Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

   Online First

Administered by

30 Most Downloaded Articles
Published in last 1 year | In last 2 years| In last 3 years| All| Most Downloaded in Recent Month | Most Downloaded in Recent Year|

In last 3 years
Please wait a minute...
For Selected: View Abstracts Toggle Thumbnails
The Effect of Family Size on Children’s Education: Evidence from the Fertility Control Policy in China
Ying Shen
Front. Econ. China    2017, 12 (1): 37-65.   https://doi.org/10.3868/s060-006-017-0003-3
Abstract   PDF (2238KB)

Empirical research on the effect of family size on child education is complicated by the endogeneity of family size. This study exploits plausibly exogenous changes in family size caused by China’s population control policy to estimate the causal relationship between family size and child education outcomes. The results show that, compared to an only child, a person with an additional sibling will have an approximate seventeen percentage points lower likelihood of completing middle school in China. Separate regressions across individual characteristics reveal that much of this negative effect appears to be driven by the cohorts born in earlier years after the policy, and children with the highest birth order within a family.

Reference | Related Articles | Metrics
A Policy Perspective on Outward Foreign Direct Investment by Chinese State-Owned Enterprises
Steven Globerman
Front. Econ. China    2016, 11 (4): 537-547.   https://doi.org/10.3868/s060-005-016-0028-8
Abstract   PDF (186KB)

A growing number of developed country governments in recent years have adopted a hostile attitude towards foreign direct investments undertaken in their markets by state-owned enterprises (SOEs), the latter often based in China. The broad reason for this hostility is the belief that state-owned enterprises pursue non-commercial objectives with resulting damage to host economies. This paper argues that the empirical evidence shows SOEs are increasingly exhibiting market-owned behavior. Furthermore, any adverse consequences of non-commercial behavior are likely to be realized primarily by the SOEs themselves.

Reference | Related Articles | Metrics
Exchange Rate Flexibility and Current Account Adjustment: A Threshold VAR Analysis
Yu You,Zongye Huang,Yoonbai Kim
Front. Econ. China    2016, 11 (4): 635-667.   https://doi.org/10.3868/s060-005-016-0032-3
Abstract   PDF (3721KB)

Global imbalances (current account imbalances) have become an important issue for economists and policy makers. Greater exchange rate flexibility is often suggested as a means to achieve faster and more efficient adjustment in the current account. However, previous empirical studies show little support for this hypothesis. This paper revisits this issue with a large panel dataset and a threshold VAR model and finds that (1) some existing popular exchange rate classifications may not capture actual exchange rate variability as well as expected; (2) Once exchange rate variability is correctly identified, the speed of mean reversion in the current account balance is indeed higher in a regime with greater exchange rate variability.

Reference | Related Articles | Metrics
Premature Deindustrialisation in the Developing World
Dani Rodrik
Front. Econ. China    2017, 12 (1): 1-6.   https://doi.org/10.3868/s060-006-017-0001-9
Abstract   PDF (1015KB)

As developed economies have substituted away from manufacturing towards services, so too have developing countries—to an even greater extent. Such sectoral change may be premature for economies that never fully industrialised in the first place. This article presents evidence that countries with smaller manufacturing sectors substitute away from manufacturing to a larger extent, suggesting a trade channel through which falling international relative prices of manufacturing lead price-taking developing economies to substitute accordingly.

Reference | Related Articles | Metrics
Rethinking Globalization in the Trump Era: US-China Relations
Joseph E. Stiglitz
Front. Econ. China    2018, 13 (2): 133-146.   https://doi.org/10.3868/s060-007-018-0010-3
Abstract   PDF (272KB)

The global economic and political order that was created in the aftermath of World War II is under attack by President Donald Trump. In this article, Nobel Prize Laureate Joseph Stiglitz discusses the scope for protectionist actions by President Trump and suggests how countries such as China could and should respond. In particular, he proposes a set of ten principles that should guide China’s response, principles designed to enhance a more stable and efficient multi-polar system of global governance that can contribute to a stronger global economy.

