Summary： Distortions refer to deviation from the optimal equilibrium state of resource allocation， which can be generally divided into endogenous and policy-imposed distortion. The relationship between distortion and development is non-linear; thus， favorable distortion is possible under certain conditions.
There are at least four alternative mechanisms for favorable distortions. (1) Advantage of backwardness. A developing economy can take the following potential advantage of backwardness： borrow technologies， business models， and marketing procedures from more advanced economies. However， when the advantage of backwardness gradually narrows and the uncertainty of frontier innovation increases， the government finds it rather difficult to collect sufficient information and make correct decisions. (2) Second-best principle. If it is infeasible to remove a particular market distortion， introducing a second (or more) market distortion may partially counteract the first and lead to a more efficient outcome. Arguably， the “rent-seeking” behavior，may push forward the marketization process in the presence of institutional barriers. (3) Coordination failure. Market failure in coordination provides a basis for government intervention. In some areas and socioeconomic environments such as cooperative interactions and underdeveloped markets， the government is indispensable in dealing with market failure. Therefore， in addition to the roles of night watchman and protector of property rights， the government may play multiple roles of coordinator， guide， and stimulator， particularly in the context of structural changes and uncertain development paths. (4) Perspective of political economy. From a slightly broader perspective such as that of political economy， which may account for aspects beyond economics such as national security， geopolitical， or ideological factors， some distortions can be considered normal or favorable. For instance， the success of the “two bombs， one satellite” program in China before the reform and opening-up was highly praised in the “Beijing Consensus”， which was in conflict with comparative advantage.
Empirical analysis is conducted to test the relationship between distortion and total factor productivity (TFP). International experience is based on a sample of 50 economies of different income levels. Distortion is measured by the Index of Economic Freedom， which is jointly published by the Heritage Foundation and Wall Street Journal， and the TFP data are obtained from Conference Board. For Chinese evidence， distortion is measured using the Marketization Index， which is published by the National Economic Research Institute， and the authors estimate the provincial TFP growth. Both international experience and Chinese evidence suggest that distortions have a positive effect on TFP in the early stages of development， but with an increase in income levels， this role is diminishing gradually. In particular， in the phase of middle and high income， the negative effects of distortions are significant and become an important factor leading to the middle income trap. Therefore， reducing and correcting distortions is the key to achieving sustainable growth.
With respect to China， it is necessary to eliminate distortions in a clear manner and let the market play the decisive role in resource allocation. Otherwise， according to the “growth catch-up” slogan， policy-imposed distortion will occur frequently， and the direction of market-oriented reform will blur and swing. Mitigating distortions is largely a process of exploring the borderline between the government and the market， which is a major challenge for all economies.
Keywords： Distortions; Growth Catch-up; Government and Market; Sustainable Growth

Summary： Local fiscal conditions undeniably played a crucial role in stabilizing the economy and promoting economic growth during the transformation of the Chinese economy. To cope with the recent financial crisis， a large-scale fiscal stimulus plan combining central and local fiscal policies has become one of the most important policy instruments. However， very little recent literature on fiscal policies has discussed the multi-layer structure of the Chinese government. In this study， we incorporated the central-local government structure into a standard dynamic stochastic general equilibrium(DSGE) model. The entire economy was featured with two layers where the local governments implemented various types of fiscal policies. To win the potential competitions between different regions， local governments strategically set their public investment policies to focus on “the gap in regional economic performance”. The model was then calibrated based on the central and regional levels of fiscal data.
To observe the fitting effect of the economic model， we first compared the dynamic results of the total output， investment and consumption with the actual data. The results showed that the corresponding Kydland-Prescott variance ratio of the output， investment and consumption in the model was 64%， 47% and 62%， respectively. Using the model， we could explain more than 60% of the fluctuations in the output and consumption and about half of the investment fluctuations， based on fiscal policies and the technology shock. We concluded that the multi-layer government DSGE model developed in this study could explain a considerable part of the fluctuations in China's macro-economy. The model enabled us to understand the dynamic effect of the fiscal policy shocks on the entire macro-economy. To further analyze the explanatory power of this model with respect to the regional economic fluctuations， we also compared the simulation results of the business cycle statistical characteristics and the actual data from different regions. The statistical results showed that the economic fluctuations in the underdeveloped regions were more volatile than those in the developed regions. In particular， the volatility of the output and the investment in the underdeveloped regions was larger than in the developed regions. This accorded with the literature on cross-country comparison. These results revealed that the model had good explanatory power for the regional economic fluctuations.
The quantitative results showed that the multi-layer government structure and the fiscal decentralization performed reasonably well in explaining the Chinese economic cycles. The fiscal competition between local governments provided a key mechanism to amplify the aggregate fluctuations. The local fiscal investment had a positive effect on the local economy and delivered positive spillover effects to the other regions through regional trade. Via counterfactual analysis， we found that the deep fiscal decentralization amplified the short-term effect of the local fiscal policies and dampened the macroeconomic effects of the central fiscal policies， and also increased the aggregate output and improved social welfare.
