Summary： Chinese state-owned economy reform encourages capital rights in the form of corporations. This choice shapes the market economy， which has mixed ownership and is dominated by public capital. Some have argued that this reform is incomplete and that corporations should seek privatization. They believe that public ownership does not meet the requirements of the market economy logic. Others have criticized the reform's socialistic direction because the nature of socialismis contrary to capitalist logic. They consider public capital as “capitalism without capitalists” and believe that capitalism will eventually return. These views are both derived from the notion that capital is incompatible with public ownership. By combining Marx's political economy and China's practice， this paper responds to these misunderstandings.
First， this paper reviews Marx's discourses on the demise of value (commodity) production and its productivity foundation in the “Economic Manuscript of 1857—1858” and summarizes them in three ways： free time becomes the measure of wealth， laborers become the supervisors and controllers of the direct labor process， and labor becomes an attractive free activity. In Marx's view， value and capital production share the same foundation， which means that the historical mission of capitalism will not be completed as long as the market economy exists. Accordingly， we examine the basic facts of global productivity development in the century following Marx and make two observations. First， Marx's prediction regarding the trend of productivity development has been proved by history; thus， there is a concrete foundation for his prediction about future society. Second， the social productivity predicted by Marx has not been fully realized， and the demise of value production and capital relations requires the further development of the global economy. Therefore， no social innovation exists beyond the mode of the market economy or the mode of “beyond capital”.
Second， based on analysis of the contradictions of socialistic public ownership， we discuss the possibility and feasibility of the existence of public capital， whereby every laborer is both the owner of public means of production and the owner of his/her own labor power. This is the dual nature of labor's role：laborers are both a group of public wealth owners and a group of enterprise workers. This separation determines the reality that the labor power market is still needed because of the combination of laborers and public means of production. After 100 years of practice， socialism finally chose public capital， and the market economy was dominated by public capital. This is derived from the reality of modern productivity.
We then discuss the nature and meaning of socialism with Chinese characteristics according to the reality of the Chinese economy. Public capital dominates the process of development and reform. The strong accumulation function of public capital was combined with the improvement of people's welfare to create China's 30-year development miracle. The rise of the Chinese economy is a powerful counter to global capitalism. The rapid improvement of 1.3 billion people's standard of living neutralized the trend of global inequality and should encourage every developing country. We exploit the innovation power of public capital and its immunity to the capitalist crisis to explore a new road of development that is “totally different from previous capitalism”. Socialism with Chinese characteristics is a market economy governed by the Marxist ruling party with public ownership. It is capable of breaking the limitations of capitalism， developing social productivity， and maximizing people's long-term benefits and common prosperity. The combination of capital and public ownership is a creation of socialism with Chinese characteristics and the innovative development of a Marxist political economy.
Key Words： Modern Productivity;Capital;Public Capital;Socialism with Chinese Characteristics

Summary： Extreme financial events have generally been ignored by mainstream research because they are usually taken as extremely low probability events or “black swan” events， and it is difficult for traditional theories and models based on the stationary stochastic process hypothesis to describe and analyze the phenomenon of sudden risk outbreak caused by extreme financial events. However， China's financial regulatory agencies have repeatedly emphasized the bottom line of forestalled systemic risk， increasing the need for studies of early warnings of extreme financial events and systemic risk.
Contingent claims analysis (CCA)， a popular forward method adopted to measure systemic risk， has been criticized for its strict theoretical assumptions and single source of risk information. Based on classical option pricing theory and the pure diffusion assumption， conventional CCA limits the asset value volatility of the macro sector to being a stationary stochastic process and does not consider potential volatility with jumps from extreme financial events. It is challenging for the source of risk information in CCA to capture the mechanism of risk surge because conventional CCA uses only the market information of asset value volatility to express the dynamics of pure diffusion. However， to consider extreme financial events and their systemic risk， it is necessary to further explore the implicit jump risk. A further problem is that financial markets can only provide jump information for market value， while for systemic risk and its surge， jump risk information for the macroeconomic sector may be more important， so an information mismatch may exist between the financial market and systemic risk.
To solve these two problems， this paper relaxes the assumption of conventional CCA by replacing pure diffusion with jump diffusion and constructing macro dynamic factors based on information from both the financial market and macro economy to improve its forward effect. We thus introduce a macro-jump-CCA that is expected to be more applicable to early warnings of extreme financial events.
Focusing on China's banking sector， this paper takes the banks listed in the Shanghai and Shenzhen Stock Exchanges as its research sample. The conclusions of this paper are as follows. (1) We replace the pure diffusion assumption in conventional CCA with a jump diffusion assumption， which enables the detection of systemic risk about 3—6 months in advance and provides a better early warning signal： the default distance of conventional CCA and jump-CCA separate clearly when systemic risk is mild but converge quickly when systemic risk surge and extreme financial events occur. (2) The risk information of conventional CCA and jump-CCA both stem from the financial market， but a single source of risk information may suffer from noise signals， which may make an early warning policy fail to react in a timely manner. (3) To improve forward effects， macro dynamic factors， which are mixed-frequency estimated in this paper， maintain the sequence dynamic and jump clustering characteristics of banking index yields while absorbing macroeconomic information neglected by financial markets and avoiding excessive jump volatility from banking index yields. Thus， macro dynamic factors can be used to consistently identify the risk surge characteristics. (4) Compared with jump-CCA， macro-jump-CCA can use macro dynamic factors to identify noise signals earlier， better reduce adverse effects， and provide 2—3 months for policy reaction to precautions against systemic risk， even given the existence of noise signals. (5) There are distinctions regarding early warning effects among three subsectors： the banking sector's default distance is more effective in early warning than the securities and insurance sectors， while the default distances of the securities and insurance sectors fluctuate smoothly and thus do not provide an early warning signal for some extreme financial events.
