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On Deep-Rooted Problems in China’s Economy
Guoqiang Tian
Frontiers of Economics in China. 2011, 6 (3): 345-358.
https://doi.org/10.1007/s11459-011-0137-1
China’s economy is currently at a crossroad leading to two different directions. One is to further deepen the reform, concentrate on crucial aspects and relax control over details, govern by non-intervention and let the market play an increasing role and lead the economy; while the other is to enhance the state sector with weakening the private sector, and let the government play a greater role and lead the economy. Which direction should China head for? The answer would undoubtedly be the former. As such, this paper argues that there does not exist the so-called “China Model” and attributes the deep-seated problems caused by those misconceptions in China’s economy to three pairs of “over-emphasis” versus “under-emphasis”, namely, over-emphasis on the government versus under-emphasis on the market, over-emphasis on enriching state versus under-emphasis on enriching the people, and over-emphasis on development versus under-emphasis on public service. Moreover, in regard to how to solve these problems, the paper proposes to further advance the two fundamental transformations of government functions: (1) to transform from a development-oriented government to a service-oriented government, and (2) to transform from an omnipotent government to a limited government.
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Rationalizing Multiple Consumption-Saving Puzzles in a Unified Framework
Kevin X. D. Huang, Frank Caliendo
Frontiers of Economics in China. 2011, 6 (3): 359-388.
https://doi.org/10.1007/s11459-011-0138-0
Empirical evidence suggests that it may cost time, effort, and resources to implement an optimal consumption-saving plan, although the cost may differ across individuals. This paper explores the implications of such friction. We begin by documenting a series of facts on consumption and savings over the life cycle, each of which goes against the prediction of the standard life-cycle model. While the existing studies demonstrate how various permutations of the benchmark model may help resolve one or another of these puzzles, it appears difficult to jointly rationalize even a small subset of these facts within the existing theories. We then incorporate a feature of costly implementation into the benchmark model and show that the addition of this one feature moves in the right direction in jointly resolving all these puzzles. This friction is the sole and common mechanism in our model for rationalizing this series of facts, as we intentionally abstract from the mechanisms explored in the existing literature that are known to help explain one or another of these facts, in order to isolate the role of costly implementation. The implementation costs in the model are small, yet our results show that the mechanism can be important in complementing the existing theories to help account for these consumption and saving facts in a unified framework.
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