Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

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Where Are We in the Economics of Industrial Policies?
Dani Rodrik
Front. Econ. China    2019, 14 (3): 329-335.–008–019–0015–2
Abstract   PDF (185KB)

Research on industrial policy has taken off, leading to a better understanding of when such policies effectively harness economic development. This article reviews the recent literature on the economics of industrial policies. Until recently, empirical studies on industrial policies came largely in one of two types: detailed country/region studies and cross-industry or cross-country econometric studies. I point out that the country/region studies had the usual problem that it was difficult to trace the effects of success to specific industrial policies, while the econometric studies suffered from the problem of misspecification. I show that a new generation of work has been moving us beyond the largely ideological debates of the past to a more contextual, pragmatic understanding.

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Effectiveness of Monetary Policy in China: Evidence from Factor-Augmented Vector Autoregression Model
Yunpeng Sun, Jingjia Zhang
Front. Econ. China    2019, 14 (3): 336-370.–008–019–0016–9
Abstract   PDF (5168KB)

Since 2002, the People’s Bank of China has frequently used both quantity-based direct monetary instruments and price-based indirect monetary instruments to promote economic growth and stabilize price level. Specifically, this study estimates 13 three-variable factor-augmented vector autoregression (FAVAR) models to explore how two types of monetary instruments affect China’s economy and price level. Overall, we find that monetary policy has positive effects on China’s economy and price level. Second, this study clearly states that the effectiveness of China’s monetary policy on the economy has depended on China’s quantity-based direct monetary instruments since 2002. Third, the effectiveness of quantity-based direct monetary instruments on China’s economy and price level is dependent on the significant and positive effects of quantity-based direct monetary instruments after the 2008 financial crisis. Fourth, the significant and positive effects of price-based indirect monetary instruments on China’s economy and price level before 2008 cannot fundamentally change their current insignificant effects on China’s economy and price level.

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An Agenda for Reforming Economic Theory
Joseph E. Stiglitz
Front. Econ. China    2019, 14 (2): 149-167.
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.

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The Effect of Land Reallocation on Off-Farm Employments in Rural China
Yi Che, Zuojun Fan, Yan Zhang
Front. Econ. China    2019, 14 (3): 401-427.–008–019–0018–3
Abstract   PDF (837KB)

Could land reallocation partially explain the decision of off-farm employment of farmers in rural China? Using an individual-level survey data, we find that there is no effect of land reallocation on the individuals’ decision on off-farm employments. However, there is a robust negative effect of land reallocation on the amount of time that villagers devote to off-farm work. The first result is attributed to the large earnings difference between farm and nonfarm work; the second result is attributed to the fact that village leaders reallocate land from households short of farm labor to households that farm intensively.

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Impacts of the Contributions of FDI and Remittances on the Economic Growth in Asia and Latin America: A Comparative Study
Leo H. Chan, Maritza Sotomayor, Donald Lien
Front. Econ. China    2019, 14 (3): 371-400.–008–019–0017–6
Abstract   PDF (324KB)

Foreign direct investment (FDI) and foreign remittance have been the main sources of external capital inflows for many developing countries. FDI has been credited as the main driver of rapid economic growth in many Asian countries/regions in recent decades. However, this effect of FDI on long-run economic growth has not been observed in Latin American countries. Now, the question is whether FDI and an increase in foreign remittances in the past two decades have achieved expected positive results in terms of economic growth for emerging economies. This study uses a generalized method of moments (GMM) dynamic panel model to quantify the impacts of FDI and foreign remittances as sources of foreign capital for Asia and Latin America. Our findings suggest that FDI and remittances perform differently in different regions in terms of their impacts on GDP growth. Countries that have specific policies (i.e., industrial policy, domestic content requirement, and export production targets) for FDI are likely to derive more significant benefits from FDI and remittances. Developing countries that are emerging or lagging should learn from the countries with positive outcomes and implement similar policies.

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Economic Policy Uncertainty and Stock Risk Features
Guojin Chen, Runze Zhang, Xiangqin Zhao
Front. Econ. China    2019, 14 (3): 461-495.–008–019–0020–4
Abstract   PDF (880KB)

In this paper, we introduce economic policy uncertainty by using a stochastic discount model. Via parameter calibration and static analysis, we investigate the dynamic characteristics of stock risk on different policy uncertainty. On this basis, we test the channel through policy uncertainty affects stock risk by empirical simulation, and the effect of policy uncertainty on stock risk formation by portfolio analysis, in order to verify the applicability of the theoretical model in China. Finally, the panel model is used to quantitatively analyze the relationship between policy uncertainty and stock risk. The results show that policy uncertainty can inereuse stock risk through enterprise cash flow, discounting factors and correlation coefficient. The effect is still significant after controlling traditional risk factors, corporate heterogeneity, and external environmental factors. Companies that are non-state-owned, have lower returns on invested capital and lower asset growth rate manifest greater stock risk when policy uncertainty is higher. The magnitude of the effect of policy uncertainty on stock risk is larger when the economy is weaker and the policy environment is more unstable.