Key Words： Systemic Risk; Extreme Financial Events; Macro-jump-CCA; Mixed-frequency Macro Dynamic Factor

Summary： A disaster (rare disaster) is an event or shock that is infrequent in probability but large in magnitude. A disaster has a huge negative effect on an economy. Examples of disasters include economic and financial crises， wars， terrorist attacks， and natural catastrophes. Asset pricing models with disaster risk have been studied extensively， as has optimal macroeconomic policy for stabilizing economic fluctuations in the face of normally distributed shocks. Optimal fiscal and monetary policy in the face of disaster shocks receives relatively little attention in the macroeconomic literature. In this paper， we investigate the optimal fiscal and monetary policy when the Chinese economy is exposed to disaster shocks. We contrast optimal policies with and without government productive spending and optimal policies under government commitment and discretion.
The research questions are as follows. (1) What is the optimal mix of fiscal and monetary policy instruments to deal with disaster shocks? (2) How does this mix depend on the government's commitment to or discretion regarding its policy plans? (3) What are the implications of government productive spending for optimal policies? (4) Can welfare be improved by making the discretionary government inflation-averse?
Outlines and Methodology： (1) We extend Niemann & Pichler's (2011) basic model by introducing government productive spending， which is one of the main characteristics of the Chinese economy. Disasters take the form of large exogenous drops in TFP and/or increases in government spending requirements. The government adopts fiscal and monetary policies to maximize the lifetime utility of a representative household. Its policy instruments include labor income tax， inflation tax， and government debt. Optimal policy prescriptions may depend critically on the government's ability to commit to its policy plans. Thus， to investigate the implications of our model， we explore cases with commitment and with discretion. (2) Our theoretical model is not analytically tractable， so we use numerical solution and calibration to derive numerical approximations for the policy functions. As disasters have highly negative distributions， local approximation methods are inappropriate; thus， we use the monomial-rule Galerkin projection method. We then explore the dynamic properties of optimal policies in the presence of disasters and compare the cases with and without government productive spending and the cases of commitment and discretion. We further study the government's optimal response to disasters and evaluate the welfare implications of disasters in these scenarios. (3) By adding an inflationary loss term into the discretionary government's objective function， we examine whether welfare improvement can be achieved by making the discretionary government inflation-averse in the discretion scenario.
We find that (1) compared with the discretion scenario， the commitment scenario results in less welfare loss; (2) government productive spending reduces consumption growth and tax income volatility while also reducing the debt absorption effect; and (3) the introduction of inflation aversion induces the government to rely more on debt to absorb the shock and reduces the welfare loss in the discretion scenario.
This paper contributes to the literature on optimal fiscal and monetary policy for dealing with disaster shocks by introducing government productive expenditure into the new Keynesian DSGE model with disaster shocks. The calibration results show that our model can better fit the stylized facts of the Chinese economy. We also find that government productive spending should help to stabilize consumption growth and tax income， but also reduce the debt absorption effect.
Key Words： Disaster Shock; Government Productive Spending; Optimal Fiscal and Monetary Policy

Summary： When house prices rise too quickly in China， the government often implements contractionary policies concerning the real estate industry， such as increasing house transaction costs， but their effects are weak. However， as no effective policy other than stimulating real estate market transactions has been found to improve economic growth in China， when the macro economy faces heavy downward pressure， the government will use expansionary policies regarding the real estate industry， such as decreasing house transaction costs， and house prices will rise again. We believe this phenomenon is caused by the expectation of both real estate developers and households that the contractionary policy for the real estate industry is only temporary. Real estate developers therefore will not lower the sale prices of houses substantially. Moreover， as households believe that house prices will rise when the contractionary policy ends and an expansionary policy begins， they will buy houses， and house prices will rise again.
Expectation-driven business cycle theory states that good news about the future and subsequent news corrections can cause economic fluctuations. Thus， to study the effects of expectations on house prices and the macro economy， we introduce anticipated shocks in a DSGE model with a patient household and an impatient household and with a consumer goods sector and a real estate sector. We analyze which factors determine house user costs and how anticipated shocks on house transaction costs and house price markups influence the economy. Compared with similar studies， this paper makes the following contributions. (1) We introduce the house transaction cost shock to replace the house preference shock and use it to denote the exogenous house demand shock. The house preference shock is a reduced-form shock， but the house transaction cost shock is a structural shock and can better describe the behavior of the government intervening in house demand in China by adjusting house transaction costs. (2) We introduce the house price markup shock to denote the behavior of real estate developers in deciding house prices according to the price elasticity of house demand. In China， house supply is deficient relative to house demand， so real estate developers have more power to adjust house prices.