This paper contributes to the literature in the following ways. We introduced a multi-region economy into the standard DSGE model and constructed a multi-layer government structure， from the viewpoint of which， we distinguished between the disaggregated public expenditures (public consumption and investment) and conducted a quantitative analysis of the dynamic and spillover effects of the local fiscal policies on the macro-economy. The introduction of fiscal competition enabled us to quantitatively evaluate the effect of “promotion and competition” between local governments on the macro-economy and the underlying transmission mechanism. Finally， the multi-layer government structure allowed us to quantify the short-term and long-term dynamic effects of fiscal decentralization on the Chinese economy.
Keywords： Multi-layer Government; Fiscal Decentralization; Regional Fiscal Competition; Fiscal Policy Evaluation

Summary： The rise and fall of house prices has correlated very highly with China's gross domestic product (GDP) fluctuations since 2008，and many scholars believe that house prices have “kidnapped” the entire Chinese economy， leading the government into a dilemma of whether to stabilize growth or control house prices. How does such a limited sector move consistently with the macroeconomic volatility？ Why is the Chinese economy tightly linked to the real estate sector？ Through which channels do the house price fluctuations affect the whole economy？ Moreover， what are the key factors in this process？
To answer these questions， we analyzed the behavior of the major macroeconomic variables. We found that the local governments' land finance behavior played a crucial role in the transmission from housing price changes to GDP fluctuations. In this regard， we introduced the real estate and non-real estate sectors into the BGG model (Bernanke et al.， 1999) along with the local governments to depict land finance. External shocks that influence house prices lead to changes in local governments' fiscal revenues and expenditures by affecting land prices. A large part has flowed into the infrastructure. Accordingly， an increase in the house prices facilitates an expansion of the residential and infrastructure investment， and then increases the capital prices. This drives up the price level and reduces the purchasing power of the residents， crowding out consumption. While considering financial frictions， with the financial accelerator effect， this increases the net worth of the enterprises in the production sector， lowering their external financing premium， and thus brings about a further expansion of the business investment. As the housing and infrastructure investment accounts for half of the total investment in fixed assets， an increase in the housing and infrastructure investment leads directly to GDP fluctuations. Therefore， the existence of land finance tightly couples the cycle of house prices to the cycle of local government spending. Inspired by the “GDP Championships”， local governments spend more on infrastructure construction， a sharp increase in which follows an increase in house prices. This directly increases the asset prices and further causes dramatic fluctuations in investment and GDP through the financial accelerator effect.
Our work contributes to the body of literature that examines the importance of the real estate sector with respect to the real economy from the following aspects.
Research discussing the effect of housing prices on economic fluctuations has ignored the role of land with Chinese characteristics; this paper makes up for this shortcoming. It was once generally assumed that both residents and enterprises needed land. They stood on both the supply and the demand side， and freely bought and sold land， and land prices were determined under these transactions. However， this is not the case in China. It is forbidden to trade land between residents and enterprises; the supply of land comes entirely from the local governments. More importantly， the land revenue in developed countries mainly comes from the collection of property tax on the stock of land or housing， while in China it comes from “land finance”.
To match these stylized facts， this article builds a model on BGG， containing real estate and non-real estate sectors， and local governments. This model replicates the fiscal behavior of the local governments. Our simulation results suggest that this model helps to explain how house prices “kidnap” the entire Chinese economy and sets up a basic framework for a future discussion on policy response.
Under this framework， we carry out a general equilibrium analysis of the relationships between house prices， land finance， and economic fluctuations; detail various channels through which house prices affect economic fluctuations; and discuss the role of different factors in the transmission including financial frictions. This is considerably significant for understanding the special status of the real estate sector and the role of land finance in economic fluctuations.
Keywords： House Prices Fluctuation; Land Finance; Financial Accelerator Effect; Business Cycle

Summary： We studied the effect of road infrastructure on economic growth through its effect on a firm's inventory. Different from previous studies， we aim to build up a unified framework to analyze the growth effect of road infrastructure.
In this paper， we propose three hypotheses to test the underlying mechanisms through which road infrastructure affects inventory and thus contributes to economic growth. First, road infrastructure helps firms to expand their market， promotes output and sales， and increases demand for inventory. Second, road infrastructure brings about competition in the domestic market， which reduces the market expansion effect and the inventory demand. Third, road infrastructure reduces transportation cost， which on the one hand increases efficiency and on the other hand helps save inventory storage.
