¡¡¡¡¡¡¡¡¡¡¡¡Economic Research Journal (Monthly) Vol.42 No.11 November, 2007

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

Improve Socialist Market Economy and Make Economic Development Betterª²andª²fast

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Zhuoyuanª« (ª©4ªª)

Value Orientation and Institutional Settings of Different Transitional Countries

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Mao Tianqiª« (ª©9ªª)

On the Dynamic Integration of Capital Accumulation and Technological Progress: A Stylized Fact in China's Economic Growth

ª«¡­¡­¡­¡­¡­¡­¡­.Zhao Zhiyun, L¨¹ Bingyang, Guo Qingwang and Jia Junxueª« (ª©18ªª)

Assessing the Role of Aggregate Demand and Supply Shocks in China's Macroeconomic Fluctuation¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Gong Min and Li Wenpuª« (ª©32ªª)

Research on the Choice of Renminbi Exchange Rate Regime: Analysis Based on the Welfare

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Yao Binª« (ª©45ªª)

Liquidity, Liquidity Excess and Monetary Policy¡­¡­¡­¡­¡­¡­¡­.Peng Xingyunª« (ª©58ªª)

Property Rights Reform Patterns and Technical Efficiency of the Firm

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Zhao Shiyong and Chen Qiguangª« (ª©71ªª)

FDI and Manufacturing Agglomeration in China: Evidence of 20 Industries

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhao Wei and Zhang Cuiª« (ª©82ªª)

Term Limits and Rotation of Chinese Governors: Do They Matter to Economic Growth?ª«

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Jun and Gao Yuanª« (ª©91ªª)

An Analysis on the Structure of Social Capital¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Chen Jianª« (ª©104ªª)

Revised Leverage Effect Based on Expected News

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Chen Langnan and Hong Rumingª« (ª©112ªª)

Income Mobility and Income Distribution: Evidence from Rural China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Qi,Mi Jianwei and Huang Jikunª« (ª©123ªª)

A Review of Bi\|polarization Measurement and Income Biª²polarization in China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Hong Xingjian and Li Jinchangª« (ª©139ªª)

Modern Economics and Economic Reality: A Summary of the 7th Forum of Young Econo

Mists¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Wang Wei, Song Huasheng and Ma Shuzhongª« (ª©154ªª)

Value Orientation and Institutional Settings of

Different Transitional Countries

Mao Tianqi

(Institute of Economics,CASS)

Abstract:

The paper studied the forming, function and inner contraction of the planned economic system set by Stalin, the failure of the reform in economic and political spheres aiming to quicken reform by Mikhail Gorbachev, the social andeconomic damage made by Boris Yeltsin's freeª²market reform, and the stable growth of Russian economy induced by adjustable market economy by Putin. As a comparison the paper analyzed the same aspects in China, and made a few comments on the economic transition and the basic framework of the socialist market economy in China under new economic theories, and proposed some related policies and judgments.

Key Words:Planned Economy; Socialist Market Economy; Effective Social Policy; For the PeopleJEL Classification:P200,P510

On the Dynamic Integration of Capital Accumulation

and Technological Progress: A Stylized Fact in China's Economic Growth

Zhao Zhiyunª¬a,L¨¹ Bingyangª¬b,Guo Qingwangª¬c,Jia Junxueª¬c

(a: Institute of Scientific and Techenical Information of China;b:School of Public Policy and Management,Tsinghua University;c:School of Finance,Renmin University of China)

Abstract:

There is a wide consensus among the academia in China that the high economic growth in the past brought little technological progress. Therefore, thislow efficient growth model is not sustainable. To investigate the validity of this conclusion, this article presents propositions to judge the capital embodiedtechnological progress by constructing an endogenous economic growth model, in which equipment investment is different from building investment. Using the three propositions, the authors find that there exists manifest technological progress embodied in equipment capital. This form of technological progress rate is atleast 5ª±1%¡ª6ª±0% over 1990¡ª2005. In addition, the progress rate in middle and western provinces is not certainly lower than that in the east provinces. These findings prove that the dynamic integration of the capital accumulation and technological progress is a stylized fact in China's economic growth, which also suggests that the high input growth model is not necessarily low efficient.

Key Words:Technological Progress; Capital Accumulation; Dynamic Integration£»Product FunctionJEL Classification:E22£¬O30£¬O41

Assessing the Role of Aggregate Demand and Supply Shocks

in China's Macroeconomic Fluctuation

Gong Min and Li Wenpu

(Center for Macroeconomic Research, Xiamen University)

Abstract:In this paper, we try to assess the role of aggregate demand and supply shocks in China's macroeconomic fluctuation, using a bivariate structural VAR model to investigate macroeconomic dynamics for China within the aggregateª²demandª²aggregateª²supply framework. We hold that China's high growth should be associated more with greatly improved supply capability in recent years. This result implies that the key factors that drive the economic growth have shifted from demand side to supply side under globalization. Therefore, the macroeconomic management should pay more emphases on supply control under current situation.