Reference | Related Articles | Metrics
An Agenda for Reforming Economic Theory
Joseph E. Stiglitz
Front. Econ. China    2019, 14 (2): 149-167.   https://doi.org/10.3868/s060-008-019-0009-3
Abstract   PDF (220KB)

In this article, Nobel Prize Laureate Joseph Stiglitz argues that the standard macro-economic paradigm has failed not only to predict the crisis but also to provide insights into the design of a regulatory framework that would make a recurrence less likely. He points out that many of the underlying assumptions of the standard paradigm always seemed implausible and many of its predictions, such as those concerning the micro-economic behavior of the constituents (firms and households), are inconsistent with the empirical evidence. He then identifies a number of key modeling challenges, what he views as key ingredients that have to be incorporated in any model that is going to describe economic fluctuations or be the basis of a well-designed regulatory or monetary framework.

Reference | Related Articles | Metrics
Urbanization in China, ca. 1100–1900
Yi Xu, Bas van Leeuwen, Jan Luiten van Zanden
Front. Econ. China    2018, 13 (3): 322-368.   https://doi.org/10.3868/s060-007-018-0018-9
Abstract   PDF (882KB)

This paper presents new estimates of the development of the urban population and the urbanization ratio for the period spanning the Song and late Qing dynasties. Urbanization is viewed, as in much of the economic historical literature on the topic, as an indirect indicator of economic development and structural change. The development of the urban system can therefore tell us a lot about long-term trends in the Chinese economy between 1100 and 1900. During the Song, the level of urbanization was high, also by international standards—the capital cities of the Song were probably the largest cities in the world. This remained so until the late Ming, but during the Qing there was a downward trend in the level of urbanization from 11%–12% to 7% in the late 18th century, a level at which it remained until the early 1900s. In our paper we analyse the role that socio–political and economic causes played in this decline, such as the changing character of the Chinese state, the limited impact of overseas trade on the urban system, and the apparent absence of the dynamic economic effects that were characteristic for the European urban system.

Reference | Related Articles | Metrics
Income Mobility and Income Inequality in Rural China
Matthieu Clément
Front. Econ. China    2016, 11 (4): 608-634.   https://doi.org/10.3868/s060-005-016-0031-6
Abstract   PDF (3702KB)

The economic literature has argued for a long time that income mobility could attenuate the degree of cross-sectional inequality by offering people opportunities to improve their socio-economic position. Using the longitudinal data from the China Health and Nutrition Survey (CHNS) from 1989 to 2011, we measure income mobility as the degree to which longer-term incomes are distributed more or less equally than yearly income. Five main results are emphasized. First, there is strong income mobility in rural China that partly offsets yearly income inequality. Second, income mobility has decreased since the 2000s, indicating that income distribution is becoming more rigid. Third, mobility is mainly associated with transitory income fluctuations, particularly in the two tails of the distribution. Fourth, income mobility has an equalizing effect on income distribution. Fifth, we show that non-agricultural income mobility has substantially increased over the period and that its equalizing nature has also recently increased. While the development of the non-agriculture sector in rural China was a crucial factor in explaining the increase in rural inequality until the mid-2000s, we suggest that the large-scale generalisation of such non-agricultural opportunities partly accounts for the decline in rural inequality observed since the mid-2000s.

Reference | Related Articles | Metrics
Aging and Migration: Micro and Macro Evidence from China
Örn B. Bodvarsson,Jack W. Hou,Kailing Shen
Front. Econ. China    2016, 11 (4): 548-580.   https://doi.org/10.3868/s060-005-016-0029-5
Abstract   PDF (1764KB)

Post-reform China has been experiencing two major demographic changes: an increasingly aging population and an extraordinary surge of rural-urban migrants. The question we ask is: are these two demographic changes related? If yes, then, how? The standard view in the migration literature is that the older the migrant, the lower the likelihood of migration. This paper proposes a simple theory of temporary migration for unskilled labor to fit the context of China. Motivated by our model, we then use both cross-sectional micro data and panel macro data to examine the potential impacts of aging on migration. We find that shifts in China’s age distribution have generated significant changes in the country’s migration patterns: migration will shift to closer provinces (probably switching from interprovincial migration to intra-provincial migration) and will concentrate to a few destination provinces.

