………………………Zhibo Tan     LiAn  Zhou     Yue Zhao 1093

DemocracyPolitical Instability and Fear of Floating

……………………………………………………………………………Xiaohui Liu     Jing Zhang 1115

A New Re-examination of the Relationship between Economic Performance and Local Leader Promotion: New Theory andNew Evidence from City-level Data

………………………………………………………Danglun Luo     Guoman She     Jie Chen 1145

Limited AttentionIndustrylevel Information Diffusion and Stock Returns

………………………Conghui Hu     Jianming Zheng     YuJane Liu     Tianqi Wu  1173

The Causes and Properties of Soft Budget ConstraintAn Improved Generalized Model

…………………………………………………Zuoshi Xie     Shanjie Li 1193

 

Is Chinas Monetary Quantitative Rule Invalid

JILIN WU*

Shandong University

ERHUA ZHANG

Fudan University

Abstract     Using instrument variables quantile regression methodthis paper explores Chinas monetary reaction function in terms of McCallum rule. We find M1 still plays an effective role in monetary policyand the reaction function exhibits obvious nonlinearity and asymmetry. Prior to 1996the central banks operations on M1 can easily lead to large fluctuations in inflation and growthbut due to changes in the operations of monetary policy after 1996M1 can effectively control inflationachieve the goal of stimulating GDP growth and maintain stable exchange rates. AdditionallyM2 can help iron out fluctuations in outputbut can not help manage inflation and real exchange rateso it is still not suitable as an intermediate target of monetary policy.

Key Words     Monetary PolicyQuantile RegressionMcCallum Rule

JEL Classification     C32E32E52

 

Experimental Economics Bridging to Real World: The Literature Review of Field Experiments

JUN  LUO*    

HANG YE    

YEFENG CHEN

Zhejiang University

DINGDING WANG

Peking University

Abstract     In this paper we summarize the research methodscore ideasdevelopment routeclassifications as defined for field experiments in economicsthen we introduce some important examples which used field experiments to solve problems in economics in recent years. We also discuss the prospect of field experiment studies in China. Apart from trying to help domestic economists better understand field experiments studieswe also provide plausible ideas and suggestions on how to carry out field experiments to bridge economics studies and the realworld in the complicated and diverse Chinese scenario context.

Key Words     Experimental EconomicsField ExperimentsChinese Context

JEL Classification     C91C92C93

 

Special Economic ZonesComparative Advantageand Industrial Structural Transformation

LIXING LI*    

GUANGJUN SHEN

Abstract     Industrial structural transformation is one of the key requirements for economic development. One of the most important policies adopted by the Chinese local governments to transform industrial structure is to set up various types of special economic zones (SEZs).Existing studies mainly examine the effect of SEZs on FDI inflowproductivityand output levelbut have largely ignored the industrial structural transformationwhich is the focus of this paper. Matching the Chinese Industrial Enterprises Database with city level datawe find that the set-up of SEZs significantly boosts the structural transformation of manufacturing sectorsespecially for those target industries of SEZs. FurthermoreSEZs are more effective when the target industry follows the local comparative advantage. The study provides theoretical support for SEZsand practical principles for identifying potential industries as well.

Key Words     Special Economic ZoneComparative Advantage Industrial Structure

JEL Classification     L16L52O11

 

Farm to MarketDynamics of Food Price in China

JISHENGY ANG*    

JUAN XU

Abstract     The rising food price is the main driving force for recent inflation in China. Based on a panel SVAR with interactive effects modelthis paper examines the pricing mechanism of food along the supply chaintaking all factorsincluding monetary shockinto account. It shows that recent food inflation can be attributed to demand shocksresulted from monetary policy and expectationrather than fluctuations in supply or vertical price transmission. Alsorealtime control of agricultural production does not help stabilize inflationit exemplifies output fluctuations instead. The rising food price increases the risk of agricultural producers rather than their benefit.

Key Words     Food PriceVertical Price TransmissionOutput Fluctuation

JEL Classification     C33E31Q11

 

The Study of Health Insurance on Households Portfolio Choice in Urban and Rural China

QIN ZHOU

Peking University

YAN YUAN    

WENBIN ZANG*

Southwestern University of Finance and Economics

Abstract     Under health insurance convergehouseholds may reduce their precautionary saving and adjust their portfolio allocation. In the theoretical framework of precautionary savingit has been found that health insurance promotes households consumptions in Chinabut few papers have investigated the effect of health insurance on the structure of households assets. Using 2002 Chinese Household Income Project Survey (CHIPS)we explore the effect of health insurance on portfolio choices by rural and urban households respectively. We find that health insurance has significant effects on portfolio choices in urban and rural areas. The insured households prefer to assets with higher risk more than households without insurance. This study has theoretical and practical significance in understanding the households investment behavior under uncertainty.

