Economic Research Journal (Monthly)Vol.42 No.3 March,
2007
CONTENTS
Why Does China Enjoy So Much Better
Physical Infrastructure?
----------------------------------------Zhang Jun, Gao Yuan, Fu Yong and Zhang Hong (4)
A Test on a Forwardlooking Monetary Policy
Reaction Function in
Chinese Monetary Policy-----------------------------Zhang Yishan and Zhang Daiqiang (20)
A Hypothesis on Effective Demand Size,
R&D Expenditure and National Innovation Capacity
------------------------------------------------------------------Fan Hongzhong (33)
On Reasonable Boundary of Public Sectors:
Price Determination in Public Sectors with Mixture Nature
-----------------------------------------------------Liu Xiaoxuan and Zhao Nong (45)
The Impact of SOE Reform on Employment:
Evidence from 11 Cities
------------------------------------------------------Huang Lingwen and Yao Yang (57)
The Distributional Effects of Public
Pension Reform in Urban China
----------------------------------------------------------------------He Lixin (70)
Jointly Deciding Contract Target: An
Improvement of Weitzman Model
-------------------------------------------------------------------Hu Zuguang (81)
Background of Independent Directors and
Corporate Performance
--------------------------------Wei Gang, Xiao Zezhong, Nick Travlos and Zou Hong (92)
The Empirical Analysis on the XEfficiency of Chinese
Commercial Banks
--------------------------------------------------Xu Chuanchen and Qi Shutian (106)
Imperfect Rationality，Sentiment and Closedendfund Puzzle
--------------------------------------------------------Wu Yanran and Han Liyan (117)
The Construction of Harmonious Society and
the Establishment of a Modern Market Economic
System
------------------------------------------------------------------Tian Guoqiang (130)
Finding Theoretical Rules from Scattered
and Stylized Facts
-----------------------------------------------------------------Wang Cheng (142)
Book Review
------------------------------------------------------------------Chen Jiagui (157)
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Editorial
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Why Does China Enjoy So Much Better Physical
Infrastructure?
Zhang Jun, Gao Yuan, Fu Yong and Zhang Hong
(China Center for Economic Studies, Fudan University)
Abstract:This paper builds up an analytical
framework within which the quicker improvement of infrastructure in China since 1990s is explained. Based on provincial panel data, the authors not only
present an evolution of infrastructure spending and a measurement of the
aggregate level of infrastructure, but also empirically identify the
determinants on infrastructure spending using GMM. The paperfinds that, after
controlling for level of development, financial depth, and other variables, FDIdriven competition among local
governments, and governance are both significant in explaining the growth of
spending on infrastructure. This implies that decentralization, Tiebouttypecompetition, and governance are
all vital to enhancing government's incentive to improve
infrastructure.
Key Words:Infrastructure;
Fiscal Decentralization; Governance
JEL Classification:P200, E220, H100
A Test on a Forwardlooking Monetary Policy Reaction
Function in Chinese Monetary Policy
Zhang Yishan
and Zhang Daiqiang (Business College of Jilin University)
Abstract:
Based on both western scholars' study such
as Taylor on a monetary policy reaction function and Chinese condition, this
article makes a new forwardlooking monetary policy reaction function, in terms of market
interest rate(interbank borrowing rate), regulated interest rate(rate of
deposit and loan) and interest rate spread. According to the result from
testing its applicability in Chinese monetary policy, we find that on the one
hand, the function can well describe the specific path of interbank borrowing rate, rate of
deposit and loan, andspread, offer referring criterion for making monetary
policy and measure the degree of tightness for monetary policy; on the other
hand, the result of test reflects that all of the three kinds of interest rate
have an insufficient respond to inflation and output, which indicates that
monetary policy of China is an instable monetary policy rule.
Key Words:Taylor
Rule; Forwardlooking;
Monetary Policy Reaction Function
JEL Classification:C520, E440, G100, P340
A Hypothesis on Effective Demand Size, R&D
Expenditure
and National Innovation Capacity
Fan Hongzhong(Institute of Economics,Huazhong University of Science and Technology)
Abstract:From
the angle of view of demand size, it is found that the increase of a country's
total income, per capita income, and the size of import and export trade,
promotes its R&D expenditure and national innovation capacity, but that the
enlargement of income disparity of the country damages. Moreover, income
disparity is found to be an important determinant to a country's innovation
capacity.