Reference | Related Articles | Metrics
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.   https://doi.org/10.3868/s060-006-017-0022-0
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.

Reference | Related Articles | Metrics
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.   https://doi.org/10.3868/s060-006-017-0023-7
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.

Reference | Related Articles | Metrics
Product Market Competition and Innovation: What Can We Learn from Economic Theory?
Zhiqi Chen
Front. Econ. China    2017, 12 (3): 450-464.   https://doi.org/10.3868/s060-006-017-0019-2
Abstract   PDF (231KB)

By means of a literature review, this paper strives to provide some clarity on the much-debated relationship between product market competition and firms’ incentives to innovate. It shows that in the literature there does not exist a robust relationship between competition and incentives to innovate. Therefore, it would be futile to continue the debate over whether competition stimulates or hinders innovation. A more useful approach is to make a distinction between pre-innovation competition and post-innovation competition, as it provides a way for reconciling many of the seemingly contradictory findings from the literature. Another important insight from the literature is that the relationship between competition and innovation depends on the source of increased competition.

Reference | Related Articles | Metrics
Regional and Sectoral Patterns and Determinants of Comparative Advantage in China
William Charles Sawyer, Kiril Tochkov, Wenting Yu
Front. Econ. China    2017, 12 (1): 7-36.   https://doi.org/10.3868/s060-006-017-0002-6
Abstract   PDF (1244KB)

China’s export performance is marked by large regional disparities which affect trade patterns at the national level. This paper uses data from input-output tables to estimate the comparative advantage of Chinese provinces in the three main economic sectors over the period 1992–2007. In contrast to existing studies, we include the services sector in the analysis and construct not only indices of revealed comparative advantage for overall trade, but also bilateral indices for interprovincial trade. The results indicate that West and Central China have a comparative advantage in agriculture/mining, coastal provinces in manufacturing, and metropolitan provinces in services. However, interprovincial trade exhibits a more complex pattern. Regression analysis identifies labor endowments as the key determinant of comparative advantage in total trade, while physical capital is the driving force in domestic trade. Human capital and government spending have a positive effect, whereas industrial loans and taxes, along with provincial trade barriers, impair comparative advantage.

Reference | Related Articles | Metrics
The Political Cause of the Movement of RMB Exchange Rate:A Research Based on the Spillover Effects of US Political Cycle
Mengnan Zhu,Qian Zhao,Yuguang Wang
Front. Econ. China    2016, 11 (4): 694-731.   https://doi.org/10.3868/s060-005-016-0034-7
Abstract   PDF (683KB)

Movement of the renminbi (RMB) exchange rate is not only affected by economic factors, but also by political factors home and aboard. This paper analyzes the transmission mechanism of political cycles on the RMB exchange rate first, and then sets up a “political cycle spillover effect model” followed by an empirical analysis. We find that: (1) the US political cycle has a direct effect on the RMB exchange rate in the short run, which is mainly transmitted by capital flows and China’s exchange rate policy control; (2) the RMB exchange rate changes periodically in accordance with the US presidential election and midterm election cycle, with the appreciation ratio significantly lower in the first year of the election cycle, while significantly higher in the year after the midterm election; (3) The effect of the political cycle will not be affected by which party holds power, though it will be affected if the president and parliament are ruled by the same party. This paper not only extends the research of the influencing factors of the RMB exchange rate to the political field, but also sets up a use theoretical model to analyze the impact of political issues on the RMB exchange rate, providing a new perspective to fully understand the external environment of RMB exchange rate reform.