Empirically， we used data from the Annual Survey of Industrial Firms (ASIF) combined with road information. To analyze the transmission channels underlying the relationship of the road infrastructure and inventory， we used the mediation model and analyzed the effect of a change in the coefficient of the road infrastructure on the inventory upon the addition of the mediating variables. As the dependent variable， we used non-finished goods as the inventory. For the road infrastructure variable， different from previous studies， we measured a firm's accessible road infrastructure using the road area of both local and neighboring cities. The mediating variables included market size， competition， and transportation cost. For market size， we directly used the log of sales as a proxy. For competition， we used the city-industry-year Herfindahl index. For transportation cost， we used the log of the input lead time. Input lead time was measured as 365/(cost of goods sold/accounts payable)， which approximated the number of days it took for firms to source their inputs.
The baseline empirical results show that road infrastructure helps to reduce inventory. We used the mediating model to verify the underlying transmission channels. We found that once the market size variable was added to the baseline regression， the coefficient for road infrastructure was further reduced. Moreover， upon the regression of market size on the infrastructure， we found a positive relationship. These two findings suggest that the road infrastructure helped to increase the market size and thus increased the inventory demand. Similarly， once the competition and transportation cost variables were added， the coefficient for road infrastructure increased. Moreover， we found that road infrastructure led to competition and transportation cost reduction. These findings indicate that the channels of competition and transportation cost reduction induced by road infrastructure reduced inventory demand. The results confirm the three transmission channels through which road infrastructure affected inventory and economic growth.
We further verified the channels through which road infrastructure affected inventory and economic growth by conducting heterogeneous analysis and dividing the samples according to the different properties of the firms. We divided the samples by product heterogeneity to verify the market expansion channel， by entry barrier to verify the competition channel， and by weight per value of product to verify the transportation cost channel. We found that firms with higher heterogeneity， lower entry barriers， and more weight per value of product were more significant in the market expansion， competition， and transportation cost channels.
Finally， we conducted a robustness check by considering measurement error of the road infrastructure and definition of the entry barrier， incorporating the effect of the communication infrastructure and industrial dynamics， and the instrumental variable of road infrastructure by using the number of post houses in the Ming Dynasty. The results remained robust.
This paper enhances the literature by providing a unified framework for the relationship between road infrastructure and inventory and for estimating the causal effect on economic growth.
Keywords： Road Infrastructure; Inventory; Market Expansion; Transportation Cost; New Structural Economics

Summary： Empirical studies of the relationship between corruption and economic growth have different conclusions. Most studies， however， have focused their analysis on the singular relationship between economic growth and corruption， and few have paid attention to how anticorruption may affect this relationship.
In this study， we do not directly discuss the relation between corruption and economic growth. Instead， we discuss the triangular relationship between corruption， anticorruption and economic growth. This new approach not only makes a significant contribution to the literature， but also leads to some interesting and meaningful research results. We used China's anticorruption campaign as an example to construct a theoretical model describing how anticorruption might promote economic growth. We then used a panel dataset covering all Chinese regions over the 2000-2014 period to test our hypotheses and quantify the triangular relationship between corruption， anticorruption and economic growth.
We used the key word “corruption”， which appeared in Party newspapers published during 2000-2014 by the Communist Party of China (CPC) Central and Regional Committees， to reflect the effort of anticorruption. The number of Party or state officials under investigation was separated into two components： the anticorruption effort and the level of corruption. These two components and their cross-terms were then embedded in an augmented production function designed for a regional economic convergence analysis.
We then used a panel dynamic analysis (GMM) approach to examine how the anticorruption effort might have affected the level of corruption and hence long-term economic growth in Chinese regions. We found that the relation between anticorruption effort and economic growth was affected by the level of corruption. As a result， sustaining an anticorruption campaign reduced the level of corruption and hence raised the level of confidence for foreign and domestic investors in addition to the governing ability of the Party and the state， which were important for sustainable socioeconomic development in the long term.
This study makes two important contributions to the literature in terms of research methodology. (1) This paper studies the triangular relationship between corruption， anticorruption and economic growth from a new perspective. (2) It finds appropriate variables to represent “corruption” and “corruption and anticorruption”， enabling us to separate the effects of these two variables and their cross-terms on regional economic growth within the framework of an endogenous growth model.
Our study produces three key findings. (1) The relationship between an anticorruption campaign and economic growth is affected by the level of corruption. When the level of corruption is low， the anticorruption campaign can promote economic growth. (2) When the level of corruption is high and the anticorruption campaign is ineffective at containing corruption， the anticorruption campaign can have a negative effect on economic growth. However， the level of corruption in China has been considerably reduced， implying that the anticorruption effort has been effective. This explains why the anticorruption campaign initiated after the Eighteenth CPC National Congress was not the cause of the economic slowdown. (3) In the long term， continuing the anticorruption campaign may reduce the level of corruption activities， and allow free market competition to replace corruption activities as the dominant force in allocating resources， thereby promoting long-term sustainable social and economic development.
