¡¡¡¡¡¡¡¡¡¡¡¡Economic Research Journal (Monthly)Vol.42 No.8 August, 2007

¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡
¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡ CONTENTS

East Asian Miracle Debate Revisited

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.ª«Justin Yifu Lin and Ren Ruoenª« (ª©4ªª)

Research on the Path of Industry and City Reversal Feeding Agriculture and Country

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Hong Yinxingª« (ª©13ªª)

Some Issues and Statistics about China's GDP

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Song Xiaochuan ª« (ª©21ªª)

Empirical Research on the Inherent Relationship between Economy Growth and Energy Consumption in China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhao Jinwen and Fan Jitaoª« (ª©31ªª)

An Analysis of Income Mobility in Rural China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Sun Wenkai, Lu Jiangyong and Bai Chongenª« (ª©43ªª)

Traditional Culture Belief, Human Capital Accumulation and the Family Security Mechanics

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Guo Qingwang, Jia Junxue and Zhao Zhiyunª« (ª©58ªª)

The Differences of Rate of Return to Schooling in Urban China and an Explanation

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Wang Haigang, Li Shi and Liu Jingjunª« (ª©73ªª)

Innovation, Allocation of Entrepreneurial Activities and Long Run Economic Growth

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhuang Ziyinª« (ª©82ªª)

Participation Inertia and Investment Choicesª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Li Taoª« (ª©95ªª)

Government Control£¬Executive Compensation and Capital Investment

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Xin Qingquan, Lin Bin and Wang Yanchaoª« (ª©110ªª)

Empirical Research on Productivity in Chinese Provinces Using Bilateral Gravity Model of Trade

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Peng Guohuaª« (ª©123ªª)

Empirical Analysis on Real Estate Price Fluctuation in Different Provinces of China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Liang Yunfang and Gao Tiemei ª« (ª©133ªª)

Estimation Models and Empirical Evidence of the Extent of Earnings Management: A Survey

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Wu Liansheng and Wang Yapingª« (ª©143ªª)

A Book Reviewª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Shuguangª« (ª©153ªª)

East Asian Miracle Debate Revisited

Justin Yifu Lin

(China Center for Economic Research, Peking University)

Ren Ruoen

(School of Economics and Management, Beihang University)

Abstract:

There have been hot discussions on China's pattern of economic development after the debate about the East Asian Miracle following Krugman's paper on this issue. This paper examines the debate and its development both in English and Chinese literature. The paper, based on the survey of total factor productivity methodology as well as the historical experiences of other countries' economic development, shows the flaws in Krugman's arguments and argues that the view held by Krugman is harmful to the economic development in the less development countries in general and in China in particular. Several implications for China's economic development from the revisit are proposed at the end of the paper.

Key Words:East Asian Miracle; Total Factor Productivity; Develop

ment Pattern

JEL Classification:O30, O40, O50

Research on the Path of Industry and City Reversal

Feeding Agriculture and Country

Hong Yinxing

(Nanjing University)

Abstract:The issue of industry reversally feeding agriculture will not be raised until agriculture has stopped feeding nonª²agriculture. The asymmetry between feeding and reversal feeding will result in the widening gap between city and countryside. Reversal feeding agriculture and country mainly covers two aspects, namely the income and factors of reversal feeding. During the initial stage of reversal feeding agriculture and country, the industry plays the dominant role, while the allª²round stage of reversal feeding agriculture and country calls for city's leading role. After industrialization and urbanization have reached a certain stage, industry and city reversal feeding agriculture and country will break through the scope of villages and towns, and the implementation center is supposed to switch to the county government. The main paths the government adopts are to expand public finance's coverage in countryside and to increase the supply of rural public goods.

