Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

   Online First

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Economic structural reform and China’s financial security —Issues, logic and countermeasures
CHEN Yulu, WANG Fang
Front. Econ. China. 2007, 2 (2): 151-168.

Abstract   PDF (391KB)
The authors believe that the financial operation based on the issuance of paper money in excess of economic capacity resulting from dependence on the state investment is the central manifestation of factors of China s financial insecurity. The financial support for the economic reform, the financial reform and the impact of globalization constitute the major logic of its formation. The fundamentals to safeguard financial security lie in the persistence of the state s comprehensive development strategy, so as to maintain long-term accumulation of the state s net wealth and the stability of faith in markets.
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Institutional causes for the slowing transition, unemployment and unequal distribution
ZHOU Tianyong
Front. Econ. China. 2007, 2 (2): 169-186.

Abstract   PDF (320KB)
Usually 65% 80% of the employment can be taken by small-and-medium-sized enterprises in a country. The more small-and-medium-sized enterprises are active in the economy, the higher proportion of the middle income classes in the population, and the lower proportion of the poor people caused by unemployment and under-employment. Therefore, without changing the policy inclination to support gigantic or large companies we cannot solve the problem of surplus on labor force, urban unemployment and gap of income distribution. Now we may face the danger of developing into the Latin-America trap . At present we should focus on institutional reform of the government and promote the development of small-and-medium-sized enterprises.
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The relationship between education and employment: A theoretical analysis and empirical test
CHEN Zhongchang, WU Yongqiu
Front. Econ. China. 2007, 2 (2): 187-211.

Abstract   PDF (505KB)
In this paper, we divide the process of educational development into two aspects: the change in educational structure and the expansion of educational scale. Based on this hypothesis, we analyze the relationships between each of the two aspects and employment respectively. In this paper, the factors and the transmission mechanism of the influence that education has on employment are also explained. Then, the theoretical models of the relationship between education and employment are built up. Finally, we use the empirical data collected in China to test the theoretical models and give explanations to the status quo of the unemployment structure within various educational levels. It suggests that: the development of education in China at present is beneficial to the increase in the employment rate, the increase in the proportion of the laborers with junior school education has negative effects on employment, and the development of higher education creates positive effects on the employment, but no evidence shows any significant correlation between the proportion of the laborers with senior high school education and the unemployment rate.
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Total Factor Productivity in Chinese agriculture: The role of infrastructure
CHEN Weiping, DING Ying
Front. Econ. China. 2007, 2 (2): 212-223.

Abstract   PDF (337KB)
This paper uses the Malmquist index to examine the sources of Total Factor Productivity (TFP) in Chinese agriculture. The overall goal of this study is to create a framework for assessing the trend of China s agricultural infrastructure and to measure its impact on Total Factor Productivity. The main methodological contribution is to provide more contributive measure of crop-specific technologies. Based on the province-level panel data set during 1988 2002, the primary finding is that infrastructure has positively and statistically significant association with the estimated coefficient on Total Factor Productivity for rice, wheat, maize, and bean.
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Empirical study on the infl uence of RMB exchange rate misalignment on China’s export —Based on the perspective of dualistic economic structure
L? Jian
Front. Econ. China. 2007, 2 (2): 224-236.

Abstract   PDF (431KB)
Using data from 1978 2005, this paper estimates RMB equilibrium exchange rate and misalignment respectively, and uses Engle-Granger (E-G) two-step method, error correction model to analyze the influence of RMB exchange rate misalignment on China s export. Because China is the economic transitional country with the character of dualistic economic structure, this paper introduces a control variant into the model which is the gap between agriculture and industry contribution to GDP. Conclusion shows that this model is more credible and stable. There is an obvious cointegration between China s export and RMB exchange rate misalignment, real effective exchange rate, domestic GDP and foreign weighted average GDP. RMB exchange rate misalignment has an obvious negative influence on China s export, but it has self-corrected dynamic mechanism. Then using binary Logit model, this paper concludes that the bigger RMB underestimated misalignment is, the bigger net export probability is, which is good for export. The bigger RMB overestimated misalignment is, the smaller net export probability is, which is bad for export.
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Fiscal competition and the structure of local public expenditure in China
ZHANG Henglong, CHEN Xian
Front. Econ. China. 2007, 2 (2): 237-249.

Abstract   PDF (412KB)
This article examines the impact of intergovernmental fiscal competition on local public expenditure in China under current performance assessment system in which GDP is a critical factor. First, we present the assignment of public goods and tax burden and the share of foreign direct investment (FDI) of 30 provinces, and we find that current fiscal competition in China has taken the form of public expenditure improvement accompanied by preferential tax policies. Second, we regress the share of FDI on different components of provincial public expenditure, and find that the share of FDI is correlated negatively with the public service, tax burden and health care service while positively with infrastructure development. Therefore, FDI-based infrastructural investment crowds out public services investment, which fails to support the view that fiscal competition improves social welfares.
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Political competition and bilateral direct investments
YU Miaojie
Front. Econ. China. 2007, 2 (2): 250-274.

Abstract   PDF (508KB)
This paper investigates a basic question about the international political economy why is international trade not free? To answer this question, we modified Grossman and Helpman (1994) by considering that interest lobbies make political contributions to both the incumbent government and the political challenger in order to influence the incumbent government s choice of trade policy. By examining the contribution schedules under a framework of bilateral direct investments, we find that the modified Ramsey rule still holds under our setting.
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Chinese consumption and asset returns: An analysis across income groups
WANG Liping
Front. Econ. China. 2007, 2 (2): 275-288.

Abstract   PDF (393KB)
The equity premium puzzle is found during the test of the Consumption-based Capital Asset Pricing Model (CCAPM) with aggregate consumption data. Because of income disparity, many consumers lack financial assets to intertemporally allocate their consumptions under income constraints. Thus, it is likely to lead to a specification error by employing aggregate consumption data to test the CCAPM. This paper examines the impacts of the economically constrained (low-income) consumers and unconstrained (high-income) consumers on the CCAPM using urban consumption expenditures in China delineated by consumer income, and tests the income constraint hypothesis. The empirical results show that the CCAPM is not more consistent with the consumption pattern of the higher-income consumers. Including the income constraint into the analyses of the consumption and asset returns does not unravel the equity premium puzzle.
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8 articles