Keywords： Anticorruption Effort; Level of Corruption; Sustainable Economic Growth

Summary： With respect to the reform of the natural monopoly of fields such as urban public utility， the literature has mainly focused on whether it is necessary to carry out mixed ownership reform， but few studies have answered practical questions about how the reform should proceed. At the end of 2013， the Central Committee of the Communist Party of China issued a report titled “The Decision on Comprehensively Deepening Reform about Some Major Issues” in an attempt to develop a fundamental design for the cross-sector reform in mixed ownership and monopoly industries： state-owned capital must retain its control in the industry of natural monopoly， and the primary target for the mixed ownership reform is the competitive links without natural monopoly. However， the type of natural monopoly reform path to be followed is still not clear. Should mixed ownership reform be carried out in natural monopoly industries？ Moreover， in which public industries and links should mixed ownership reform be prioritized？
In response to the above questions and based on a cost function analysis developed by William Baumol and panel data from 1998 to 2008 composed of national urban utilities above a designated size， in this study， we first measured the attributes of natural monopoly at the industry level and the total factor productivity (TFP) at the enterprise level. In particular， we constructed a translog cost function (TCF) with a variable return to scale and used the seemingly unrelated regression (SUR) to estimate the cost functions of the urban utilities in different cities， thus defining the attributes of the city–industry natural monopoly by a “cost subadditivity” standard. In the calculation of the TFP at the enterprise level， we not only derived a TFP estimation equation from the cost function of variable scaled compensations， but also attempted to introduce the semi-parametric estimation model proposed by Olley & Pakes (1996) into the cost function to formulate a new TFP estimation equation. Finally， we sorted a sample consisting of firms that experienced early property rights reform， and empirically tested the relationship between natural monopoly， mixed ownership reform， and the production efficiency of enterprises using the difference-in-differences-in-differences (DDD) method.
The main conclusions of this paper were as follows： (1) In the natural monopoly link of urban utilities， a mixed ownership reform could not significantly improve the production efficiency of enterprises. (2) The traditional DID model could not verify the remarkable achievements of the mixed ownership reform if the natural monopoly and the competitive link were not distinguished and the implementation of the mixed ownership reform without any distinction contained considerable policy uncertainty. (3) In the competitive link without a natural monopoly， the mixed ownership reform had a significant positive effect on the productivity of the municipal utilities. Compared with that of the natural monopoly， the production efficiency of the competitive link improved significantly after the mixed ownership reform and the “policy dividend” of the system reform increased. Therefore， the mixed ownership reform in urban utilities should first be carried out in the competitive links without a natural monopoly. The key to the mixed ownership reform was to determine the natural monopoly property in a specific city and specific public utilities. This work needs to be started with cost data， and thus the accuracy and openness of cost data are crucial. Therefore， in this paper， we suggest that the cost data of the city utilities be made publicly available to government industry management departments; this can be promoted by combining the recent legislative work.
A marginal contribution of this paper lies in taking the mixed ownership reform into the framework of natural monopoly theory and specifically distinguishing its heterogeneity effect between monopolistic and competitive links and providing some policy suggestions on the implementation of the mixed ownership reform. This research may inspire and promote the application of natural monopoly theory to the reform of state-owned enterprises.
Keywords： Economic System Reform; Mixed Ownership; Natural Monopoly; Cost Function; Triple Difference Method

Summary： Given the rapid development of the financial market and the change in attitude toward consumption， the debt level of Chinese households has increased sharply. As of October 2017， the balance of household loans was approximately 39.56 trillion yuan， of which consumer loans reached approximately 30.67 trillion yuan. Against the current background of the “deleveraging” policy in China， such a large balance of household debts should be considered more seriously. The effect of the household debt decision is a double-edged sword for the economy and society. Moderate debt can not only smoothen consumption in different periods and improve the intertemporal utility for the household， but also accelerate the growth of household wealth (Wu et al.， 2016). However， over-indebtedness may increase the pressure on household repayments， damaging the health of residents (Clayton et al.， 2015)， and even trigger a financial crisis (Gerardi et al.， 2010). Therefore， it is important to analyze the factors that influence the debt decision of Chinese households from a micro perspective.
Among the factors that influence the household debt decision， the role of financial literacy cannot be ignored. Moore (2003) finds that households with a lower level of financial literacy are more likely to hold mortgages that are more costly. Klapper et al. (2013) reported that households with higher financial literacy were more inclined to borrow from banks and other formal financial institutions. Meanwhile， Lusardi & Tufano (2015) stated that individuals with a lower level of financial literacy tended to hold excessive debt loads. In this study， we first used data from the “China Consumer Finance Status and Investor Education Survey” conducted by China Financial Research Center of Tsinghua University in 2010 and 2011 to construct a financial literacy index by conducting factor analysis and examining the group differences in financial literacy among households in China. We then empirically tested the effects of financial literacy on Chinese household debt， over-indebtedness， and liability channels using models such as the probit model. Moreover， taking the possible issues of endogeneity into account， we conducted two-stage estimations. Finally， other measures of financial literacy or over-indebtedness， different subsamples， and the Heckman two-stage method were used to verify the robustness of our empirical results.
