Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

邮发代号 80-978




2016年, 第11卷 第3期 出版日期:2016-09-23 上一期   下一期
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A Biography of Gregory C. Chow
Ben Bernanke
Frontiers of Economics in China. 2016, 11 (3): 351-354.

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The Competitive Saving Motive: Concept, Evidence, and Implications
Shang-Jin Wei,Xiaobo Zhang
Frontiers of Economics in China. 2016, 11 (3): 355-366.

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This short essay surveys recent literature on the competitive saving motive and its broader economic implications. The competitive saving motive is defined as saving to improve one’s status relative to other competitors for dating and marriage partners. Here are some of the key results of the recent literature: (i) cross-country evidence show that greater gender imbalances tend to correspond with higher savings rates; (ii) household-level evidence suggest that: (a) families with unmarried sons in rural regions with more skewed sex ratios tend to have higher savings rates, while savings rates of families with unmarried daughters appear uncorrelated with gender imbalances; and (b) savings rates of families in cities tend to rise with the local sex ratio; (iii) rising sex ratios contribute nearly half of the rise in housing prices in the People’s Republic of China; and (iv) families with sons in regions of greater sex ratios are more likely to become entrepreneurs and take risky jobs to earn more income.

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Why Doesn’t the Hong Kong Government Sell More Public Land?
Saku Aura, Francis K. Cheung, Shawn Ni
Frontiers of Economics in China. 2016, 11 (3): 367-389.

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Why doesn’t the Hong Kong government sell more of its enormous land holding to lower the city’s high housing price and increase the residents’ small living space? We answer the question in an overlapping generations framework. We show that while a rapid and complete privatization of government land is efficient in the absence of externalities; it is made politically difficult by a compensation gap, when the losses of current property owners are greater than the government revenue from land sales. We argue that the cross-country diversity of government land ownership owes to historical incidents in some countries (such as the U.S. in the 19th century) that allowed disposal of government land without filling the compensation gap and the absence of such incidents in others (such as Hong Kong).

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Hollowing out of the Real Economy: Evidence from China’s Listed Firms
Xu Li,Xiang Shao,Zhigang Tao
Frontiers of Economics in China. 2016, 11 (3): 390-409.

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The paper studies an often-observed phenomenon of diversification of manufacturing firms into real estate development in East Asian economies. Utilizing a sudden change in China’s accounting standards that requires firms to disclose information about their real estate holdings for investment purpose (or investment property), we examine both the impact of such diversification on firms’ investment in their original business and the stock market response to such diversification. Our results confirm there exists underinvestment in original business (or hollowing out of the real economy) for firms diversifying into real estate, and that there is a lack of investor response to such diversification, in both short-run and long-run. Our study calls for further research on the role of real estate development in the long-run competitiveness of developing economies.

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Understanding China’s Foreign Trade Policy: A Literature Review
Tan Li,Larry Qiu,Ying Xue
Frontiers of Economics in China. 2016, 11 (3): 410-438.

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China has continued to experience rapid growth in its foreign trade since the implementation of its reform and opening-up policies. In recent years, the country has become the world’s largest exporter and second largest importer of goods and commodities. China’s trade policy has also gradually been transforming from protectionism to open trade. This paper aims to provide a comprehensive survey on the literature of China’s trade policy. The review covers (1) export and import policies, (2) tariff and non-tariff barriers, and (3) policy effects and motivations behind the policy design. This paper also reports on important topics and issues that deserve more research attention.

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Option Pricing Based on Alternative Jump Size Distributions
Jian Chen,Chenghu Ma
Frontiers of Economics in China. 2016, 11 (3): 439-467.

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It is well known that volatility smirks and heavy-tailed asset return distributions are two violations of the Black-Scholes model. This paper investigates the role of jump size distribution played in explaining these two abnormalities. We consider a jump-diffusion model with Laplace jump size distribution, in comparison to the conventional normal distribution. In addition, our analysis is built upon a pure exchange economy, in which the representative agent’s risk preference shows a fanning characteristic. We find that, when a fanning effect is present, Laplace model produces a more remarkable leptokurtic pattern of the risk-neutral distribution implied by options, as well as generating more pronounced volatility smirks than the normal model.

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Redundancy of Moment Conditions in Restricted GMM Estimation
Hailong Qian
Frontiers of Economics in China. 2016, 11 (3): 468-497.

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Using a novel approach to calculating the rank of the difference of two asymptotic variance matrices, The author derives the necessary and sufficient conditions for an extra set of moment conditions to be redundant given a set of moment conditions in GMM estimation with general nonlinear restrictions. The necessary and sufficient conditions derived in this paper include as a special case the redundancy of moment conditions for GMM estimation without restrictions that was first derived by Breusch et al. (1999). Therefore this paper advances the research on redundancy of moment conditions from unrestricted GMM estimation to a larger class of GMM estimation. To show their usefulness, the main results of the current paper are applied to instrumental variables estimation of linear regression models and the efficient estimation of seemingly unrelated regressions models, subject to restrictions.

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A Dynamic Model of the Choice of Technology in Economic Development
Haiwen Zhou,Ruhai Zhou
Frontiers of Economics in China. 2016, 11 (3): 498-518.

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In this overlapping-generations model, there is unemployment in the manufacturing sector. Manufacturing firms engage in oligopolistic competition and choose technologies to maximize profits. With capital as a fixed cost of production, increasing returns in the manufacturing sector exist. In the unique steady state, first, when individuals become more patient, the savings rate increases while the level of an individual’s income decreases. Second, an increase in population or percentage of income spent on manufactured goods does not change steady-state technology while the level of an individual’s income decreases. Third, an increase in the wage rate leads manufacturing firms to choose more advanced technologies and the steady-state capital stock increases. Finally, an increase in the level of subsidies to technology adoption does not change steady-state technology.

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Spatial Competition and Lowest Price Commitment
Hao Wang
Frontiers of Economics in China. 2016, 11 (3): 519-536.

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This paper suggests that credibly committing to the strictly lowest price can be profitable and self-fulfilling in a spatial price competition. Consumers live in multiple residential zones. Each zone has a store. Consumers incur heterogeneous transportation costs moving between two zones. When there is one store credibly committing to the strictly lowest price, there is a pure strategy equilibrium in which a discount store directly competes with all other stores. The discount store offers the lowest price, takes the largest market share, and makes more profits than the other stores. Moreover, the low price commitment is not binding in equilibrium, which implies that the commitment is self-fulfilling.

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