Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

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, Volume 12 Issue 4 Previous Issue   
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Orginal Article
Examining the Factors Affecting Personal Income: An Empirical Study Based on Survey Data in Chinese Cities
Lihui Wang, Junyi Shen
Front. Econ. China. 2017, 12 (4): 515-544.

Abstract   PDF (441KB)

This paper empirically analyzes the factors affecting personal income in urban China using survey data of the “Preference and Life Satisfaction Survey” conducted by the Global COE project of Osaka University from 2009 to 2013. We consider education level as an endogenous variable, and both ordinary least squares (OLS) regression and instrumental variable (IV) regression are performed. We find a number of factors, such as sex, age, education, and marriage that significantly affect personal income. In addition, differences between different occupations are also investigated.

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Why Does the World Need a Reserve Asset with a Hard Anchor?
Dongsheng Di, Warren Coats, Yuxuan Zhao
Front. Econ. China. 2017, 12 (4): 545-570.

Abstract   PDF (835KB)

From the 1970s, the global currency system has two features: the use of one or a few sovereign currencies as the global reserve asset and the floating exchange rate regime between major currencies. This paper points out that the costs of the dollar’s use as an international reserve currency exceed the benefits for both the US and the rest of the world. These costs include the exporting of American manufacturing as a byproduct of its current account deficit needed to supply its currency to the rest of the world. In addition to the detriment to trade from unpredictable exchange rate fluctuations, the termination of the U.S. obligation to redeem its currency for gold also removed an important restraint on deficit financing for the US and many other countries in the short-run, thus promoting excessive leverage that was a major contributor to the 2008 financial crisis. The paper suggests replacing several main countries’ currencies in international reserves with a real Special Drawing Right (SDR) issued according to currency board rules.

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Are Central and Western Chinese Provinces Catching up with the East? An Empirical Analysis of Convergence Processes across China
Marlies Schütz, Han Li, Nicole Palan
Front. Econ. China. 2017, 12 (4): 571-606.

Abstract   PDF (1748KB)

Since the Reform and Opening-up policy had been implemented in 1978, mainland China has experienced significant economic growth, with GDP rising on an annual average of about 10%. However, this growth miracle was far from being evenly distributed across space. It is, therefore, the aim of this paper to study the evolution of spatial disparities in economic development across the country between 1993 and 2012, a period which is characterized by all provinces having access to international markets and being open for international investors. We seek to answer the question of whether Central and Western Chinese provinces were catching up with the East. We define ‘catching up’ as a growing similarity among spatial units. Convergence processes might manifest in four dimensions, including (1) the spatial allocation of employment, value added generation and the fixed capital stock, (2) forms of technical change, (3) productivity patterns, and (4) income distribution. Results show that persistent phases of convergence appeared. However, in some cases the catching up of China’s less developed parts with the flourishing East was limited to only a few Western and Central Chinese provinces. A high degree of path-dependency in economic development prevented catching up from taking place in a more uniform manner.

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Can a Government Initiate Enterprise Reform to Improve Efficiency? A Cross-Section Analysis of the Chinese Pharmaceutical Industry
Ying Chu Ng, Suthathip Yaisawarng
Front. Econ. China. 2017, 12 (4): 607-634.

Abstract   PDF (4456KB)

This paper examines the effects of state-owned enterprises (SOE) privatization, implemented by the Chinese government in the 1990s, on enterprise efficiency for a sample of non-privatized SOEs and privatized ex-SOEs. The study calculates input-oriented DEA meta-frontier efficiency scores, after accounting for heterogeneity in technology across groups. These scores are used to test whether or not one group’s technology dominates the other. A measure of additional input saving is also provided if these enterprises have access to unrestricted meta-technology. The analysis of the Chinese pharmaceutical industry reveals that privatization has not improved enterprise efficiency, at least in the short run. Almost 56% of inputs could be proportionally saved if these privatized ex-SOEs had been efficient, relative to the meta-production technology while non-privatized SOEs could proportionally save only 51%. Privatized ex-SOEs had less ability to access to meta-technology. This finding could be explained by subsequent observations that China, at the time of our analysis, did not have well-established intellectual property rights and formal drug approval procedures; these two factors are important driving forces for developing joint ventures with foreign investors to gain additional capital funding and technology transfer. Broadly speaking, our results are consistent with the subsequent shakeup in the Chinese pharmaceutical industry.

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Decision Making and Ability: An Explanation of Elitism in China’s Government
Shiqiang Li
Front. Econ. China. 2017, 12 (4): 635-659.

Abstract   PDF (471KB)

This article tries to explain elitism in China’s governmental decision making. Our model shows that the governments’ expected utility increases with a bureaucrat’s ability to make decisions under the flexible framework of delegation and communication (with separated reporting strategy). In the early of 1950s, China’s government choose a flexible decision making framework in order to efficiently manage many affairs in a complex environment. This initial choice started the process of a self-reinforcing demand for ability inside of the flexible decision making framework. With the current reforms of streamlining administrations and retreating from the market, the elitism of China’s government might reverse.

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An Overlapping-Generations Model of Firm Heterogeneity in Economic Development
Yu Chen, Haiwen Zhou
Front. Econ. China. 2017, 12 (4): 660-676.

Abstract   PDF (323KB)

We study firm heterogeneity in economic development in an overlapping-generations general equilibrium model in which manufacturing firms engage in oligopolistic competition. Individuals differ in their productivities in the manufacturing sector and choose to become entrepreneurs or workers. The model is surprisingly tractable. In the steady state, an increase in the entry barrier in the manufacturing sector or an increase in the percentage of income spent on the agricultural good decreases the wage rate, but the level of output in the manufacturing sector does not necessarily decrease. An increase in the degree of patience of an individual increases the steady state wage rate and the capital stock. Even with increasing returns in manufacturing and constant returns in agriculture, neither the wage rate nor the output level in the manufacturing sector may increase with population size.

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6 articles