We found that Chinese household financial literacy was positively related to the education level， while the financial literacy of women was significantly lower than that of men. More importantly， financial literacy had a significant effect on the debt decision. With the improvement in the financial literacy， households intended to hold debts and preferred to borrow from banks and other formal financial institutions while restraining the degree of over-indebtedness at the same time. These findings suggest that financial literacy can assist households in making better and more suitable debt decisions. Furthermore， a more scientific and reasonable credit behavior of households contributes to the healthy and stable development of the credit and financial markets.
This study contributes to the current literature in two ways. First， using the micro-survey data of Chinese households， we construct an index of financial literacy and investigate the group differences in financial literacy across households in China. Second， we systematically examine the effect of financial literacy on the household debt decision in China.
The findings reported in this paper have significant policy implications. First， we should recognize that the level of financial literacy of most Chinese households is relatively low and that the level of financial literacy has a negative effect on over-indebtedness at the micro level. Second， financial education should vary from person to person because there exists a distinct heterogeneity of financial literacy among people of different ages， genders， and educational degrees. Third， any financial policies (such as the reform of pension insurance and the promotion of inclusive finance) that involve households should consider household financial literacy.
Keywords： Household Debt; Financial Literacy; Over-indebtedness

Summary： Since the implementation of the housing commercialization reform in 1998， housing prices in China have increased continuously. A house has become an important asset of most families in China. The effect of housing prices on residents' risk preference has caused wide academic concern. Recognition of the relationship between residents' risk preferences and wealth is mostly based on common sense or unsystematic observations. As a house is the main part of residents' wealth， its value fluctuation directly affects residents' risk preference. However， most studies have not directly analyzed their relationship and only implied that the increase in housing prices has led to an increase in residents' risk preferences (Flavin and Nakagawa， 2008). A discussion of the effect of housing prices on residents' risk preferences should contribute to the understanding of how the housing price affects residents' micro behaviors.
In this study， we focused on the following three main questions. Can housing prices affect residents' risk preference in China？ Do housing prices have a consistent effect on the subjective attitude and objective behavior of residents' risk preference？ Which factors affect the relationship between housing prices and residents' risk preference？ Based on these three questions， we first analyzed the effect of housing prices on residents' subjective attitude toward their risk preferences. Second， we studied the effect of housing prices on the household objective behavior of residents' risk preferences. Third， we applied the instrumental variable method to solve the endogeneity between housing prices and residents' risk preferences. Fourth， we discussed the different effects of housing prices on the risk preferences of residents with different characteristics， such as differences in housing loans， health conditions， housing property， and household expenditure.
Using data from the China Household Finance Survey， Urban Investors' Behaviors Survey， and regional statistics， we empirically studied the effect of housing prices on residents' risk preferences in China. The findings of this study can be summarized as follows. First， we found that housing prices had a significant effect on residents' risk preferences. The higher the housing price and the larger its increase， the lower the absolute risk aversion coefficient and the higher the relative risk aversion coefficient. Second， we found that some factors， such as residents' housing loans， health conditions， and number of houses owned and the nature of the housing property， moderated the relationship between housing prices and residents' risk preferences. In particular， the results indicated that when residents did not have housing loans and full property rights to their houses， the effect of housing prices on their risk preferences was stronger. Meanwhile， residents' health conditions and the number of houses they owned only affected the relationship between housing prices and the residents' subjective attitude toward risk preference. Furthermore， the increase in housing price had a stronger effect on the subjective attitude and objective behavior of the risk preferences of residents who owned multiple housing units. These findings also indicated the differences between the residents' subjective attitudes and the objective behavior of risk preferences. Lastly， the regional evidence on housing prices and residents' participation in the stock market supported the hypothesis that housing prices significantly affected the residents' risk preference.
This study provides empirical evidence for the effect of housing prices on residents' risk preferences. This paper makers three main contributions. First， we empirically studied how housing prices and housing price changes affected residents' risk preferences， while the literature mainly focuses on the effects of residents' characteristics， such as age， education， gender， marital status， and wealth. Second， we distinguished between the subjective attitude and objective behavior of risk preferences， and provided a comprehensive analysis of the effect of housing prices on residents' subjective attitude and objective behavior of risk preference. Lastly， we used micro survey data to accurately measure housing prices and their changes， and applied the instrumental variable method to reduce the endogeneity between housing prices and residents' risk preferences.