Reference | Related Articles | Metrics
Inequality and Crime in China
Jiangli Zhu, Zilian Li
Front. Econ. China    2017, 12 (2): 309-339.   https://doi.org/10.3868/s060-006-017-0014-7
Abstract   PDF (706KB)

This paper attempts to investigate comprehensively, a “U”-shaped relationship between income inequality and crime rates in China after building a cost-benefit analysis model, by using time series data from 1981–2012 and panel data from 1999–2012. The empirical results show that: firstly, in the time series model, the U-shaped relationships between inequality and the total crime rate and rates of various crimes except from smuggling, are very significant in the period of 1981–2012, secondly, the panel threshold models show that inequality and crime tend to be correlated positively with each other during 1999–2012, because the inequality level during this period is much higher than the turning points of inequality estimated in the time series models, although three regions with different development levels are located in different parts of a U-shaped curve between inequality and crime.

Reference | Related Articles | Metrics
Usury, Market Power and Poverty Traps: A Study of Rural Credit in 1930s’ China
Zhiwu Chen, Kaixiang Peng, Weipeng Yuan
Front. Econ. China    2018, 13 (3): 369-396.   https://doi.org/10.3868/s060-007-018-0019-6
Abstract   PDF (478KB)

This paper studies the cross-regional variation of interest rates in China in the 1930s. Based on county-level data from the Buck (1941) rural surveys, we examine factors that may have influenced rural interest rates in pre-1949 China. Since the quality of institutions that define property rights and facilitate contract enforcement is important for such transactions as land tenancy arrangements, we treat land tenancy rate (or percentage of owner-farmers) as a proxy for institutional quality. Contrary to the popular belief among historians and economists that usury or high interest rates caused persistent poverty, we find that while the monopoly-exploitation hypothesis has little explanatory power, a region’s institutional quality and income level are persistent and significant determinants of interest rates. Thus, poverty is a key driver of high rates of interest. Economic growth and the development of market institutions are crucial for lowering high interest rates and combating usury.

Reference | Related Articles | Metrics
R&D Returns, Spillovers and Firm Incentives: Evidence from China
Chorching Goh,Lixin Colin Xu,Wei Li
Front. Econ. China    2016, 11 (4): 581-607.   https://doi.org/10.3868/s060-005-016-0030-9
Abstract   PDF (317KB)

Using a new data set of 12,000 firms in China, this paper estimates the returns to R&D investment and its spillover effects, and investigates how the returns to R&D depend on firm incentives. For the firms in the sample, the results show that on average firm output increases around 0.4 yuan for each additional 1 yuan spent on R&D in the previous year, and there is high R&D return regardless of whether the endogeneity of R&D intensity is dealt with or not. Interestingly, the marginal return to R&D is significantly higher in firms whose CEOs were not appointed by the government, and lower when CEO pay is directly related to annual performance. The return to R&D is higher in relatively poor regions and for firms with worse access to finance. There are also non-trivial R&D spillover effects.

Reference | Related Articles | Metrics
China under Uncertainty: Outlook, Counterfactual and Policy Simulations, and Reform Implementation—A Summary of Annual Report (2016–2017)
Kevin X. D. Huang, Guoqiang Tian, Yibo Yang
Front. Econ. China    2017, 12 (2): 167-187.   https://doi.org/10.3868/s060-006-017-0008-8
Abstract   PDF (660KB)