Our main results are as follows：
(1) Using the local identification test in Iskrev (2010)， we identify all of the parameters， including anticipated and unanticipated shocks. The variance decomposition shows that anticipated shocks on house transaction costs and house price markup explain around 70% of the business cycle fluctuations in the main macroeconomic variables.
(2) The rise of current house prices increases house users' costs， but the expected rise of future house prices decreases them， so an expected sharp rise in future house prices will cause the “more rise， more buy” phenomenon. Moreover， as an expected rise in future house prices can help impatient households borrow more money and raise their current consumption， it will induce impatient households to buy more houses than patient households， and the “more rise， more buy” phenomenon will be more significant.
(3) Once the public forms the expectation that the government will decrease house transaction costs， house prices will begin to rise even though the policy has not yet been implemented. Thus， if the government implements a contractionary policy for the real estate industry， but the public expects that policy to be implemented for the real estate industry due to a bust of the macro economy， this expectation will make current contractionary policy ineffective.
(4) If the government can lead the public to form correct expectations about industrial policy， the effect of the policy will be improved. However， incorrect public expectations will cause reverse correction and increase economic fluctuations.
Key Words： Anticipated Shock; House Price; House Transaction Cost; House User Cost; Economic Fluctuation

Summary： As interest rate， exchange rate， and capital account reforms accelerate， the Chinese financial market faces unprecedented challenges. Most studies show that factors such as capital control， transaction cost， and limited arbitrage render the relationship between the interests and forward exchange rates as nonlinear and time-varying on a non-flat-rate parity curve. This paper builds a time-varying theoretical model to identify the relationships between the interest rate， exchange rate， and international capital flow based on the current market situation in China， where the monetary authority implements a managed floating exchange rate system and capital control. Using monthly data for 1997M01—2016M04， we establish a vector autoregressive model with time-varying parameters to estimate their relationships. Unlike the traditional constant VAR model， our framework can effectively derive the dynamic relationships between the three variables over time. The model can also be used to evaluate the effectiveness of a non-flat-rate parity curve in China.
We analyze the effects of the market-oriented reform of the interest rate， the exchange rate system， and capital account liberalization on the interest and exchange rates and international capital flow. The results show that if the difference between the onshore and offshore RMB interest rates exceeds the threshold value， the effect of the interest rate on the exchange rate is positive， as is the effect of an interest rate shock on the international capital flow. However， if the difference between the onshore and offshore RMB interest rates is below the threshold value， the exchange rate depreciates or remains unchanged， and the positive effect of an interest rate shock on the international capital flow declines substantially. Thus， currency appreciation and interest rate expectation promote international capital inflows if and only if the risk premium is sufficiently large， making the effects of the interest rate and the exchange rate on the international capital flow time-varying conditional on the risk premium. These findings make a useful contribution to the literature.
The analysis of time-varying variance decomposition shows that the effect of interest rate changes on the exchange rate and international capital flow is relatively limited. The transmission mechanism from the exchange rate to the interest rate is almost ineffective， although it is relatively effective from the exchange rate to the international capital flow. In sharp contrast， the effect of the international capital flow is limited on the interest rate but highly significant on the exchange rate. The reasons the effects of interest rate changes on the international capital flow and exchange rate are limited are twofold. First， the monetary authority still controls the capital account， which weakens the price transmission effect of interest rate changes on the other two variables. Second， the monetary authority controls the exchange rate volatility range， which results in the interest rate parity not holding well.
Thus， the most urgent strategy of the three major financial market reforms is to improve the transmission mechanism of the interest rate to the exchange rate to further expand the range of RMB exchange rate fluctuations and liberalize capital accounts， which would improve the transmission effectiveness of monetary policy on international capital flow. It is therefore suggested that market-oriented reforms be implemented in the interest rate liberalization-exchange rate market reform-capital account liberalization sequence to prevent China from suffering a systematic financial crisis arising from unexpected capital flight.
Key Words： Interest Rate Liberalization; Exchange Rate Reform; Capital Account Liberalization

Summary： The Chinese economy has entered the “new normal”. It is widely believed that the driving force of the economy in this new era should be innovation instead of factories and investment. To realize this transformation， the human capital level must be improved and allocation efficiency must be optimized. However， China's human capital level is currently extremely low. In 2010， the average years of education of people above 15 was only 7.5， while it was 13.2 in the USA and 11.6 in Japan. Furthermore， China's limited human capital is misallocated， as a great deal of outstanding talent is allocated to the government. In 2005， the average number of years of government employees' education was 12.73， much higher than that of enterprise employees (9.31). Given this background， this paper tries to answer the following question： what is the effect of talent allocation between the government and enterprises on economic growth in China?
All of the literature on the relationship between China's government-enterprise talent allocation and economic growth is descriptive. For example， Wu & Huang (2008) argue that since 1995， the government has strengthened administrative intervention in many areas， such as land and the financial market， while failing to provide the prerequisite environment for the rule of law in a timely manner. Zhang et al. (2010) argue that China's economic miracle over the past three decades can be attributed to the reallocation of entrepreneurial talent from the government and agricultural sectors to business activities. In contrast to these studies， in this paper， we provide empirical evidence to answer this question.