Keywords： Housing Price; Risk Preference; Endogeneity

Summary： As a major component of national economy， household consumption reflects the actual living standard of a country's citizens and is the central target of macroeconomic policies. Compared with developed countries， however， the aging consumption market of China remains underdeveloped and thus has considerable potential. In the meantime， the healthcare consumption of the Chinese aging population is increasing considerably faster than any of its other consumption types， and its healthcare expenditure has become one of the most concerning social topics in China. Both medical and healthcare expenditures are important components of household health investment. Nevertheless， healthcare expenditure is often regarded as a part of medical expenditure and has attracted less attention and systematic study. From an empirical perspective， study of the relationship between the healthcare expenditure of aging people， their emotional demands， and the underlying mechanism is very important. In this study， we examined the causal relationship between the feeling of loneliness and the healthcare expenditure of China's aging population empirically， and investigated how healthcare expenditure was determined by controlling for other factors.
Few studies have focused on the healthcare expenditure of the aging population. Most studies have focused on the general healthcare expenditure of households as a whole， and have basically ignored the effect of loneliness and other emotional feelings. Most foreign studies have used samples from the Organization for Economic Co-operation and Development countries and investigated the macro factors that affect healthcare expenditure. Studies by Chinese scholars have been based on Chinese datasets， but take a similar macro approach to determining the healthcare expenditure. We believe our research， conducted from the perspective of loneliness， covers the shortage in related studies to some extent.
In this study， we used the China Health and Retirement Longitudinal Study (CHARLS) dataset in the first effort to analyze the effects of loneliness on healthcare expenditure. Our estimations implied that both health demands and emotional demands had significantly positive effects on the elderly's healthcare expenditure. At the same time， the effects of health and emotional demands on healthcare expenditure were complementary. We also adopted several methods to test the potential endogeneity in the baseline regressions， and guaranteed the robustness of our estimations by conducting several complementary regressions.We make three contributions to the literature on healthcare consumption. First， our empirical findings suggest for the first time that the degree of loneliness has a significantly positive effect on healthcare expenditure. Elderly people who feel lonelier tend to spend more of their income in both absolute and relative terms on healthcare products， and the most probable explanation is that the elderly believe they can have more social interactions by communicating with health product sales staff and other aged people. Second， our estimations suggest that one's physical health status has significant negative effects on their healthcare expenditure. Third， the elderly with a worse self-assessed physical health status， more severe chronic diseases， and poorer self-care ability spend more of their income on healthcare products. We also found that the aging population's cognition， frequency of visits from children， and ability to live independently significantly affected their healthcare expenditure statistically.
Based on our estimations， we advise the related ministries and government institutions to pay more attention to the loneliness problem of the Chinese aging population. In addition， they should consider the potential negative shocks to the healthcare expenditure market by decreasing the loneliness of the Chinese aging population as these people improve their mental health conditions. The continuous development of China's healthcare consumption market should be based on the increasing health demand， rather than the emotional demands that immoral healthcare suppliers could take advantage of.
Keywords： Health Care Consumption; Loneliness; Social Interaction

Summary： Shares pledge is a phenomenon in which a controlling shareholder (insider) uses his or her shares as collateral in a personal loan. Taking advantage of the shares pledge， the controlling shareholder can diversify his or her investments. Thus， the shares pledge has become popular across the globe. However， this pledge may result in a margin call against the insider， which may cause the controlling shareholder to lose control of the firm. That the controlling shareholder chooses to pledge his or her shares rather than sell them indicates that he or she is reluctant to lose control of the firm. Moreover， compared with the benefits the shares pledge brings， the controlling shareholder can get more from the control of the listed company. Obviously， the controlling shareholder will conduct activities to protect his or her control after pledging his shares.
Studies have reported that the controlling shareholder's opportunistic behavior is more acute within the pledge because he or she has incentives to direct firm activities to protect his or her control rights after the pledge， such as information manipulation and real earnings management. However， information manipulation can only blind investors temporarily. Meanwhile， the real earnings management leads the firm to pay more tax， which weakens the effect of the real earnings management on boosting the stock price. Moreover， real earnings management destroys the firm value in the long term. Hence， information manipulation and real earnings management are not effective at boosting the stock price and they alone cannot help the insider to protect his control rights.
In contrast， tax avoidance transfers wealth from the government to firms and leaves more resources available for the firms to put into operation， which can truly enhance the firms' value. Although an insider may take advantage of tax avoidance as shelter to pursue his or her personal interests， doing so is not in the interest of the insider when he or she pledges his or her shares. If the insider takes advantage of tax avoidance to pursue his or her personal interests， he or she will damage the firm's value and increase the firm's crash risk， resulting in a margin call and even perhaps a loss of his or her control rights. Thus， the insider will direct the firm to engage in tax avoidance activities to increase the firm's value rather than pursue his or her personal interest.