China’s macroeconomy is surrounded by increased uncertainties while facing persistent downward pressures entering year 2017. Major external challenges are imposed by the chaotic political climate and disorderly retreat from globalization of the US accompanied with the impending FED rate hikes, which may trigger a destructive trade war and exert pressures on RMB depreciation and capital flight. Remaining ingrained in major internal challenges are the gridlock risks accumulated from excessive financialization of real estate sector and swelling housing market bubbles amid escalating debt levels, and more fundamentally, the continued off-real-to-virtual movement in the general economy and ascendancy of government over market in resource allocation. Based on IAR-CMM model, which takes into account both cyclical and secular factors, the baseline real GDP growth rate is projected to be 6.5% in 2017 (6.13% using more reliable instead of official data). Counterfactual analyses and policy simulations are also conducted to highlight the convoluted uncertainties surrounding China’s macroeconomy. Through the lens of these analyses, we identify a root cause of the weak outlook as the persistently distorted economic structure due to procrastination in reforms of the institutions and governance, which not only impairs China’s growth potential but also limits the power of its recent stimulating policies while exacerbating their side effects. Key to successful economic restructuring in the face of adversely evolving demographics are market-oriented reforms, with well-designed strategies to balance short-term stabilization and long-run development. Such reforms should hold center stage in China’s transition towards a modern free market economy and regulatory state.

Reference | Related Articles | Metrics
Who Defended Monetary Stability in a Specie Regime? Evidence from the Chinese History
Sheng Qian, LeminWu
Front. Econ. China    2018, 13 (3): 397-435.   https://doi.org/10.3868/s060-007-018-0020-0
Abstract   PDF (3345KB)

Despite the lack of political accountability, ancient autocracies maintained a level of monetary stability that rivals modern democracies. This paper hypothesizes that it is the threat of counterfeiting that has constrained currency debasement. Unwilling to share seigniorage with counterfeiters, who are active only if currency is debased, the government refrains from debasement unless in extreme fiscal situations. To document the facts, we build a database of historical Chinese copper coins that covers the period from the Qin dynasty (221 BC–207 BC) to the Republic of China. We also use the introduction of the steam press in late Qing China as a natural experiment to test the theory. The steam press produced coins of fine patterns that counterfeiters were unable to mimic. As the theory predicts, the removal of the threat of counterfeiting triggered the most serious debasement in the history of the Qing dynasty (1644–1912).

Reference | Related Articles | Metrics
China’s Investments in Skills
James J. Heckman, Shuaizhang Feng
Front. Econ. China    2018, 13 (4): 531-558.   https://doi.org/10.3868/s060-007-018-0025-5
Abstract   PDF (8146KB)

This paper discusses the benefits of investment in skills in China. We highlight the achievements China has made over time in human capital investments and the new challenges that have emerged as the country develops. To fuel China’s further economic growth and social developments, it is essential to take a more holistic view on skill investments. We suggest policies that promote both economic efficiency and social mobility.

Reference | Related Articles | Metrics
China’s Growth Deceleration: Causes and Future Growth Prospect
Justin Yifu Lin
Front. Econ. China    2019, 14 (1): 26-52.   https://doi.org/10.3868/s060-008-019-0003-1
Abstract   PDF (1314KB)

China’s growth decelerated substantially after 2010. This paper argues that the main cause for the deceleration is external and cyclical, China has a potential growth rate of 8%, the economy has good investment opportunities and resources, and China is likely to achieve a medium-high growth rate of around 6.5% in the coming years. The paper also examines the various structural reforms that can help China to release its growth potential and complete the transition to a well-functioning market economy.

Reference | Related Articles | Metrics
Surviving Unstable Property Rights in Early Modern China: A Case Study of Young Brother Bank
Jinsong Zhao, Hao Pang
Front. Econ. China    2018, 13 (3): 505-530.   https://doi.org/10.3868/s060-007-018-0024-8
Abstract   PDF (855KB)

China’s banking industry experienced rapid growth during the free access era from 1911 to 1927. However, the reasons private banks were so successful then remain unclear, particularly when property rights were not well protected due to government intervention. Using archived Young Brother Bank documents, we describe the bank’s development from its founding as a family firm through its reinvention from a partnership into a corporation. We focus on organizational form choice and bank performance in this case study. We find that bankers in early modern China gain political connections by placing influential nonfamily members (often, acquisitive local warlords) on boards of directors because this protects them from the depredations of those warlords. This is a precondition for operating family businesses in unstable political circumstances.