Before conducting the empirical regression， we construct a theoretical model to demonstrate the possible effect of talent allocation between the government and enterprises on economic growth and its mechanism. In this model， the source of economic growth is innovation， and the source of innovation is the human capital allocated to enterprises. Human capital in government can improve the innovation efficiency of enterprises through the provision of high-quality public services. Therefore， when society's total human capital is given， there exists a best allocation ratio of talent between the government and enterprises. When the allocation ratio is higher than the optimal point—that is， when more human capital is allocated to the government—the economic growth rate is lower.
We then use China's city-level data to test whether the present talent allocation between the government and enterprises has deviated from the optimal ratio， and in which direction. The data we use consist of 1% of the 2005 national sample census and the China city statistical yearbooks from 2001 to 2010. We calculate the ratio of the average years of education of employees in government and enterprises in each city and use this as proxy of a city's talent allocation between the government and enterprises. We find that the more talent allocated to the government， the lower the economic growth rate. To address the endogeneity problem， we use the ratio of the average years of education of employees in the government and enterprises in other cities of this province as an instrumental variable and use the 2SLS method to rerun our benchmark regression. The results are unchanged. We also conduct other sensitive analysis and our findings are robust. The findings indicate that allocating too much human capital to the government has impaired China's economic growth.
The policy implication is that to promote economic growth， the government should reduce the income premium of government employees， further limit the government's power(reducing corruption)， and improve the social security system to attract more outstanding talent to work in enterprises.
Key Words： Government and Enterprise; Talent Allocation; Economic Growth

Summary： Since the market-oriented reform of 1978， China has undergone rapid economic growth. During this time， increasingly sharp contradictions between employees and employers have occurred that are detrimental to social harmony. To protect employees' benefits and maintain social harmony， a labor law was passed and executed in 2008. Studies have examined the effects of the labor law on the employment rate， cost stickiness， and operation flexibility of firms but have not investigated its effects on corporate investment or China's economic growth. This paper therefore tests whether the labor law has negative effects on corporate investment and economic growth in China.
In theory， the effect of the labor law on corporate investment is ambiguous. The law increases the employee cost of illegal firms and reduces the flexibility of employing human capital， which decreases the net present values， growth options， switch options， and put options of projects， subsequently reducing corporate investment. However， due to the law， firms may work to improve corporate culture to incentive workers to invest in firm-specific capital or increase investment in innovative assets that include more capital and less labor， which may increase corporate investment.
The data used in this paper include firm and province characteristics from 2005 to 2013. Firm data are obtained from the CSMAR and Chinese Industrial Enterprises databases， while the province data are taken from China's National Bureau of Statistics and Wang et al. (2013). When corporate investment (provincial economic growth rate) is used as an independent variable， fixed effects are used， and the standard errors are clustered at the firm (province) level. We find that the labor law has an insignificant effect on the investment of state-owned firms but a significantly negative effect on the investment of private firms， which is particularly pronounced in labor-intensive industries and smaller firms， and that these effects are only found in the first three years. These results suggest that compared with state-owned firms， the labor law reduces the investment of private firms， as state-owned firms usually hire more workers and do not fire workers. Given this law， private firms may work to improve corporate culture to incentive workers to invest in firm-specific capital or to buy new innovative assets that are less labor intensive， which may mitigate the negative effect of the labor law after 2011. Furthermore， the law has a significantly negative effect on the GDP growth of provinces， which is more pronounced in provinces in which private firms invest more or hire more employees.
This article contributes to the literature in several ways. The first is related to its economic analysis of labor market frictions. Many works have examined the effects of the labor law on employment costs， the employment rate， and cost stickiness， while few works have studied the effect of employment protection on corporate investment in other countries. We add to this literature by examining the effects of the labor law on corporate investment and China's economic growth. This study also contributes to the literature on the interpretations of the decline of China's economic growth after 2008. The literature focuses on the US financial crisis and the decline of the labor supply. Our results suggest that the employee burdens resulting from the labor law will impede China's economic growth and thus provide a new explanation for the decline of China's economic growth after 2008. Finally， we provide new evidence regarding the social objects of state-owned firms. Although many studies have argued that social objects lead to the inefficiency of state-owned firms， few have provided direct evidence of the social objects of state-owned firms. We find that the labor law for social objects has an insignificant effect on the investment of state-owned firms and thus extend the literature.
Our study has the following policy implication. To hedge against the negative effects of the labor law on corporate investment and China's economic growth， the government should enact certain policies， such as encouraging corporate innovations and decreasing the tax rates of firms and especially small private firms.
Key Words： Labor Law; Property Rights; Corporate Investment; Labor-intensive Industries; Economic Growth

Summary： China experienced a devastating flood in the areas of the Yangtze River, the Songhua River, and the Nen River in 1998, which raised serious concerns regarding soil erosion. Subsequently, the Grain-for-Green Project was implemented in China's central and western provinces to prevent soil erosion. As it changed farmers' production mode, the project also had economic effects. The government has recently focused on economic effects, particularly on poverty alleviation. This paper researches the project's effects on income, non-farm employment, and poverty alleviation.