Key Words:Industry; City; Reversal Feeding; Agriculture; Country

side

JEL Classification:H220£¬ O130

Some Issues and Statistics about China's GDP

Song Xiaochuan

(Chongqing Technology & Business University; San Diego Mesa College)

Abstract:

This paper explores the basic concept of GDP measure and its limitations in a historical perspective. Particularly, it shows how the government's decadesª²old counting system misses the growing portion of GDPª²intangible investment, and fails to capture the emerging knowledgebased economy. The paper has reassessed the Chinese economy, its position and impact in this dramatically evolving global economy. The main arguments of the paper are: the current GDP measures do not include the nonª²market economic activities, underground economy, and leisure time; underestimate the value and growth potential in service sector; have no way of tracking the billions of dollars companies spend each year on innovation and product design, brand building, employee training, or any of the other intangible investments; miss the rapidly increasing knowledge component, especially the education investment in the Chinese economy. The paper concludes that, due to historical, cultural, and institutional factors, these omissions and underestimates in China are much bigger than those of industrial countries and the otherdeveloping countries, therefore, the actual Chinese economy and its growth rate, especially its growth potential are much larger than the official statistics.

Key Words:GDP; Intangible Investment; Knowledge Economy

JEL Classification:E01, E26, O53

Empirical Research on the Inherent Relationship between

Economy Growth and Energy Consumption in China

Zhao Jinwenª¬ª©1)ªª and  Fan Jitaoª¬ª©2)ªª

(  1)£¬2)ªªSchool of Statistics, Dongbei University of Finance & Economics£»

ª©ªªª¬ª©1)ªªCenter for Applied Statistics, Renmin University of China)

Abstract: In the world economic development, the energy issue has been risen for the strategic hot topic of countries. The research to the relationship between the economical growth and the energy consumption in academic circles continuously took the linear supposition as the premise, by no means to this supposition whether strictly carried on the econometric test reasonably up to now. This article takes the lead to study the intrinsic structure relations between the economical growth and the energy consumption which are profound and complex in China£¬employed the nonlinear STR models which have been developed in recent years. We obtained the following main conclusions: (1) The influence of Chinese economic growth on the energy consumption has the typical nonª²linear characteristic, and, may express through the LSTR2 model. (2) The influence of Chinese economic growthon the energy consumption has the asymmetry. When the GDP growth appears drops absolutely, the energy consumption compared to GDP has the quicker rate of descent; When the GDP rate of increment does not surpass 18ª±04%, the influence will h

ave the relative stability, and the elasticity of the energy consumption to the economic growth is 09592; When the GDP rate of increment surpasses 18ª±04%, the energy consumption compared to GDP will have the quicker rate of rise, thus, theeconomic growth will completely take the high energy consumption as the cost. Therefore, we should avoid the economic negative growth and the superª²velocity growth as far as possible. (3) The influence of Chinese economic growth on the energy consumption has the obvious gradual characteristic. During 1956¡ª1976 year, it presented the obvious nonª²linear characteristic; but during 1977¡ª2005 year, it presented the obvious linear characteristic.

Key Words:Economy Growth; Energy Consumption; STR Model; Granger

 Causality Test

JEL Classification:C510, C520, E610, O120

An Analysis of Income Mobility in Rural China

Sun Wenkai, Lu Jiangyong and Bai Chongen

(School of Economics and Management, Tsinghua University)

Abstract£ºIn this paper we analyze household income mobility dynamics in rural China between 1986 and 2001. Four important findings are obtained: (1) Among all households, income mobility increased initially, and then kept stable. This means that dynamic inequality is significantly smaller than static inequality. After1995, annual income inequality is larger than before but the opposite is true for permanent income inequality. (2) Compared to the urban area, income mobility

in the rural area was higher during 1991¡ª2001. (3) Mobility in richer provinceswas higher between 1986 and 1990, but the difference became inconspicuous between 1995 and 2001. (4) Using multivariate analysis, we find that household income converges after other factors are controlled, while income growth depends on thechange in the levels of education and chance of migrant jobs.