Reference | Related Articles | Metrics
Industrialized Innovation: The Connection of Science & Technology Innovation with Industrial Innovation
Yinxing Hong, Yao Lu, Jianghuai Zheng
Front. Econ. China    2017, 12 (3): 400-417.   https://doi.org/10.3868/s060-006-017-0017-8
Abstract   PDF (302KB)

In light of the relationship and the current disconnection between science & technology (S&T) innovation and industrial innovation in China, it is necessary to put forward and emphasize the concept of industrialized innovation. Industrialized innovation is the bridge and intermediation between S&T innovation and industrial innovation, which is not only a concept, but also a mechanism and combination force. There are two ways to achieve industrialized innovation: through industry-university-research coordination and through technology entrepreneurship. The meaning of industry-university-research coordination is not about coordination among industry, university and research sectors in an institutional sense; rather it is about the coordination of the functions of cultivation and development in new industries, new technologies, and new talents of industrialized innovation. The incentive mechanism for industrialized innovation should motivate not only innovation but also coordination. Technology entrepreneurship is the industrialization of new technology through business start-ups, which occurs beyond the stage of incubation and development of new technology. The capital of technology entrepreneurship is the set consisting of knowledge capital manifested through technological innovation, human capital manifested through entrepreneurs, and physical capital in the form of venture capital. While physical capital is indispensable, knowledge capital and human capital play the decisive role in technology entrepreneurship. The industrialization of technological innovation involves two requirements: one is to enable the new technology industry to achieve a large scale rapidly, and the other is to fully realize the potential value of the new technology. Both requirements are reliant on effective innovation in business models.

Reference | Related Articles | Metrics
A Multi-Layer System and Its Features: Reconceptualizing the Monetary Regime of Late Qing and Modern China
Hongzhong Yan, Zhijian Qiao, Chen Xu
Front. Econ. China    2018, 13 (3): 436-457.   https://doi.org/10.3868/s060-007-018-0021-7
Abstract   PDF (565KB)

This essay aims to reconceptualize the monetary regime of late Qing and modern China as a multilayer system of currencies and examine the features and logics of its operation from the 16th century to early 20th century. We argue that this system consists of a variety of silver and copper currencies, each occupying a particular layer in the structure and each satisfying a specific market demand. Analyzing the production and circulation of copper and silver currencies, we first trace their evolution from the Qing to the Republican era and demonstrate the multi-layer currency structure persisted in China across the modernizing changes that took place at the end of the 19th century. Second, using data drawn from gazetteers, this essay adopts a quantitative approach to empirically examine the mechanism and speed of interactions between the different layers of the monetary market and reveal the operational mechanism of the multi-layer system. We suggest that this multi-layer system, while bringing some efficiency loss, also constituted an effective institutional arrangement that helped to ensure the stability of the Chinese economy in tumultuous times.

Reference | Related Articles | Metrics
Hidden Reserve Prices with Risk-Averse Bidders
Huagang Li, Guofu Tan
Front. Econ. China    2017, 12 (3): 341-370.   https://doi.org/10.3868/s060-006-017-0015-4
Abstract   PDF (469KB)

In this paper, we provide an alternative explanation for why auctioneers often keep the reserve price hidden or secret. We consider a standard independent private values environment in which the buyers are risk-averse and the seller has private information about her valuation of the object to be auctioned. The seller uses a first-price sealed-bid auction mechanism combined with either an announced reserve price or a hidden reserve price. We compare the seller’s ex ante expected profits under these two policies and find that the optimal hidden reserve price policy generates higher expected profits for the seller when the buyers are fairly risk-averse under particular restrictions on buyers’ preferences and the distributions of private values. As the number of the buyers increases, the hidden reserve price is more likely to dominate. Numerical methods are used to demonstrate the generality of our main results.