Although some similar studies had been reported, the data, research methods, and content of prior studies present defects. Most studies choose only one or several provinces as research objects and thus cannot fully demonstrate the effects of the project. Central government cannot wholly realize and figure out the effect of the Project and then it is not conducive to enact and supplement relevant supporting policies. This paper is the first to study its economic effects at the national level. Second, most prior studies use questionnaires to collect data and estimate income data, which is not accurate enough. As we know, if measurement error appears in the dependent variable, the variance of estimated coefficient will be larger and then the statistical test will be invalid. Income data in our paper are collected by recording, which is more accurate. Third, definitions and classifications of farmers' income are ambiguous and unreasonable. If the property income and transfer income was taken into account without distinction, conclusion might be easily disturbed. In addition, whether in-kind income that produced and consumed both by farmer himself should be included, was not explained in prior literatures. If ignoring this factor, the effect of income increasing will likely be overestimated. In the aspects of empirical method, early empirical studies mainly use statistical descriptive analysis. Recent studies have focused on the causal relationship and used propensity score matching or the difference-in-differences method. However, only one period of pre-policy data exists, and we cannot test whether the treatment and control groups shared a secular trend before the policy was enacted. This paper tests whether the project can attract nonparticipants in participating villages to engage in nonfarm employment. It also compares the effects of the narrowing income gap between the Grain-for-Green subsidy and other fiscal subsidies.
This paper evaluates the project's economic effects based on poverty-monitoring survey data from 2006 to 2010 collected by the National Bureau of Statistics and using propensity score matching and the difference-in-differences method. First, this paper finds that the Grain-for-Green Project increases farmers' income. When subsidies are removed from farmers' income, increased nonfarm income can only compensate for losses from landholding. The effect of income increasing isn't significant any more. Second, subsidies mainly flow to lower-income participants, and the project significantly reduces income inequality in rural areas. Third, nonfarm employment orientation varies by income level. High-income households affect the forest, husbandry, and fishery industry, while middle-income households rely on wages from outside. Fourth, the project cannot induce non-participants in a village to engage in nonfarm work, showing an insignificant driving effect. Finally, the poverty relief effect differs according to different poverty standards. According to the New Stage Rural Poverty Standard, the Project shows a significant effect.
Considering the Project's active effect on nonfarm employment, income distribution, poverty relief, as well as the huge progress on environment protecting, the Grain for Green Project should be continuously supported. But how to help the farmers realize stable nonfarm employment and avoid planting again becomes the key problem of system design in the process. Therefore, this paper gave several suggestions. One is to increase subsidy standard. The second one is to enhance production technical training and employment guidance and to promote system reformation and optimization.
Key Words： Grain for Green Project; Non-farm Employment; Increasing Income; Propensity Score Matching; Difference-in-Differences

Summary： Given its serious environmental pollution， China now risks falling into the “environment-health-poverty” trap， as it is highly likely that environmental pollution will slow economic growth due to impaired human health and thereby worsen poverty， leading to a more energy-intensive production mix and damaging the environment and public health. Thus， protecting the environment without hurting the economy presents a challenge for effective energy taxation reform in China. Energy taxation is a major policy measure for mitigating environmental pollution， but it has some undesirable side effects and the optimal energy tax revenue allocation has long been neglected.
The literature shows that whether energy taxation hurts the economy remains controversial. Important issues that have often been ignored are the linkage between environmental pollution， public health， and labor productivity and the allocation of energy tax revenue to pollution abatement and residential income， both of which are of great concern for avoiding the “environment-health-poverty” trap. Thus， by considering the detrimental effect of environmental pollution on public health and the economy， this paper theoretically and empirically analyzes energy tax revenue allocation to maximize economic output and residential well-being.
This paper introduces an overlapping generations (OLG) model that incorporates the negative effects of environmental pollution on labor productivity and introduces environmental quality and public health into the production functions as endogenous factors. We establish a two-period theoretical OLG model to systematically analyze the underlying mechanisms of the interactions of energy tax， energy consumption， environmental pollution， and public health and their effects on long-term economic growth. Given the levels of the energy tax rates， total production is a function of the energy tax revenue allocated to subsidized residential income when the economy reaches a stable equilibrium. Thus， the government can set an optimal allocation of energy tax revenue to minimize losses to economic output and social welfare.
Our findings show that there exists a theoretically optimal redistribution to maximize steady-state production per capita or residential welfare. However， it is impossible for any tax revenue allocation policy to satisfy both goals. A higher share of labor in economic output or a greater influence of public health on labor productivity makes the allocation of energy tax revenue to pollution abatement activities more likely to increase the steady-state level of economic output per worker and lifetime residential welfare. However， when the effect of environmental pollution on public health decreases， the optimal allocation share of tax revenue to pollution abatement declines.
The important policy implications can be summarized as follows： energy tax revenue is expected to be used to subsidize residential income and pollution mitigation activities in an open and transparent way; this allocation share is determined by policymakers' decision preference， and if the policy orientation is changed from GDP to residential well-being， it may slow the pace of economic growth but yield a welfare benefit. Local governments should also adjust their tax revenue allocation policies according to their own actual economic and social situations to maximize residential welfare and well-being.