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Premature Deindustrialisation in the Developing World
Dani Rodrik
Front. Econ. China    2017, 12 (1): 1-6.
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.

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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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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.
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.

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Product Market Competition and Innovation: What Can We Learn from Economic Theory?
Zhiqi Chen
Front. Econ. China    2017, 12 (3): 450-464.
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.

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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.
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.

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Reference Dependent Preference and Labor Supply: Evidence from China
Guanfu Fang, Guanliang Hu, Lan Yao
Front. Econ. China    2019, 14 (2): 264-301.
Abstract   PDF (1052KB)

This paper investigates the daily labor supply decisions of Hangzhou cabdrivers. We find that Hangzhou cabdrivers’ wage elasticity is significantly positive, their working decisions are largely affected by shift time, and crude proxy variables for income; hours targets can hardly explain their working behavior. Nevertheless, Hangzhou cabdrivers are still affected by reference dependent preference. Using new empirical strategies, we show that cabdrivers are more likely to continue working when wage rates are unexpectedly low and more likely to quit when wage rates are unexpectedly high.

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Productivity and Export Performance: Micro-Level Evidence from the Manufacturing Sector in Nigeria
Kanang Amos Akims, Dianah Mukwate Ngui
Front. Econ. China    2019, 14 (3): 428-460.–008–019–0019–0
Abstract   PDF (351KB)

This paper investigates how productivity influences firms’ exports. Various firm characteristics are employed to test the self-selection hypothesis alongside the effects of firms’ productivity on their share of exports in total sales. Using a pseudo-panel data set constructed from the firm-level data for the manufacturing sector in Nigeria, we find no evidence that higher productivity influences the decision on whether or not a firm would participate in exports. However, it is established that higher productivity increases the share of exports in total sales of firms that are already participating in foreign markets. A policy implication of our result is that Nigeria can realize a larger share of manufactured exports in total merchandise exports by directing efforts towards improving primarily the productivity of firms that are already involved in exports.

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Kreps & Scheinkman with Product Differentiation
Stephen Martin
Front. Econ. China    2019, 14 (2): 203-219.
Abstract   PDF (884KB)

Kreps and Scheinkman (1983)’s celebrated result is that in a two-stage model of a market with homogeneous products in which firms noncooperatively pick capacities in the first stage and set prices in the second stage, the equilibrium outcome is that of a one-shot Cournot game. This note derives capacity best response functions for the first stage and extends the Kreps and Scheinkman result to the case of differentiated products.

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Research on the Education of Migrant Children in China: A Review of the Literature
Yuanyuan Chen, Shuaizhang Feng, Yujie Han
Front. Econ. China    2019, 14 (2): 168-202.
Abstract   PDF (1139KB)

With the rapid urbanization and mass internal migration in China during the past several decades, the population of children who migrate with their parents to the cities has now reached over 35 million. The education of migrant children poses significant challenges to China’s hukou based education system. In this paper, we first review the policy developments and descriptive studies related to migrant children’s education to offer a comprehensive view of the issue. We then provide in-depth examination of several important quantitative literatures, including the effect of parental migration on children’s education, schooling choices of migrant children and their impacts on school performance, peer effects of migrant children in urban public schools. Overall, although considerable progress has been made regarding migrant children’s education in China, more fundamental policy reforms are necessary to improve the quality of migrant children’s education at the compulsory education level and beyond.

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Structural Transformation under Trade Imbalances: The Case of the Postwar U.S.
Zongye Huang
Front. Econ. China    2017, 12 (2): 228-267.
Abstract   PDF (3548KB)

A striking feature of the structural change literature is that, even though the U.S. economy is often used as a benchmark for calibration, the traditional models cannot account for the steep decline in manufacturing and rise in services in the U.S. since the late 1970s (Buera and Kaboski, 2009). In order to solve this puzzle, this paper develops a three-sector model to evaluate various factors that could have contributed to the structural transformation process from 1950 to 2005. The results show that, in addition to traditional explanations, such as non-homothetic preference and sector-biased productivity progress, international trade is another major source of structural change and is able to explain about 35.5% of the overall employment share decrease in American manufacturing. The quantitative calibration estimates that the inter-sector trade makes a moderate contribution, while trade imbalances dominate the recent contraction of manufacturing employment share. Our results suggest that calibrated models based on U.S. data have to be adjusted by trade factors.