In this study， we arrived at the following findings. (1) Firms with controlling shareholders pledging their shares engage in more tax avoidance. (2) If the controlling shareholders face a higher risk of losing control rights， such as non-SOE controlling shareholders， located in the eastern part of China， the controlling shareholders have a lower equity ratio in a bear market period; the firm faces a higher crash risk and then engages in more tax avoidance activities. (3) The positive relationship between the shares pledge and tax avoidance only exists in the lower tunneling firms， lower financial constraints firms， and upward real earrings management firms. (4) The positive relationship between the shares pledge and tax avoidance only exists in firms with a smaller board size， lower proportion of independent directors， lower ratio of management expense， higher asset turnover ratio， and lower other receivables.
This study makes several contributions to the literature. First， we document the economic consequence of the insiders' shares pledge on tax avoidance， advancing the small but growing literature on the shares pledge. Second， we advance the tax avoidance literature by providing a shares pledging explanation for tax avoidance in addition to the common agency theory framework. Third， our findings have policy implications for tax administration. That is， when a firm has the controlling shareholders' shares pledge， it will be more aggressive in tax avoidance. Thus， increasing the tax monitoring by a tax authority should be considered.
Keywords： Shares Pledge; Risk of Losing Control Rights; Tax Avoidance

Summary： Investor sophistication is defined as how smart investors can be in the process of information acquisition and interpretation (Tan et al.， 2014; Kalay， 2015). Information technology is changing the process of investors' information acquisition and interpretation and thus can change the corresponding smartness of the investors. Therefore， research on how market efficiency is influenced by the change in investor sophistication due to information technology is considerably important for academia and policy.
SSE E-Interaction， a Chinese security-themed social media platform operated and regulated by the Shanghai Stock Exchange (SSE)， is aimed at facilitating the process of investors' information acquisition and interpretation by allowing online interaction between investors and the listed firms. This online interaction is organized such that investors ask the listed firms questions and the SSE asks the listed firms to answer these questions according to their disclosed information. According to the SSE requests， a listed firm has the obligation to answer the questions from investors on the SSE E-Interaction， and the answers of the listed firms should not contain any private information or false information.
Here， we studied how the accuracy of the market earnings expectation is influenced by the change in investor sophistication due to information technology， which is proxied by the online interactions on SSE E-Interaction. Two competing theories may be related to the market consequence of investor sophistication. The market efficiency hypothesis (Fama， 1998) argues that market prices fully reflect all publicly available information. Conditional on this hypothesis， the improvement of investor sophistication makes no difference to market efficiency. In contrast， the incomplete revelation hypothesis (Bloomfield， 2002) asserts that statistics that are more costly to extract from public data are less completely revealed in market prices. Conditional on this hypothesis， the improvement of investor sophistication can speed up the incorporation of information into prices.
In this study， we found that when there were more words in the listed firms' answers on SSE E-Interaction， the market earnings expectation was more accurate， and the effect was more pronounced when the institutional ownership was lower. We also found that when there were more words in the listed firms' answers on SSE E-Interaction， the information asymmetry was lower during the earnings announcements. Our findings suggest that the market efficiency can be improved by the investor sophistication improvement due to information technology. Our findings are robust to different measurements of the interactions of the listed firms， different earnings expectation models， and different measurements of information asymmetry during the earnings announcements. One endogenous problem of this study lies in the incentive issues of the listed firms' interactions. The market efficiency may be improved by the incentive issues of the listed firms' interactions rather than by the interactions themselves. To solve this endogenous problem， we provide evidence that disclosure quality has no correlation with the listed firms' online answers. The problem of endogeneity is a limitation of this study， as we did not filter out other potential incentive issues related to the listed firms' answers.
This study mainly makes the following contributions. First， our study shed light on the potential limitation of the efficient market hypothesis with the empirical evidence that the market efficiency could be improved by the improvement of investor sophistication due to information technology. Second， in our study of investor sophistication， we use the online interaction of social media as a proxy for investor sophistication improvement due to information technology， which provides more details of the information acquisition and interpretation process than the traditional proxy of institutional ownership. Third， by illustrating how information technology has changed the information environment of the capital market， we provide empirical evidence that information technology can facilitate the information acquisition and interpretation of investors through online interactions.
Keywords： Social Media; Investor Sophistication; Earnings Expectation; Market Efficiency

Summary： With the slowdown of the multilateral negotiations in the World Trade Organization (WTO) and the rise of the new regionalism， regional service trade agreements have become a realistic choice for all countries. The previous decade has witnessed a rapid growth in the number of regional service trade agreements. Meanwhile， the relevant contracting parties are no longer confined to the developed economies; they involve many emerging economies， which have the ambition to expand their service development space and obtain an increased market share to enhance their international competitiveness and status in the global labor division.
However， only nine regional service trade agreements were concluded by China until 2011 with a relatively small number of contracting parties， which were mostly developing countries and accounted for only a relatively small part of China's service exports. Therefore， the effects of such agreements on Chinese services export and its involvement in the division of labor in the global value chain are rather limited. Expanding the openness of service industries and developing a trade of services through regional service trade agreements can help China take the initiative in formulating new international trade rules and participate deeper in the global value chain， which is of critical importance in the present stage of the Chinese economy.