Our contributions can be summarized as follows. First， from the new perspective of the “environment-health-poverty” trap， we incorporate energy tax revenue allocation into pollution mitigation activities and residential income. Second， we establish a theoretical model and quantitatively analyze energy tax revenue and its optimal allocation to economic activities. Finally， we propose a number of policy suggestions and implications that may provide new insights into real-world policymaking.
Key Words： Energy Tax Revenue Allocation; Public Health; Economic Growth; “Environment-Health-Poverty” Trap

Summary： The decentralized authoritarism that combines political centralization and economic decentralization is considered as an important factor underlying China's remarkable economic growth over the past four decades. In this framework， the central government provides strong incentives to local government officials to stimulate economic development， and local government officials respond by encouraging investment. The local government plays the role of providing a helping hand.
Although a political structure is centralized at the highest level of government， many political science researchers point out that decision making in local governments and government branches is becoming increasingly fragmented. Various divisions take into account their own divisional interests， and cronyism becomes a serious challenge. In the context of streamlining administration and restricting executives to promote comprehensively deepening reform， it is important to remove the interference and obstacles from vested interest groups.
In this paper, we set up an optimal delegation model following Holmstrom (1984)， in which a government consists of two divisions. We mainly focus on the consequences of interest divergence between divisions. The model indicates that larger interest divergence is associated with organizational efficiency loss， which increases with respect to the importance of the division. Examining the model predictions empirically， the interest divergence biases government policy through the real political power structure， which represents the importance of division in the model. The model implies that in the absence of external monitoring and under the principle of collective leadership， the interest divergence based on the divisions may affect policymaking through the real political power structure. Therefore， government policy could be biased toward government insiders， which would cause more interference in the market economy and reduce the social welfare.
We manually collect information on provincial party standing committee members from 1992 to 2011 and construct indicators to measure standing committee diversity to measure the interest divergence and real power structure of local governments. Using a fixed effect model， we find that if the local standing committee diversity indicator increases by one standard deviation， public employment will increase by 1% in the next year， private investment will decrease by 4.4 percentage points， and the total social investment will decrease by 3.9 percentage points. At the same time， the amount of illegally used land will increase by 12.5% and the land leasing revenue of the local government over fiscal revenue will increase by 1.8%. This evidence is consistent with the tendency of interest divergence within a local government to distort policy and lead to the expansion of public employment， increasing illegal land use and reliance on land finance and exerting adverse effects on private firms and economic development.
This paper's contribution is that it treats the local government as a collection of agents instead of a single agent， as in the literature. Our study shows that the real political power structure inside a local government is dynamic and shapes policy outcomes at the local level. Hence， any top-down attempts to implement policy directives should take this power structure into account. We suggest that improving external monitoring and restricting executives' discretionary authority is the fundamental way to protect the economy from opportunism. Eliminating fragmented decision-making processes， properly centralizing power， and increasing the accountability of local officials may reduce the negative effect of divisional interests， improve efficiency， and strengthen economic growth.
Key Words： Real Political Power Structure; Local Government Behavior; Government Size; Land Finance

Summary： The price limit mechanism， a common financial market trading mechanism system， is usually applied to the early stages of the financial market to ease the volatility of asset prices and calm the resulting market panic. In December 1996， China's stock markets imposed daily price limits whereby all stocks (including A and B shares) were limited to a ±10% daily price change except for the so-called “special treatment” (ST) shares， which were limited to ±5%. In the last two decades， the price limit policy has come to be seen as a necessary regulation for the Chinese stock market. Margin trading is a two-way hedging instrument for the stock market， and it is one of the most effective risk management tools in the financial market. Chinese authorities officially allowed margin trading in 2010 and gradually expanded the margin trading range afterward.
Can price limiting and margin trading effectively facilitate price discovery and moderate market volatility? To better understand the effects of the price limit mechanism， this paper uses historical price data from the Shanghai Stock Composite Index， including periods with price limit regulation， to compare the volatility of the index with that of the Chinese Taiwan Capitalization Weighted Stock Index， the Chinese Hong Kong Hang Seng Stock Index， and the US stock market. The empirical results of the EGARCH model suggest that the price limit policy is somewhat ineffective in mitigating market volatility in the Chinese stock markets. However， different countries have different trading mechanisms， macro environments， and trader behavior. Without making further assumptions about volatility where price limiting has not been imposed， it is impossible to make reliable inferences about the price limit's specific effects. To further prove the effect of the price limit mechanism and margin trading on stock volatility， we need to find the “perfect research control group”.