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“One Belt and One Road” and Free Trade Zones—China’s New Opening-up Initiatives
Justin Yifu Lin
Front. Econ. China    2015, 10 (4): 585-590.
Abstract   PDF (187KB)

“One Belt and One Road” and Free Trade Zones are two of China’s new opening-up strategies developed in response to the changed domestic and international circumstances. Implementation of these strategies can provide China with a sounder market economic system and a better external environment. It can not only help China to further develop into a high income country, but also facilitate the industrialization and modernization of other developing countries.

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An Accounting Method for Economic Growth
Hongchun Zhao
Front Econ Chin    2012, 7 (1): 44-69.
Abstract   HTML   PDF (1783KB)

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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A Model of Endogenous Cross-Holdings in Oligopoly
Cheng-Zhong Qin, Dandan Zhu, Shengping Zhang
Front. Econ. China    2017, 12 (3): 465-479.
Abstract   PDF (287KB)

A network approach is proposed to analyze the formation of cross-holdings and anti-competitive implications. Our approach is motivated by the bilateral arrangement of passive ownership between Microsoft and Apple in 1997. We provide a complete characterization of pairwise stable cross-holdings for a model of Cournot oligopoly with a homogeneous product. Our results strengthen the competitive implications of endogenous cross-holdings in Cournot oligopoly found in the literature.

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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.
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.

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Hidden Reserve Prices with Risk-Averse Bidders
Huagang Li, Guofu Tan
Front. Econ. China    2017, 12 (3): 341-370.
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.

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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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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.
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.

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Legal Knowledge, Land Expropriation, and Agricultural Development in Rural China
Yi Che, Yan Zhang
Front. Econ. China    2017, 12 (1): 132-166.
Abstract   PDF (631KB)

By using household survey data, this paper examines the effect of legal knowledge, a proxy for farmers’ ability to protect their land, on agricultural development in rural China. The Ordinary Least Square (OLS) estimation results indicate that legal knowledge in a household raises agricultural production. Further, once the production effect of legal knowledge is controlled for, the objective measure of land expropriation has no production effect. These results survive for alternative measures of legal knowledge and subsample analysis. A two-stage least squares strategy further confirms that the effect of legal knowledge on farm production is causal. A preliminary channel analysis suggests that the impact of legal knowledge on farm production works mainly through farmyard manure investments and labor incentives.

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Understanding the Motivation of College Students to Volunteer: An Integrated Consumption/Investment Analysis
Peiguan Wu,Xiaoye Li,Xue Wang
Front. Econ. China    2015, 10 (4): 691-721.
Abstract   PDF (1008KB)

This study examines the specific motivation of college students to volunteer, based on the interpretation of volunteering as entailing both consumption and investment. Analysis of micro-level data, collected in an online survey from non-volunteers and volunteers on the RenDa Economics Forum, one of the main social networking sites in China, and from volunteers at the Shanghai World Expo 2010 in China, provides strong support for consumption-related motivation. However, we find no clear statistical evidence for the validity of the investment motive. Volunteering activities are found to play no significant role in determining future income when compared to other factors, such as test scores, gender, age, parents’ education, job location, and the type of employer.

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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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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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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.
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.

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Competitive Equilibrium in an Overlapping Generations Model with Production Loans
Dihai Wang, Gaowang Wang, Heng-fu Zou
Front. Econ. China    2017, 12 (2): 268-279.
Abstract   PDF (343KB)

The paper shows that there do exist two kinds of steady states equilibria in the overlapping generations models with consumption and production loans, similar to the pure exchange economies examined by Gale (1973). Furthermore, the local stability properties of these two (kinds of) steady states are also investigated: In the classical case, the golden-rule steady state is stable and the balanced steady state is saddle-point stable; however, in the Samuelson case, the golden-rule steady state is saddle-point stable and the balanced steady state is stable.

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China’s Capital Stock Series by Region and Sector
Yanrui Wu
Front. Econ. China    2016, 11 (1): 156-172.
Abstract   PDF (283KB)

The lack of capital stock statistics for empirical research of the Chinese economy has for a long time been one of the major impediments in the profession. Professor Gregory Chow is one of the pioneers who attempted to deal with this matter. His seminal paper on China’s capital formation and economic growth was published in 1993 (Chow, 1993). Since then many authors have estimated their own capital stock data series. However, most authors have focused on investigations at the national level and their findings are not without controversies. In particular, few studies have provided estimates of capital stock for China’s regional economies. This paper adds to the existing literature in several ways. First, it presents a critical review of the methods and findings in the existing literature. Second, it proposes an alternative approach to estimate China’s capital stock series by region as well as across three economic sectors (agriculture, industry and services). Finally, preliminary analyses of the derived capital stock statistics are conducted to examine growth, disparity and convergence in China’s regional economies.

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