Key Words:Effective
Demand Size； Income
Disparity；
Innovation Capacity
JEL Classification:O310，
O320，
O570
On Reasonable Boundary of Public Sectors：
Price Determination in Public Sectors with
Mixture Nature
Liu Xiaoxuan and Zhao Nong
(Institute of Economics, Chinese Academy of Social Sciences)
Abstract:
From the view of existing problems in
Chinese public sectors, we have studied the failures of government, and try to
find its reasons. Government behavior depends on its targets. If government
maximize their own benefits but not social welfare, if there are no constraints
of public demand for public sector, government could expand boundary of public
sectors as it likes. In this way it could result in the unlimited boundary of
public sectors controlled by government.
Therefore we give the theoretical
proposition that make government distinguished from private sectors clearly.
Based on the theory we can identify whether government behavior is good for
optimal target of social welfare or for its own benefits. The confusion between
public and private sectors also cause price distortion. In condition of
reasonable boundary between them, liberalizing barrier to entry and introducing
competition in certain constraints could increase public supply, and form
equilibrium price in mixture sector with nature of both private and
public.
Key Words:Economics
of Public Sector；Boundary
of Public Sector
；Publicly
Provided Private Goods；Government Behavior；Government Failure
JEL Classification:H230，H410，H420
The Impact of SOE Reform on Employment:
Evidence from 11 Cities
Huang Lingwen
and Yao Yang
(Agricultural and Applied Economics, Wisconsin University; CCER, Peking University)
Abstract:
This paper evaluates the impact of
privatization on firm employment using a panel dataset of 386 firms in China in the period 1995-2001. Controlling firm and year fixed effects, our panel
regressions find that employment grows faster in privatized firms than in pure
stateowned firms
by a margin of 17.7 percentage points over the base year of 1995. We also study
the dynamic impact of privatization on employment growth and find that the
performance of privatized firms improves over time. These findings are robust
even after we control other performance and financial variables as well as the
preprivatization
employment history of privatized firms. In addition, we employ the differenceindifference propensity score
matching method to check the robustness of our results. The estimates confirm
the regressionbased
results.
Key Words:SOE
Reform; Employment; PSM
JEL Classification:J230, L330, P310
The Distributional Effects of Public Pension Reform in
Urban China
He Lixin
(Graduate School of Economics, Hitotsubashi University)
Abstract:
Using the micro data of the NBS Urban Household
Survey 2002, this paper studies quantitatively the distributional effects of
Public Pension Reform in urban China, from intragenerational and intergenerational perspectives, by measuring
lifetime net benefits that urban employees obtain under the public pension
system in 1997 and the newest one announced in December 2005, respectively. The
results indicate that the regressive income transfer existing before
implementation of the reform is improved as a consequence of the 1997 reform.
However, th
e Act of 2005 Reform generates the obvious
inclination of the regressive income transfer among people who exceed 40 years
old in 2002. On the other hand, from the viewpoint of intergenerational distribution, the
intergenerational
inequality resulted from 1997 reform is greater than that from 2005 reform.
More over, all generations would receive higher lifetime net benefits under the
Act 2005 Reform, but it must be based on sustainable pension system and
participants' full pension contribution during their duration of employment.
Key Words:Pension
Reform; Income Distribution; Generational Inequality
JEL Classification:H550, D310, I380
Jointly Deciding Contract Target: An Improvement of
Weitzman Model
Hu Zuguang
(Zhejiang Gongshang University)
Abstract:
The paper analyzed the principalagent theories at home and
abroad that are mainly confined in theoretical analyses and are not easy to be
used in practice, briefly reviewed relevant literatures on deciding contract
profit target and put forward the “Model of jointly deciding contract target”
after a case study of principalagent problem in an American company. The paper analyzed the dif
ferences and links between the Model of
jointly deciding contract target and Weitzman Model of ratchet effect and
proved mathematically some propositions for the Model of jointly deciding
contract target, described the mechanism of motivation by benefits in deciding
the company profit target. Finally the paper made a comparison between the
Model of jointly deciding contract target and the Model of incentive design in
an American economics textbook. The paper tries to replace
the dynamic models of repetitively
bargaining in deciding contract target with the onceandforall dynamic model based on the
Model of jointly deciding contract target.