AH shares in the Chinese stock market are suitable for conducting a natural experiment to study how price limiting affects market volatility. AH shares are those of a company listed on both the Mainland China Exchange (A-shares) and the Hong Kong Stock Exchange (H-shares). First， this paper selects 88 AH share stocks from January 2005 to August 2016 to study volatility when controlling for the market factors and variables representing trader behavior and the trading mechanism. Our empirical result suggests that the price limit is one of the reasons why the A-share market is more volatile than the H-share market. Second， we select 74 AH share stocks that are eligible for margin trading from April 2010 to August 2016 to study the effects of margin trading. We find that after introducing margin trading， the A-share market， which imposed price limiting， became more volatile. Third， based on the data from January 2005 to August 2016 and treating the Shanghai Stock Composite Index volatility (market_s) as the explanatory variable， we find that institutional investors drive excess market volatility. In contrast to the traditional view that China's high proportion of retail investors causes a great deal of market volatility， we find that it causes relatively little volatility.
To promote the healthy development of a fair， transparent， and predictable stock market， China's government should further improve the trading system， let the market play a decisive role， focus on regulatory coordination， and crack down on illegal trade， especially to large or institutional investors.
Key Words： Price Limit; Margin Trading; Magnet Effect; Volatility

Summary： Increasing numbers of managers in China are converting their stocks into cash. The statistics show the market value of stock that executives sold are about 96 billion and 113 billion RMB in 2016 and 2015, increased respectively by 134 times and 186 times compared to 2014. Obviously, the size and growth speed of executives holdings-selling are very amazing. As senior managers are the actual controllers of companies, the large-scale selling of stock is usually viewed as a bad sign for a company, and its stock price is likely to fall sharply. Furthermore, managers are also able to take advantage of their insider status to boost the stock price during stock selling periods, which is harmful for individual investors' interests and is not conducive to develop healthily for Chinese stock market.
Using samples of managers' stock selling from 2006 to 2014 in China's A-share market and news coverage from newspapers and the internet, we research the strategic behavior of deliberate media disclosure and its market effects. To identify management behavior regarding media disclosure strategies, we adopt the following three methods. First, we use statistical descriptive analysis to determine whether media attention and coverage tone change significantly in different stages of stock selling periods. Second, we use a dummy variable to demonstrate the effect of managers' stock selling on media coverage (including media attention and coverage tone). Finally, we identify whether managers actively manage media coverage during stock selling periods by testing whether the stock price reverses after they finish their stock selling.
We find that managers actively manage media coverage during their stock selling periods. First, a firm's level of media attention will rise in the early stage of stock selling, will peak during stock selling, and will drop significantly or recover to a normal level afterward. Second, the media disclosure focus varies in different periods: managers focus on obtaining media attention in the early stage but on obtaining a more favorable tone when they begin to sell. Third, the number of stocks being sold and the number of participants have significant effects on a disclosure strategy, but managers' positions have insignificant effects. Fourth, managers can acquire more wealth by managing their disclosure strategies to boost the stock price in the short term and cause the stock price to reverse in the long term. Finally, the external effects of managing media disclosure will induce other peer managers to sell their shares. In short, media disclosure has become a vehicle for seeking self-interest. Our findings have important implications for regulation of information disclosure, insider trading and investor decision.
The contributions of our study are as follows. (1) Compare to existing literature about information disclosure management while major shareholders selling their holdings (Wu & Wu, 2010), we focus on information disclosure management by senior managers during their stock selling periods, specifically their active media disclosure management behavior in periods of stock selling from the perspective of trading-driven information. This research contributes to the research of insider trading and information superiority. (2) Prior literatures on media disclosure management during important events that involved in overall interests for company, such as merger and acquisition (Ahern & Sosyura, 2014), scandals (Zavyalova et al., 2012; Gu, 2016) and equity financing (Cai et al., 2014; Wang et al., 2015; Wang & Li, 2016). Few research study this strategic behavior in the situation that concerning managers' private interests directly. We explore senior managers' use of media disclosure strategies to seek their self-interests when they sell their holdings, and further enrich the literature about media disclosure management of company. (3) We find that the externality effect of media disclosure management induces other peer managers to free-ride and sell their stock. This finding may be explains the causation of “peer effects” in corporate decisions (Leary & Roberts, 2014).
Key Words： Managers' Stock Selling; Strategic Media Disclosure; Media Coverage; Stock Price; Free-riding

Summary： A typical venture capital cycle consists of fund raising， investing， managing， and exiting. Our data， however， show that long after their portfolio firms go public， many venture capitalists still hold their shares. Given the nature of the venture capital cycle， this unwillingness to exit is puzzling. First， while their peers in US markets usually face a lockup period of 180 days， Chinese venture capitalists have to lock up their shares for at least one year and sometimes up to three years after the initial public offering (IPO). Second， as the main channel for Chinese venture capitalists to exit， IPOs are frequently subject to Chinese regulations， such as IPO blackouts and modifications to listing requirements. Third， unlike other institutional investors， venture capitalists have competitive advantages in selecting investment projects with huge growth opportunities and fostering them through value-added services. Their expertise does not rest on trading stock in the post-IPO market.
The literature documents that individual investors tend to hold stocks with losses but sell stocks with gains. However， whether institutional investors are subject to the disposition effect remains unsolved. This study examines the existence of disposition effects for venture capitalists and whether some reference prices affect their exiting decisions after their portfolio firms go public.
