Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

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, Volume 9 Issue 2 Previous Issue    Next Issue
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A Note on Covariance Matrix Estimation in Quantile Regressions
Hongtao Guo,Zhijie Xiao
Front. Econ. China. 2014, 9 (2): 165-173.  
https://doi.org/10.3868/s060-003-014-0009-3

Abstract   PDF (241KB)

This note discusses some issues related to bandwidth selection based on moment expansions of the mean squared error (MSE) of the regression quantile estimator. We use higher order expansions to provide a way to distinguish among asymptotically equivalent nonparametric estimators. We derive approximations to the (standardized) MSE of the covariance matrix estimation. This facilitates a comparison of different estimators at the second order level, where differences do occur and depend on the bandwidth choice. A method of bandwidth selection is defined by minimizing the second order effect in the mean squared error.

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Does China’s National College Entrance Exam Effectively Evaluate Applicants?
Wei Hu,Feng Li,Li Gan
Front. Econ. China. 2014, 9 (2): 174-182.  
https://doi.org/10.3868/s060-003-014-0010-7

Abstract   PDF (230KB)

Based on micro-level student data from one Chinese academic institution, we study the validity of the national college entrance exam from the perspective of student performance in college and employment prospects after graduation. We find that the current college entrance exam could reflect the students’ learning ability to a certain degree, providing a relatively valid evaluation. Demonstration of well-rounded development ability should be an important factor in the evaluation system. Based on our empirical results, we give some suggestions for college entrance exam reform.

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Estimating the Economic Value of Statistical Life in China: A Study of the Willingness to Pay for Cancer Prevention
Hua Wang,Jie He
Front. Econ. China. 2014, 9 (2): 183-215.  
https://doi.org/10.3868/s060-003-014-0011-4

Abstract   PDF (634KB)

This paper reports the results of a Contingent Valuation (CV) study on cancer prevention where Multiple-Bounded Dichotomous Choice (MBDC) questions are asked of rural residents in China about their willingness to pay (WTP) for a hypothetical cancer vaccine which is expected to be effective for one year. The WTP data are analyzed with region-, age- and gender-specific cancer morbidity and mortality risk statistics; an upper and lower bound of the Value of a Statistical Life (VSL) are then estimated. The estimated VSL is between 481 and 814 thousand yuan (or 58 and 98 thousand US dollars) at 2000 constant prices, which is compatible with the results of previous studies.

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Intermediate Inputs and External Economies
Haiwen Zhou
Front. Econ. China. 2014, 9 (2): 216-239.  
https://doi.org/10.3868/s060-003-014-0012-1

Abstract   PDF (291KB)

Is the degree of external economies (at the industry level) higher than the degree of internal increasing returns (at the firm level)? If so, what is the exact source of this difference? In the general equilibrium model in which firms producing final goods choose the degree of specialization of their technologies, external economies arise from the usage of intermediate inputs and the existence of internal increasing returns. It is frequently assumed that increasing returns are absent at the firm level while present at the industry level. In this model, the existence of increasing returns at the firm level is necessary for the existence of external economies at the industry level. We show that the degree of external economies increases with the level of linkage effects. However, a higher linkage effect does not always lead firms to choose more specialized technologies.

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Inspections and Information Disclosure: Quality Regulations with Incomplete Enforcement
Liguo Lin,Lan Yao
Front. Econ. China. 2014, 9 (2): 240-260.  
https://doi.org/10.3868/s060-003-014-0013-8

Abstract   PDF (354KB)

The weak enforcement and monitoring systems employed in China (e.g., insufficient inspection resources and negligible fines for noncompliance) are widely blamed for the growing unrest over food safety in the country. Given this development, we consider a model where quality inspection performed by agencies is a means of disclosing information on product quality. We analyze the price-quality equilibrium scheme and show that a higher probability of inspection leads to lower price premiums attached to qualified products. We further investigate the welfare effect of minimum quality standards and inspection efforts and show that they should be complementary. We finally suggest that a state dependent inspection strategy, such as not inspecting those firms that have previously been found to be noncompliant, will enhance social welfare.

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The Gender-Biased Employment Effect of Exports: Evidence from China
Hao Chen,Jianwei Chen
Front. Econ. China. 2014, 9 (2): 261-284.  
https://doi.org/10.3868/s060-003-014-0014-5

Abstract   PDF (330KB)

Traditional international trade theories believe export trade has a positive effect on employment, which means exports would increase the level of employment with no difference between genders. Based on enterprise heterogeneity, however, the new-trade theories doubt this conclusion. Using the Chinese industrial enterprise database (2006–2009), this paper re-examines the relationship between export volume and the level of employment, and discusses different effects of exports on the employment of different genders. We find that although exports increase the total level of employment, enterprises’ exports have a prominent negative effect on the employment of women. This proves that it is hard to optimize employment structure through the promotion of foreign trade, even if it improves the overall level of employment.

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Weights and Empirical Analysis of RMB Exchange Rate Adjustments with Reference to a Basket of Currencies Following the Exchange Rate System Reform of 2010
Qianjin Lu
Front. Econ. China. 2014, 9 (2): 285-308.  
https://doi.org/10.3868/s060-003-014-0015-2

Abstract   PDF (7496KB)

This paper constructs an RMB/USD exchange rate index and a basket currency exchange rate index. The correlation maximization of the RMB/USD and the basket currency index may determine the weight and quantity of the basket currency. The currency basket indicates that the weight of the USD is highest, whereas that of the GB Pound is the lowest. Our currency basket has a high linear dependence on that of the central bank. We found that the RMB/USD and currency basket indices have a long-term co-integration relationship according to the optimal currency weights. The results of the error-correcting model manifest as the RMB/USD exchange rate deviates from the long-term equilibrium level, wherein 76.3% will be corrected. This paper checks the prediction capacity, which indicates the good fit of the model. By using the Granger causality test the findings show that the People’s Bank of China adjusts the RMB/USD exchange rate with reference to the currency basket.

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Market Transition and Income Inequality in Urban China: Evidence from Shapley Value Decomposition
Chunjin Chen,Shi Li
Front. Econ. China. 2014, 9 (2): 309-337.  
https://doi.org/10.3868/s060-003-014-0016-9

Abstract   PDF (1306KB)

China’s market-oriented reform is expected to strengthen the role of the market in allocating resources, which raises concerns over the impact of market transformation on income distribution and earnings inequality in the past decades. This paper decomposes the sources of inequality based on the newly developed Shapley value approach and examines the contributions of the market, along with other nonmarket factors, to total inequality. Using the China Health and Nutrition Survey data over the period 1989–2009, we find that the income gap between laborers with a higher level of education and those with a lower level has widened since the transformational reforms of the economy. Our results suggest that the largest contribution of changes in income inequality can be attributed to the increase in returns to education, while the relative contributions of the household registration (hukou) system, type of sector ownership, geographic location, and gender to inequality experienced a downward trend between 1989 and 2009. The authors argue that rising income inequality is the consequence of efficiency improvements and an imperfect economic system, and that the market is a decisive force in economic development as it releases competitive signals and creates incentive mechanisms for innovation. Creating a more efficient labor market and increasing investment in human capital, particularly equalizing educational opportunities and improving the quality of education in lagging rural and inland regions to disadvantaged groups, are significant for an equitable distribution of income and sustainable development in the long run.

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