Key Words£º Income Mobility; Permanent Income Inequality; Income Convergence

JEL Classification£ºJ300£¬R200£¬O150

Traditional Culture Belief, Human Capital Accumulation and

the Family Security Mechanics

Guo Qingwang, Jia Junxue and Zhao Zhiyun

(China Financial Policy Research Center£¬Renmin University of China;

Institute of Scientific and Technical Information of China)

Abstract£º

This paper establishes a model of human capital accumulation and analyzes the effects of the family security mechanisms driven by traditional Chinese cultural belief and social pension security systems on household¬ðs provision for the aged and human capital investment behavior and in turn on economic growth. Our analyses suggest that: (1) the traditional cultural belief connects effectively the offspring human capital accumulation with parental pension security, whi

ch provides a good system of family provision for the aged and endogenous human capital accumulation; (2) the payª²asª²youª²go (PAYG) social security systems have adverse impacts on human capital accumulation and economic growth. In addition, the empirical study based on the relevant data of China indicates that the current social pension security systems exert significant adverse effects on the economic growth, while the family security mechanisms have positive effects on humancapital accumulation and economic growth. Therefore, the effects of household¬ðsprovision for the aged should not be underestimated whilst the social pension s

ecurity system is being constructed.

Key Words£º Traditional Culture Belief; Human Capital Accumulati

on; Family Security Mechanics

JEL Classification£ºA130, J410

The Differences of Rate of Return to Schooling in Urban China

and an Explanation

Wang Haigangª¬a, Li Shiª¬b and Liu Jingjunª¬c

(a: Department of Economics, Lingnan College, Sun Yatª²sen University;

b: School of Economics and Business Management, Beijing Normal University;

c: Department of Risk Management and Insurance, Lingnan College, Sun Yatª²

sen University)

Abstract:

Based on the household income data, this paper reª²estimates the rate of returns to schooling by Hierarchical Linear Model. It is found that a) the rate varies much across the regions either in 1995 or 2002 and the variations come almost solely from betweenª²cities within provinces instead of betweenª²provinces as studied early by OLS method; b) the degree of the marketlization of labor allocation has a positive effect on the rate of returns to schooling and the variations of the rate across the regions are due to the variations of the degree of marketlization of labor allocation across the regions.

Key Words:Returns to Schooling; HLM; Variance Analysis

JEL Classification:C010, I200, C130

Innovation, Allocation of Entrepreneurial Activities

and Long Run Economic Growth

Zhuang Ziyin

(Economics and Management School, Institute of Advanced Study, Wuhan

University)

Abstract£º

Based on the idea of Schumpeter¬ðs entrepreneurship, this paper introduces allocation of entrepreneurial activities into endogenous technological innovation models. This paper points out the allocation of entrepreneurial activities determines the crossª²country difference in R&D input level, technological level and growth rates. In this paper, the reward structure of different economic activities determines the allocation of entrepreneurial activities, and the reward structure is endogenous and historyª²dependent. Therefore, in order to increaseR&D input level, technological level and growth rate, we must provide incentive for more productive innovative activities through political, economic, legal andcultural institutional arrangement, so that the economy can break the trap of lowª²income equilibrium and move to a developed equilibrium. This paper has two contributions: one is introduce the allocation of entrepreneurial activities into

endogenous growth model, provides an explanation for the crossª²country difference in R&D input level, technological level and growth rates. The other focuses the effect of the allocation of entrepreneurial activities on innovative activities, and examines the dynamic relation among the allocation of entrepreneurial activities, relative reward structure and technological innovation level. This paper has important policy implication for the National Strategies of Autonomous Innovation.

Key Words£º Innovation; Allocation of Entrepreneurial Activities

; Unproductive Rentª²seeking Activities; Longª²run Growth

JEL Classification£ºO11, O31, O43

Participation Inertia and Investment Choices

Li Tao

(School of Finance at Renmin University)

Abstract:

Does inertia affect individual investment participation choice? If so,where does the participation inertia come from? Based on an individual investorsurvey in 9 cities in China in 2006, I find that there is significant inertia to maintain those corresponding decisions in individual investors' current and future expected participation in saving, foreign exchange, stock, bond, futures, mutual fund, lending, business, insurance, collection, real estate, wealthª²managing product, and lottery, behind which is a behavior bias caused by endowment effects or a tendency to procrastinate in decision making, but not a rational choice. The policy implications of current study is: improving investor education and making people realize their participation inertia in investment and hence overcome this inertia actively, should be taken into consideration by the government to improve investor welfare.

