Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

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Empirical Evidence of the Leverage Effect in a Stochastic Volatility Model: A Realized Volatility Approach
Dinghai Xu, Yuying Li
Front Econ Chin. 2012, 7 (1): 22-43.  
https://doi.org/10.3868/s060-001-012-0002-6

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Increasing attention has been focused on the analysis of the realized volatility, which can be treated as a proxy for the true volatility. In this paper, we study the potential use of the realized volatility as a proxy in a stochastic volatility model estimation. We estimate the leveraged stochastic volatility model using the realized volatility computed from five popular methods across six sampling-frequency transaction data (from 1-min to 60- min) based on the trust region method. Availability of the realized volatility allows us to estimate the model parameters via the MLE and thus avoids computational challenge in the high dimensional integration. Six stock indices are considered in the empirical investigation. We discover some consistent findings and interesting patterns from the empirical results. In general, the significant leverage effect is consistently detected at each sampling frequency and the volatility persistence becomes weaker at the lower sampling frequency.

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An Accounting Method for Economic Growth
Hongchun Zhao
Front Econ Chin. 2012, 7 (1): 44-69.  
https://doi.org/10.3868/s060-001-012-0003-3

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As Chari et al. (2007) indicate, many growth theories explaining frictions in real economies are equivalent to a competitive economy, with some exogenous taxes. Using this idea, I developed an accounting method for identifying fundamental causes of economic growth. A two-sector neoclassical growth model with taxes is used as a prototype economy, and its equilibrium conditions define wedges. These wedges endogenously determine the long run growth rate, which is exogenous and not correlated with any other variables in a one-sector growth model. Furthermore, the importance of wedges in explaining the long-run growth rate can be evaluated through the use of a prototype economy. Applying this method to fifty countries reveals that, among seven wedges, two wedges that are respectively associated with the production function and the Euler equation for human capital are important in explaining economic growth.

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Socioeconomic Status and Obesity Gradient over Age: New Evidence from China
Bing Ma
Front Econ Chin. 2012, 7 (1): 70-93.  
https://doi.org/10.3868/s060-001-012-0004-0

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This paper presents a systematic analysis of the impact of socioeconomic status (SES) on overweight and obesity in China and investigates how and why the SES-obesity gradient differs with age. Using a longitudinal sample drawn from the China Health and Nutrition Survey (CHNS), I find that body mass index (BMI) is positively associated with SES during early childhood but becomes inversely related to childhood SES as children age into adulthood. Estimation results show that children from low SES families are less likely to be overweight or obese than their median and high SES peers. The results from subsamples stratified by living area reveal that the SES gaps of obesity are generally larger for urban residents than rural residents. Females are significantly less likely to be overweight than males in China. The SES during childhood has independent effects after controlling for respondents’ contemporaneous SES. The relationship between the contemporaneous SES of a male adult and his chance of being overweight or obese is significantly positive, while the contemporaneous SES of a female adult is negatively related to her chance of being overweight or obese.

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Accounting for the "Subnational Penn Effect"—A General Theory of Regional and National Price Levels
Xiang Tang
Front Econ Chin. 2012, 7 (1): 94-121.  
https://doi.org/10.3868/s060-001-012-0005-7

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As an extension of the neoclassical urban systems theory (Henderson, 1974), we develop a general theory of regional (inter-city) price dispersion which also explains the “subnational Penn effect,” i.e., cross-city correlations among population size, prices, real income and human capital stock. The model is also a theory of international price dispersion that is observationally equivalent to and more appealing than the Balassa-Samuelson theory, implying that the (international) Penn effect may simply be an aggregate result of the “subnational Penn effect.” Furthermore, it shows that, contrary to the popular view, economic integration can increase as well as decrease spatial price variation.

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Children's Migration Decisions and Elderly Support in China: Evidences from CHARLS Pilot Data
Meng Tian
Front Econ Chin. 2012, 7 (1): 122-140.  
https://doi.org/10.3868/s060-001-012-0006-4

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The purpose of this paper is to explain the determinants of migration in China with special concern for elderly support based on evidences from China Health and Retirement Longitudinal Study (CHARLS) pilot data. We find parents’ needs for care significantly affect adult children’s participation in migrant labor market. Joint family decisions have also been made among adult siblings as far as elderly support is concerned. Different patterns of migrant labor force participation in Zhejiang and Gansu provinces largely reflect the differences between their respective migrant labor markets. Understanding of these new patterns of China’s internal migration helps policy makers in China and other developing counties formulate effective social policies, and consequently, a more appropriate urbanization path.

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Measurement of Technology Spillovers
Kunrong Shen, Jian Li
Front Econ Chin. 2012, 7 (1): 141-161.  
https://doi.org/10.3868/s060-001-012-0007-1

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This paper builds an externality-based model with physical and R&D capital, proves the linearity of technology functions, and derives two measures of spillovers from the relative differences between social and private rates of return. China’s regional empiric studies exhibit a reverse direction of spillovers between foreign invested firms and local economy and provide an estimation of the spillover measures of between 13% and 18%.

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6 articles