Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

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Factor Mobility and Dispersion in Marginal Products: A Case on China
Gong Liutang, Xie Danyang
Front. Econ. China. 2006, 1 (1): 1-13.

Abstract   PDF (392KB)
This paper examines the efficiency in resource allocation in China. We estimate production functions at the provincial level and use these functions to compute time series for marginal products of capital and labor. We found that dispersion in the marginal product of capital declined from1970 to 1984 and then became stable afterward, whereas the dispersion in the marginal product of labor declined initially but the trend has been reversed since 1993. We argue that this reversal may indicate any of the following: (1) policy-driven labor migration adding to labor market inefficiency; (2) the presence of increasing returns in labor; and (3) both capital and labor having become mobile since 1993.
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Issues on Settlement of Final Expenses and Performance Assessment in the Course of Transition: Evidence from China
L? Wei, LIU Yusheng
Front. Econ. China. 2006, 1 (1): 14-38.

Abstract   PDF (232KB)
This paper studies the process and the performance of transition with the following logic: transition is an objective process in accordance with the general principles of economic history; the objectivity is embodied in the expected economic and social effects of transition, the profound economic and social changes in the course of transition, and the different problems facing different transitional stages. Transition is, at the same time, a subjective process involving the participation of the government and the public; the subjectivity is embodied in the thinking on transition, path selection, policy design, and process control. It requires evaluation, correction, and anticipation on the dynamic process with analysis tools and methods that are normally used to validate the subjective thoughts in the objective world to verify whether effects of the subjective action follow and develop the objective principles. It is under such a logical framework that issues on the settlement of final expenses and the performance assessment of transition raised in this paper focus on the improvement in traditional analysis tools and methods and further apply such improvement to China s course of transition. The rudimental premise in this study is the combination of the process of transition, all-roundness of development, and phases of evolution.
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SOE Reform under Oligopolistic Market Structure: The Optimal Choice of State Shares
SUN Qunyan, LI Jie, ZHANG Anming
Front. Econ. China. 2006, 1 (1): 39-47.

Abstract   PDF (124KB)
This paper examines the effect of the change of state shares in a state-owned enterprise (SOE) on the efficiency of the whole society and the payoff of the government. This issue is addressed by setting up a mixed oligopolistic competition model and dividing the analysis into two cases: closed economy and open economy. The basic results are as follows: If the relative production efficiency of an SOE is too low, complete state ownership is not optimal, and privatization will be a necessary step; however, if the relative production efficiency of an SOE is not too low, complete privatization is not optimal both for the government and from the perspective of social welfare. The results can, to a certain extent, provide theoretical support to the government s idea on the SOE reform.
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Reform, Interaction of Policies, and Economic Growth: Evidence from China’s Provincial Panel Data
CHEN Zhao, LU Ming, YAN Ji
Front. Econ. China. 2006, 1 (1): 48-68.

Abstract   PDF (176KB)
Based on provincial panel data, we tested the effects of openness, denationalization, fiscal reform, and their interactions on Chinese regional economic growth. We found the following: (1) Openness, especially the growth of foreign-direct-investment/gross-domesticproduct ratio, has been important in enhancing China s growth since the mid-1980s, while this effect is not so significant in western China. (2) Fiscal reform is another significant factor for economic growth. If local governments deregulate, higher growth will be obtained. In particular, reducing extrabudget expenditure helps push economic growth, especially in western China. (3) The interaction of economic policies, such as openness, denationalization, and fiscal reform, also plays an essential role in local economic growth. Both for the whole nation and for the eastern area, denationalization does not affect growth independently but expands the effects of deregulation. (4) After controlling economic policies and their interactions, conditional convergence exists. (5) With other factors controlled, eastern China achieved higher growth, while the middle and western areas did not differ significantly in growth. (6)Western China, where policy variables have lower explanatory power for growth, has a growth pattern different from those of the eastern and middle areas.
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An Empirical Study on Corporate Governance and Market Valuation in China
BAI Chong-En, LIU Qiao, LU Joe, SONG Frank M., ZHANG Junxi
Front. Econ. China. 2006, 1 (1): 83-111.

Abstract   PDF (353KB)
This paper empirically studies the relationship between the governance mechanisms and the market valuation of publicly listed firms in China. The authors construct measures for corporate governance mechanisms and measures of market valuation for all publicly listed firms on the two stock markets in China by using data from the firm s annual reports. They then investigate how the market-valuation variables are affected by the corporate governance variables while controlling for a number of factors commonly considered in market valuation analysis. A corporate governance index is also constructed to summarize the information contained in the corporate governance variables. The index is found to have statistically and economically significant effects on market valuation. The analysis indicates that investors pay a significant premium for well-governed firms in China, benefiting firms that improve their governance mechanisms.
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Risks, Financing Constraints, and High Savings Ratio in the Rural Economy of China: A Model Incorporating Precautionary Savings and Liquidity Constraints
MA Junlu, TIAN Gang
Front. Econ. China. 2006, 1 (1): 112-125.

Abstract   PDF (211KB)
This paper makes an in-depth investigation on the phenomenon of high savings rate in the rural economy of China between 1978 and 2003. On the basis of precautionary savings theory, we construct a model incorporating the risks, liquidity constrains, and aging population to explain the existence of high savings rate in the rural economy of China. We measure risks with Gini coefficient and marginal propensity to save. We find that these risk indices are positively associated with the higher savings rate and the higher degree of prudence of rural households. Our findings pose an urgency of the reform of rural financial system and the improvement in social security system in the rural economy of China.
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The Effect of Changes in Real Exchange Rates on Employment: Evidence from Manufacturing Industries in China, 1980–2002
FAN Yanhui, SONG Wang
Front. Econ. China. 2006, 1 (1): 126-139.

Abstract   PDF (198KB)
This paper analyzes the effect of changes in real exchange rate on manufacturing employment. Our theoretical model predicts the positive effect of depreciation of real exchange rate on employment through a firm s expectation on changes in real exchange rate and the interaction between real exchange rate and a firm s import and domestic input. Using China s manufacturing data during the 1980 2003 period, we find that depreciation of real exchange rate promotes employment growth in manufacturing industries, while change in real exchange rate is not a significant factor in promoting wage growth. We also find that an increase in export share offsets partially the effects of real exchange rate on employment and real wages.
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Informal Institutions, Consumption Custom, and Assumption of OLG Model—A Theoretical Analysis on Households’ Consumption Decisions in the Oriental Culture and Belief
HUANG Shao′an, SUN Tao
Front. Econ. China. 2006, 1 (1): 140-152.

Abstract   PDF (146KB)
Orthodox consumption theories have not incorporated the overlapping-generations (OLG) model and wealth-stock model, whereas this article explains households  characters in consumption and savings in countries such as China and some other regions from the viewpoints of social convention, moral formation, ethics, and other informal institutions. The authors exploit and extend the OLG model, introduce the concepts of bequest, gift, and wealth preference to the economic agent s utility function, then apply optimal conditions to analyzing the characters and problems concerning consumption and savings behavior. Furthermore, they deliberate on the effects of this analysis on government macroeconomic policies and suggest some relevant theoretical thinking and solutions.
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