Key Words:Participation Inertia; Investment Choice

JEL Classification:G10, G11

Government Control£¬Executive Compensation and Capital Investment

Xin Qingquan, Lin Bin and Wang Yanchao

                         (School of Business, SUN YATª²SEN Univesity)

Abstract:

Based on agency theory of the firm, and the special institutional settings that there exists the regulation on executive compensation in Chinese SOEs,this paper analyses the impact of executive compensation on overª²investment andunderª²investment. Subsequently, Using the data on China's listed companies datafrom 2000 to 2004, we investigate governance effect of executive compensation on capital investment decision. We find that, on the condition of executive diligence and talent not being compensated, there are more evidence shows that govern

ment control especially SOELG control and SAMB control has induced overª²investment.

Key Words:Executive Compensation; Government Control; Overª²investment; Underª²investment

JEL Classification:G310£¬G320£¬G380

Empirical Research on Productivity in Chinese Provinces

Using Bilateral Gravity Model of Trade

Peng Guohua

£¨College of Economics, Jinan University£©

Abstract:

Using gravity model of bilateral trade, this paper constructs instruments variables to deal with the endogenous factors of international trade. The empirical results show that international trade has a significant positive effect on labor productivity in Chinese provinces. The channels are total factor

productivity and human capital other than physical capital though which international trade affects labor productivity. Moreover, the effects of international trade on composition of human capital are different.

Key Words:International Trade; Gravity Model; Productivity; Human Capital

JEL Classification:F43, J24, O47

Empirical Analysis on Real Estate Price Fluctuation

in Different Provinces of China

Liang Yunfang and Gao Tiemei

(Dongbei University of Finance and Economics)

Abstract£ºIn this paper, we found the real estate prices in different regions have the same trend, but their growth rates are different through comparing typical provinces¬ð real estate price. According to the economic developing situation,we divided 28 provinces into three regions¡ª¡ªeastern, middle and western. We dynamically analyzed the factors, which determined real estate price fluctuation, based on error correction model and panel data model. In these models, we considered the impact of monetary policy on house price specially. The conclusions areas follows: firstly, to the longª²term trend and shortª²term fluctuation of housepiece, the effects of credit policy in eastern region and western region are stronger, and middle region¬ðs is weaker. So we think the credit policy is effective to control eastern and western region¬ðs house price. Secondly, the effects ofinterest rate policy have no distinct difference in all regions. Thirdly, in middle region, the development of real estate market is more dependent on its economic conditions. Fourthly, anticipating variable of real estate prices only has aremarkable effect in eastern region.

Key Words£º Fluctuation of Real Estate Price; Regional Differenc

e; Panel Data Model; Error Correction Model

JEL Classification£ºR10, R31

Estimation Models and Empirical Evidence of the

Extent of Earnings Management:A Survey

Wu Liansheng and Wang Yaping

£¨Guanghua School of Management, Peking University£©

Abstract:Earnings management is an important issue in the field of accounting, finance and even economics since it is closely related with investor protection and accounting standard setting. Estimation of the extent of earnings managementis the precondition of studying the economic consequences of earnings management. This paper reviews the extant theoretical and empirical studies on the estimation of the extent of earnings management and provides direction for future research. Relevant literature suggests that abnormal accrual estimation can detect the earnings management for some specific firms, but it cannot estimate the frequency and magnitude of earnings management for all the firms. Earnings distribution model is the core method that can estimate the extent of earnings management with real economic consequences, but assumes that the true earnings distribution is smooth. The future direction is to isolate the effect of some other factors on the discontinuity of earnings distribution, such as the choice of earnings measures and deflation methods. The interaction of different thresholds and relaxation of assumptions should also be taken into account in the future research.

Key Words:Earnings Management; Unexpected Accruals; Earnings Dis

tribution; Investor Protection; Accounting Standard

JEL Classification:M41£¬ G10£¬ G30£¬ C89