Key Words     Health InsurancePortfolio ChoicePrecautionary Saving

JEL Classification     G11I13D12

 

Determinants of Crude Oil PricesDrivenby Financial Speculations or Chinas Demands

LIHUI TIAN    

DEKAI TAN*

Nankai University

Abstract     Does China’s demand push up the oil prices We empirically find that the stock market of the United States plays an important role in pricing the oil. Although the influence of the Chinese demand factor is somehow significant in the short termthe American financial factor is more influential. We further find that the American financial factor has the lead effect as well as the amplification effect on changing oil prices. We argue that it is not the demand from Chinabut the American financial factor that has shaped the oil prices during the period from 2002 to 2012.

Key Words     Energy FinanceOil PricingDemand from China

JEL Classification     Q40Q41G10

 

A Study on Risk Premium and Commodity Futures Pricing: Based on the Perspective of Oil Scarcity

XUEWEN ZHANG*

Shanghai University of Finance and Economics

WENSONGSUN

Huazhong University of Science and Technology

Abstract     This paper does both theoretical and empirical study on the scarcity commodity pricingfrom the perspective of oil scarcity and by dividing crude oil spot price into assets value and scarcity price with the Ribeiro and Hodges (2004) model. The results show that the future commodity scarcitys expected change is the determinant of Samuelson Effect”;the commodityspecific net hedging pressure risk premium and the scarcity risk premium coexist and affect crude oil futures pricingcompared to the two commodityspecific risk factorsasset market risk factors such as exchange rates and stock market shocks affect futures returns and the term structure of futures pricesin a much more homogeneous wayin factcommodity futures is also a kind of valuable investment.

Key Words     Risk PremiumCommodity Futures PricingUnderlying Commodity Scarcity

JEL Classification     G11G13G15

 

The Chinas Electricity Structural Reforms and Industrial Growth19992010

RUKAIGONG*

Abstract     This paper provides an econometric assessment on the effect of structural reforms on the growth of electricity industry in China from the perspectives of competitionownership and regulations. The empirical results show that(a) the competitionownership reform and regulation policy have all improved productivitythereby contribute to the rapid growth of the industry. In particularthe effect of ownership reform is more significant than others(b) during the period of 1999 to 2010the reforms account for 937% of the indusial growthand this contribution has risen from 720% in the initial stagewhich is from 1999 to 2004to 1067% in the deepening stagewhich is from 2005 to 2010. The results are robust to different models combined by various performance and reform variablesand have very important policy implications for further reforms in the electricity industry.

Key Words     CompetitionOwnership ReformsRegulation Policy

JEL Classification     L43L52O43

 

Imports and Firms’  ProductivityEvidence from China

JIEZHANG    

WENPINGZHENG    

ZHIYUANCHEN*

Renmin University of China

Abstract     We use combined data of Chinese industrial enterprises database and customs trade statistics from 2000 to 2006 to study the effect of imports on productivity in the perspectives of intermediate goods and capital goods. The results of various tests show thatthe scale of intermediate goods and the scale of capital goods imports have significant positive correlation with productivity respectivelywhich means the imports of intermediate goods and capital goods are promoting the productivity of firms. This proves that import is an important channel to promote Chinas economic development. From the estimation results of subsamplethe imports of intermediate goods have more obvious effect in promoting productivity on nonexportpositive R&D and private enterpriseswhile the imports of capital goods have more obvious effect on positive exportpositive R&D and private enterprise. In particularexports show a very prominent negative effect on firms productivity when taken imports in consideration.

Key Words     Import of Intermediate GoodsImport of Capital GoodsFirms Productivity

JEL Classification     F00C10D24

 

City Size and Labor ProductivityAre Chinese Cities Too Small?—Based on Chinese City-level Data Analysis

JING LIANG*    

QINGHUA ZHANG    

LIUTANG GONG

Peking University

Abstract     This paper derives the relationship between city size and labor productivity in a new economic geography model from which we get the econometric model. Based on the data analysis to a sample of prefecturelevel cities from 2003 to 2009this paper shows an inverted U shape of labor productivity against city size in prefecturelevel cities. Using a comparative methodwe find that there are less undersized cities in China and the size of most cities are near the optimal sizebut at the same time the oversized cities have increased. In additioncompared with eastern and central cities that develop more rapidlywestern cities show significantly positive correlation between city size and labor productivity.

Key Words     Agglomeration EconomiesLabor ProductivityOptimal City Size

JEL Classification     D62O18R12

 

Productivity Advantages in Cluster RegionsAgglomeration or Selection

HAIYANGLIU*    

YUHAILIU

Dalian University of Technology

PENGYUAN

Southwestern University of Finance and Economics

Abstract     Firms in cluster regions tend to have productivity advantage. New Economic Geography considers that it comes from agglomeration effectwhile New New Economic Geography also admits selection effect. We prove the coexistence of the two effectsthen use firm level data and find firms of cluster prefectures have these features(1) they have productivity advantage(2) howeverthere are fewer firms with either lowest or highest efficiencyand (3) they have high startup productivityhigh elimination rate and low growth rate. As a conclusionthe productivity advantage in cluster region comes from selection effect instead of agglomeration effect.