In this study， we used the World Input-Output Database and the Wang et al. method (commonly referred to as the WWZ method， 2013) to estimate the service trade in value added in 40 economies from 1995 to 2011. Moreover， we used the regional service trade agreements data from the WTO regional trade agreement information system to construct the index of the service industry coverage. Then， we applied the gravity model developed by Anderson & van Wincoop (2003) and the Poisson pseudo maximum likelihood estimation technique to investigate the effects of the regional service trade agreements on service exports.
After controlling for the bilateral trade cost， supply shocks at the exporter level， and demand shocks at the importer level with fixed effects， we found that the regional service trade agreements had significant positive effects on both the total and added value of service exports. The effects increased with an increase in the openness of the agreements. However， the effects on foreign value-added exports were greater than those on domestic exports. The promotion effects were significant in several robustness tests. Furthermore， from the perspective of the use of service products in importing countries， the effects of promotion on the total value and added-value of service exports were mainly achieved by increasing the intermediate service exports. From the perspective of the decomposition of a value-added service， the effects of promotion on the domestic value-added exports were mainly achieved through the domestic value-added exports created by an increase in the domestic service input.
The results reported in this paper have several important implications for the trade policy of China. To promote the development of China's trade in services and enhance the international competitiveness of service products and the status of the division of labor in the global value chain， the government must continue to deepen the reform of the market economy， ease the control on the service industry gradually， reduce the service industry access barriers， and encourage competition in the market. Moreover， the government must expand the openness of the service industry， rely on the construction of a free-trade zone， and actively contract regional service trade agreements to increase the market space for domestic services trade.
Keywords： Regional Service Trade Agreements; Trade in Service; Valued-added Export

Summary： The Belt and Road initiative was proposed by XI Jinping， President of the People's Republic of China, in 2013. One Belt refers to the countries along the Silk Road Economic Belt， and One Road refers to the 21st Century Maritime Silk Road. These countries are not clearly defined by the Chinese government， but in general， Southeast Asian countries， middle Asian countries， Middle East countries， and some Eastern European countries are included in the One Belt and One Road countries， which are called Belt and Road for short. The Belt and Road initiative has become crucial， with the advent of the new normal stage of China's economy and the deepening global trade.
Other noteworthy features of the Belt and Road countries are frequent terrorist attacks， which lead to enormous suffering. However， international media have paid considerable attention to attacks in developed countries， such as the Paris attack on November 13， 2015 and the explosion attack in Brussels on March 22， 2016， and little attention to the attacks in developing countries such as the Belt and Road countries. Based on the Global Terrorism Database， from 1984 to 2014， the ratio of terrorist attacks in the Belt and Road countries to the global terrorist attacks was 63%， and this proportion reached an astounding 83% after the Iraq War.
To further explore the effects of terrorist attacks on bilateral trade between China and the Belt and Road countries， we used the workhorse in international trade， the gravity model， along with a cross-country panel dataset and combined the terrorism index into the model. For the first time， we found that China had a peculiar feature compared with other countries， in that China could somehow immunize itself from terrorist attacks when trading with the Belt and Road countries; we called this China's new comparative advantage over terrorist attacks.
Furthermore， we investigated two potential mechanisms behind this comparative advantage. In the first mechanism， we added the American and Mexico interaction terms to compare with the interaction terms of China. We found that both the magnitude and significance of the American coefficients were smaller than those of their Chinese counterparts， thereby leading to the conclusion that the risk feature existed only in developing countries such as China and Mexico. In addition， we classified terrorist attacks according to attack types and targets， and explored China's different behaviors when confronted with different types of terrorist attacks. The results show that China has a comparative advantage over the explosion attacks and a disadvantage over the kidnapping attacks， and that Chinese civilians take more risks than Chinese officials. In the second mechanism， the non-interference foreign policy， we divided the sample into groups before and after the Iraq War and found that China showed a comparative advantage over terrorist attacks only after the Iraq War. Moreover， we replaced the Belt and Road countries with African countries， Latin American countries， and European OECD countries; our findings reveal that China did not have a comparative advantage over terrorist attacks when trading with these countries.
Our findings show not only that countries behave heterogeneously against terrorist attacks during the trading process， but also constructive and far-reaching policy implications. First， the comparative advantage of China over terrorist attacks when trading with Belt and Road countries indicates the realistic foundation of the Belt and Road initiative. Second， according to the second mechanism， China's non-interference foreign policy played a vital important role in the formation of this comparative advantage， in accordance with the proposal of China's peaceful rise. Finally， the interferential foreign policies from the Western countries， particularly the U.S.， which were decorated with the slogan “human rights are superior to the sovereignty”， incurred revenge in the form of terrorist attacks to some extent， leading to a substantial loss of economic benefits.
Keywords： Terrorism; Trade; Belt and Road