Venture capitalists focus on discovering new firms with huge potential and helping them grow. They may not have the expertise to trade professionally in secondary markets. In addition， profit-sharing mechanisms in venture capital firms motivate their managers to pursue high-investment returns. The managers then care about the stock performance of their IPO firms. Thus， we expect venture capitalists to be subject to the influence of the reference price—that is， they sell their stocks when the prices are higher than the reference point but hold their stocks when the prices are lower.
The involvement of venture capitalists on boards of directors and in site visits gives them information advantages that help them evaluate the real value of IPO firms. We expect that a better understanding of firm operation can mitigate the disposition effect of venture capitalists. Moreover， experienced venture capitalists are more likely to follow their plans and have better decision processes. Consequently， we expect that experienced venture capitalists are less likely to exhibit disposition effects.
Our sample consists of all of the firms with venture capital backing that went public on the SME board or the ChiNext board from 2004 to 2011. The data for the venture capital firms are taken from the CV Source database. We hand-collect the information for the lock-up period and lock-up shares from the prospectuses of listed firms. Quarterly stockholding information， the top 10 tradable shareholders， and the stock price data are taken from the CSMAR database. The final sample includes 270 companies and 285 venture capital firms. Our tests focus on the first selling after the lockup expiration. If， at the end of a quarter after the lockup， stockholdings by the venture capitalists are less than their shares reported in the IPO prospectus， we consider this as selling.
The results show that after the lock-up period， the selling behavior of the venture capitalists is negatively associated with the degree of loss compared with the reference prices， such as the closing price at the IPO date or at the end of the first month of trading. The evidence is consistent with the disposition effect. We further examine whether a venture capitalist is located near the IPO firm and has a board seat. These proxies for low information asymmetry between the firm and venture capitalists mitigate the disposition effects in the selling decision. We also find that more IPO experience and more investment experience can reduce the likelihood of existence of disposition effects.
Key Words： Venture Capital; Disposition Effect; Information Asymmetry; Investment Experience

Summary： China's high-speed railway(HSR) network has experienced extensive growth since 2009. By the end of 2015， 19，000 kilometers of HSR had been constructed， accounting for over 60% of the world's total HSR length. An additional 38，000 kilometers of HSR are either in construction or planned for completion by 2030. Given the large scale of investment in HSR， it is critical to ask whether HSR is economically justifiable and what it actually provides. Given the invest-in-the-early-stage nature of venture capital， we study the effect of HSR on the venture capital industry in terms of investment in HSR cities.
Venture capital investment can be a leading indicator of economic development. HSR can be critical for the venture capital industry because of the time and financial efficiency of the technology. We study HSR effects on venture capital for the following reasons. First， venture capitalists foster entrepreneurs who are likely to be innovators and key drivers of future growth. Previous studies indicate that venture capitalists support innovation， add value to their portfolio firms， and are critical for regional economic development. Thus， understanding venture capital behavior regarding HSR can provide a great deal of information about future development. Second， personal (especially face-to-face) interaction is still the best way for venture capitalists and entrepreneurs to learn about each other， and HSR reduces the costs of such communication. Geographical proximity is changed by new technology， and venture capital investment behavior changes geographically. HSR reduces travel time and the cost of interaction between venture capitalists and entrepreneurs， and it facilitates the transfer of soft information.
HSR also provides an excellent opportunity for empirical identification. We apply the difference-in-differences (DID) approach with HSR's initial operation as an exogenous shock to local investment. Our sample includes all of the investment deals from 2006 to 2012 at the prefecture city level. In the DID analysis， we first conduct a full-sample regression analysis and then conduct a paired-sample regression analysis. For the paired-sample analysis， we use propensity score matching (PSM) technology to find comparable cities for on-HSR-line cities. The DID regressions are then conducted using the paired sample. The analyses of the samples lead to the same conclusion： venture capital investment in HSR cities is significantly higher than in other cities. The number of investment deals and the amount of money invested in HSR cities are 28.9% and 49.5% higher， respectively， than in non-HSR cities. The result is stronger for first-round investments. HSR cities outgrow their peers threefold in terms of the amount of money compared with their peers after HSR opening. Furthermore， the radiation scope of VC centers such as Beijing and Shanghai are extended to a 150-kilometer circle， as regions within this range witness significant increases in VC investment. The effect is more significant for early-stage investments and private VCs， which indicates that the results are more likely to be driven by direct interactions between venture capitals and their portfolio firms. The number of deals supported by private VCs increases by 27%， seven percentage points higher than the growth rate of government-backed venture capital fund investment.
We contribute to the literature by identifying the effect of geographical proximity on the selection and value-added properties of venture capital based on the predictions of information economic theories. HSR network can foster innovation and economic development by saving time， compressing space， and improving accessibility. China's HSR network greatly improves the efficiency of the capital invested by changing the spatial constraints that venture capitalists face， just as the U.S. railway network in the 19th century greatly reduced market barriers， enhanced the value of land， and reduced social costs， thus contributing a great deal to economic development， as reflected in the work of Fogel(1964) and Donaldson & Hornbeck(2016).In addition， we quantify the HSR effect by the increase in the number of investment deals， the amount invested， and the extension of the VC-center circles.
Key Words： High-speed Railway; Venture Capital; Soft Information; Information Asymmetry