Key Words     New New Economic GeographyAgglomerationSelection

JEL Classification     O18R12P25

County Administrated by Province ReformFiscal Decentralization and People’s WelfareA Difference-in-Differences Estimation

ZHIBOTAN*

Fudan University

LIANZHOU

Peking University

YUEZHAO

The Peoples Bank of China

Abstract     Using a large dataset about provincescities and counties in China during 19992010this paper employs DID to evaluate the impacts of County Directly Administrated by Province reform on fiscal decentralization and peoples welfare. We find that the reform significantly increases the fiscal decentralizationmiddle school student enrollment ratio and social assistance at the county levelbut the cities are hurt in terms of fiscal decentralization. The reform also decreases the urbanrural income gap. Moreoverthe effect is lasting. This paper provides systematic evidence about the impacts of reform and evaluates its effects on counties and cities comprehensively.

Key Words     County Administrated by Province ReformFiscal DecentralizationWelfare

JEL Classification     E65, H52, H53

 

DemocracyPolitical Instability and Fear of Floating

XIAOHUILIU*    

JINGZHANG

Southwestern University of Finance and Economics

Abstract     Fear of floating prevailing in developing and new emerging market economies in the past twenty years is an important subfield in international finance. Why are these economies more interested in such a policyThe paper explores the underlying forces contributing to the phenomenon from perspectives of democracy and political instability. It is hypothesized that a more democratic and politically unstable country is more associated with fear of floating. Using a panel data sample covering 150 developing and new emerging countries in 19742007the paper tests these hypotheses and finds evidences supportive of the hypotheses.

Key Words     DemocracyPolitical InstabilityFear of Floating

JEL Classification     F41F33F59

 

A New Re-examination of the Relationship between Economic Performance and Local Leader’s Promotion: New Theory and New Evidence from City-level Data

DANGLUN LUO

Sun Yat-sen University

GUOMAN SHE

Fudan University

JIE CHEN*

Shanghai University of Finance and Economics

Abstract     Founded on the perspectives of political legibility and authoritative government”,the study discusses the relationship between local leader’s promotion and economic growth in Chinese cities from 19992009. The research confirms that better economic growth significantly boosts the promotion probability of the secretarywhile the economic performance of the immediate predecessor acts as a benchmark. Meanwhilesecretaries with both work experiences at university or state-owned enterprise and rotating experiences are more likely to be promoted. Nonethelessthese elements dont contribute to weaken the strong relationship between economic performance and promotion. Furthermorethe economic rise stimulated by TFP is linked closely with the promotion.

Key Words     Tournament Competition HypothesisEconomic GrowthEconomic Efficiency

JEL Classification     H76H77O16

 

Limited AttentionIndustry-level Information Diffusion and Stock Returns

CONGHUI HU*    

JIANMING ZHENG

University of International Business and Economics

YUJANE LIU

Peking University

TIANQI WU

HSBCHong Kong)

Abstract     We exploit segment sales information contained in the appendix of listed firms annual financial report to quantify the frictions in the diffusion of information in the stock market and investigate how investors limited attention impacts information incorporation into stock prices. The results show that conglomerate firms respond more slowly to industrylevel information than standalone firms. A long/short strategy based on this effect generates returns of around 14% per month. We further show that this return predictability is not driven by stock momentumindustry momentum or investors overreaction. The predictability becomes more pronounced for firms with poor market performancelower turnoverlower fraction of sophisticated investors ownership and firms that are harder to valueindicating the impact of limited attention and limited processing ability on information diffusion and stock prices.

Key Words     Limited AttentionInformation DiffusionReturn predictability

JEL Classification     G10G11G14

 

The Causes and Properties of Soft Budget ConstraintAn Improved Generalized Model

ZUOSHIXIE*

Zhejiang University of Finance and Economics

SHANJIELI

American Da Tang Group

Abstract     This article builds a dynamic commitment inconformity model which includes the cost of project selection and institutive choice. In this model we converges traditional and latest explanations to the causes and properties of soft budget constraints into a uniformed analyzing framework. The suggested possible ways to harden the budget constraint includeprivatizing ownership to individuals as clarified as possiblelowering transaction cost and bringing price mechanism into full play in the operation of privatebased economydividing political rightsincreasing negotiation costs on how to use public assetsand minimizing government interference in public organizations and realms.

Key Words     Soft Budget ConstraintDynamic CommitmentCost Separation

JEL Classification     A10D01P20

 
 
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