Key Words:Principalagent Theory; Model of Jointly
Deciding Contract Target; W
eitzman Model of Ratchet Effect; Model of
Incentive Design
JEL Classification:L140，L200，G300
Background of Independent Directors and Corporate
Performance
Wei Ganga,Xiao Zezhongb,Nick Travlosc and Zou Hong
(a: Institute of Finance and Securities
Research, He'nan University； b: Cardiff Business School, Cardiff University;c: Cardiff Business
School, Cardiff University; Athens Laboratory of Business Administration; d:
Lingnan University)
Abstract:
In
this study, we empirically test the impacts of background of independent
directors on corporate performance in China. We find that education background
of independent directors do not have any positive effects on firm performance,
while our results indicate that “Guan Xi" is key to business success in
Chia. Meanwhile our findings support calls for limits on directorships held by
an individual. Overall, in addition to extending growing corporate governance
literature, our results provide an important insight into the nature of
effective functioning of independent directors and empirical evidence for the
reform of corporate governance in China.
Key Words:Background
of Independent Directors; Corporate Performance; Boards of Directors;
Corporate Governance
JEL Classification:G300, G340, G320
The Empirical Analysis on the XEfficiency of Chinese Commercial Banks
Xu Chuanchen
and Qi Shutian(Jilin University)
Abstract:
In this paper, the cost and profit
efficiency level and their evolution of 14 Chinese commercial banks from 1996
to 2003 are investigated. Empirical results indicate that ownership reform has
took some significant effect, and the retrieval and adjusting of government
also make notable gains in cost efficiency; However, the authors find the profit
efficiency scores are well below cost efficiency levels. That means Chinese
commercial banks seem to deal much better on the cost than on the profit side
as their expertise in generating profits is not as developed as their ability
to supply their services in a costsaving way. Our paper provides evidence for a important result that,
when the opening time of WTO is coming, how to enhance the profit efficiency of
commercial banking sector is becoming the main task of Chinese financial
reforming.
Key Words:China; Commercial Bank; Cost and Profit
Efficiency
JEL Classification:D610,G210
Imperfect Rationality，Sentiment and Closedendfund
Puzzle
Wu Yanran and
Han Liyan
(School of Economics and Management, Beihang University)
Abstract:
“Chinese
Closedendfund puzzle" is explained
by using the sentiment of imperfectly rational investors, which is proved to be
the key factor of asset pricing. Firstly, we argue that Chinese stock market is
inefficient by showing excess volatility with Closedendfund price. Secondly, two new
hypothesis are raised in order to explain our outcome as same as LST(1991)
comparing with the different investors structure with CEFs in USA. Thirdly, we prove that the discount of CEFs is a sentiment indicator. Finally, we find that
there exists the longterm negative and the shortterm positive influence between sentiment and stockmarket return.
Key Words:Imperfect
Rationality; Sentiment; ClosedendFunds(CEFs);
Behavior Finance; Excess Volatility
JEL Classification:G120,G140,C220
The Construction
of Harmonious Society and the Establishment of
a Modern
Market Economic System
Tian Guoqiang
(Texas A&M University, Shanghai University of Finance and Economics)
Abstract：
This paper studies the
inherence consistency and compatibility between the construction of harmonious
society and the establishment of a modern market economic system from the point
of review of modern economics. The paper first discusses basic features of a
harmonious society it should have, and investigates relationship between a
harmonious society and efficiency, equity, and institutions based on its
features and essences. By using some basic theoretical results in modern
economics as well as the reform practices in China, the paper then shows the
consistency between the construction of harmonious society and the establishment
of modern market system. As a conclusion, the construction of harmonioussociety
should be a process of marketizationoriented reform and institutional innovation. Finally, it provides
some policy suggestions, and discusses on the responsibilities of Chinese
economists in constructing a harmonious society in C
hina.
Key Words： Harmonious Society； Modern Market System； Consiste
ncy； Equity；
Institution
JEL Classification：B552, D550, D661, D663
Finding Theoretical Rules from Scattered and Stylized
Facts
Wang Cheng
(Institute of Economics, Chinese Academy of Social Sciences)
Abstract：
The role and position of stylized facts in
theoretical economics are explored in the paper based on the thinking of Chinas economic development. Thefindings
include that the definition of a stylized fact is the one which can critically
reflect and represent the reality and basic features of an economic operation;
the set of stylized facts in Chinese economy has not yet found and established,
and then require lots of academic effort and time in it; the relationshipbetween
the stylized facts and economic theory is in interaction; the procedureof
economic research is generally embodied in the extraction of stylized facts from
scattered facts, the building of theoretical models on base of stylized facts,
the exploration of the truemodels from ordinary theoretical models, and eventually the finding
of the economic rules and laws.
Key Words： Stylized Fact; Scattered
Fact; Economic Research; Hi
story of Theoretical Economics
JEL Classification：A11, B22, B41
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