Reference | Related Articles | Metrics
Deceleration of China’s Economic Growth: Causes and Countermeasures
Guoqiang Tian
Front. Econ. China    2019, 14 (1): 3-25.   https://doi.org/10.3868/s060-008-019-0002-4
Abstract   PDF (5250KB)

China’s economic growth has been declining continuously at a rapid rate since 2011. It dropped to 6.7% in 2016 by more than 3% from nearly 10% average growth rate during 1979–2010. As for its causes, there are different interpretations among Chinese economists. One of the interpretations, which is held by some scholars including Justin Yifu Lin, is that external and cyclical factors are the main causes for the decline. The author disagrees with this viewpoint and holds that the root cause of economic deceleration is the delay in deep institutional reforms. An inclusive economy and state coercive capacity are two essential ingredients for sustaining economic prosperity. China must further enhance economic inclusiveness, and accelerate its transition into an efficiency-driven and innovation-driven economy through deepened comprehensive marketization reforms. Meanwhile, it should further strengthen the rule of law to build a limited government that is capable, accountable, effective and caring.

Reference | Related Articles | Metrics
Technical Progress and the Diffusion of Innovations: Classical and Schumpeterian Perspectives
Heinz D. Kurz
Front. Econ. China    2017, 12 (3): 418-449.   https://doi.org/10.3868/s060-006-017-0018-5
Abstract   PDF (4170KB)

The paper discusses the diffusion of new technologies from the perspective of the classical economists and Schumpeter. After a comparison of the pre- and post-technical change long-period positions of the economy, we illustrate the process of transition between the two in terms of a two-sector model. Next, we turn to a system with joint production. The fact that some products may be “bads” that need to be disposed of leads to a study of systems of production-cum-disposal. Finally, we investigate the selection pressure innovations exert on incumbent firms. An important message is that technical change cannot generally be studied within a partial framework of the analysis.

Reference | Related Articles | Metrics
Improving the Accuracy of Estimated Returns to Education in China—Based on Employment Rate, Career Length, and Income Growth
Binlei Gong
Front. Econ. China    2017, 12 (1): 113-131.   https://doi.org/10.3868/s060-006-017-0006-4
Abstract   PDF (282KB)

Most empirical studies on the returns to education use current income to proxy for lifetime income due to the lack of longitudinal data. This simplification is found to cause biased estimates and the result is conditional on being employed. This paper quantifies the returns to education with heterogeneity in employment rates, career lengths, and income growth rates. Using data from China, this paper attempts to account for these differences across the life-cycle and estimates the returns to education in terms of lifetime income when actual lifetime earnings data are not available. The model clarifies the mathematical relationship between conditional current returns to education, unconditional current returns to education, and unconditional lifetime returns to education. This new approach explains how employment rates, career lengths, and income growth rates affect the direction and magnitude of the bias in estimating the returns to education.

Reference | Related Articles | Metrics
Does Health Insurance Coverage Influence Household Financial Portfolios? A Case Study in Urban China
Qin Zhou, Kisalaya Basu, Yan Yuan
Front. Econ. China    2017, 12 (1): 94-112.   https://doi.org/10.3868/s060-006-017-0005-7
Abstract   PDF (340KB)

Health insurance lowers the medical financial burden of the insured through a risk-sharing mechanism, and more importantly, reduces the motivation for precautionary saving. This paper explores the relationship between health insurance coverage and household financial portfolios. We choose 2002 urban China as a case study when the health insurance system had a problem of limited adverse selection. Using data from the 2002 Chinese Household Income Project Survey, we find that health insurance coverage influences households’ preference for financial assets, especially for the risky financial assets. These effects become more pronounced as the coverage rate of health insurance in the family increases. Our results are consistent with precautionary saving theory which suggests that future expenditure risk could affect household asset portfolios. Therefore, development of social security or a health insurance system could effectively promote the development of financial markets, especially riskier aspects of financial markets.

Reference | Related Articles | Metrics