Key Words:Supply and Demand Shocks; Structural VAR; Supply Management Policy

JEL Classification:E30,C32,O53

Research on the Choice of Renminbi Exchange Rate Regime£º

Analysis Based on the Welfare

Yao Bin

£¨The People's Bank of China,Shanghai£©

Abstract:This paper which synthesis the experiential analysis and the methodology of normative and positive economics to take both qualitative and quantitativeanalysis apply the ¡°new open economy economics" to the research on the choice of Renminbi exchange rate regime in the short and middle run and set up the structural model and then take the historical economical data during 1985¡ª2005 to perform both the experiential and simulative analysis and have the conclusion: withthe continuous increase of international real demand and international price index, in order to improve the welfare of people, the Renminbi exchange rate regime should step forward to be more flexible.

Key Words:Choice of Renminbi Exchange Rate Regime, New Open Economy Economics,

Welfare Analysis

JEL Classification:F310, F410

Liquidity, Liquidity Excess and Monetary Policy

Peng Xingyun

(Institute of Finance and Banking, Chinese Academy of Social Sciences)

Abstract:This Paper holds that it is more correct to define liquidity as maturity curve of financial asset. Money and credit growth rate increasing does not mean liquidity excess, which should be defined as that short term asset is more than the desired equilibrium level and long term asset is inadequate in investor's portfolio in perspective of asset portfolio theory. On this ground, it is understandable that the typical phenomena of asset price is booming and yields curve becomes flatting accompanied with liquidity excess. Liquidity can be analyzed fromvarious perspectives. The relationship between monetary policy intermediary target (operation target) and ultimate target might be changed by varied liquidity,therefore, liquidity change (excess) might make central bank reform monetary policy framework. This paper holds that liquidity management is too narrow in China and proposes some brief advice of improving Chinese liquidity management.

Key Words:Liquidity; Liquidity Excess; Liquidity Management; Monetary Policy

JEL Classification:E520, G110

Property Rights Reform Patterns and Technical Efficiency of the Firm

Zhao Shiyong and Chen Qiguang

(Institute of Economics, Chinese Academy of Social Sciences)

Abstract:By using the firmª²level data of the Chinese manufacturing industry, westudied the property rights reform patterns of 442 public owned enterprises andits implications on firm efficiency. We find that not all reform measures or patterns have positive effect on firm efficiency; according to our classification, there are only three patterns that have positive effect on technical efficiency of the firm, they are: the manger controls the shares or purchases the firm; the management team controls the shares or purchases the firm; foreign investors purchase the firm or organize joint ventures. That is to say, only by transferring the control rights or ownership of the firm from public to private entrepreneurs can reform be called successful. Our study also shows that the bigger of the firm, the more favorable the market and government environment, the younger of the firm, the more efficient of the firm.

Key Words:Property Rights Reform Patterns; Privatization; Technical Efficiency

JEL Classification:L200£¬L120£¬ L190

FDI and Manufacturing Agglomeration in China: Evidence of 20 Industries

Zhao Wei and  Zhang Cui

(Institute of International Economics, Zhejiang University;CRPE, Zhejiang University)

Abstract:Starting from the logical connections between agglomeration and manufacturing growth, this paper identifies the FDI elements in the agglomeration of the major manufacturing industries in China. The empirical checking of the effects is focused on the three targets successively, the general connections between the FDI penetration and manufacturing agglomeration, the FDI elements in all proagglomeration factors in specific industries, and the difference of the FDI effects between different industries with differentiated agglomeration degree. All the three empirical works show clear existence of the agglomeration effects of the FDI on major manufacturing industries. A further study aiming at proofing theinvertedª²U shaped connection between FDI and agglomeration gets a negative answer.

Key Words:Manufacturing Growth, FDI Elements in Manufacturing Agglomeration, Spatial Giniª²Coefficient

JEL Classification:F20, R11, R12, C23

Term Limits and Rotation of Chinese Governors:

Do They Matter to Economic Growth?

Zhang Jun and Gao Yuan

(China Center for Economic Studies, Fudan University)

Abstract£ºOne of the motivation and control mechanisms established in Chinas political and bureaucratic hierarchy is an introduction of term limits and rotation system into higher level government officials. Using a panel data covering detailed information for all the provincial governors (including provincial party secretary, mayor for municipal cities, and chairman for autonomous regions) between 1978 and 2004, this paper finds a positive impact of both term limits and rotation of governors across provinces on local economic growth. It also finds that term limits and economic growth exhibit a weakly inversed U relationship. Though the rotation of governors matters to local economic growth, regional variation is observed, and the positive impact of rotated governors on local growth turned out to be more obvious in the eastern provinces than rest provinces.

Key Words£º Term Limits£» Rotation£» Economic Growth

JEL Classification£ºH83, P26

An Analysis on the Structure of Social Captial

Chen Jian

(Institute of Economics, Chinese Academy of Social Science)

Abstract£ºBased on the Putnam¬ðs work on social captial, we analyse the horizontal and vertical structure of th social capital how to influence the market¬ðs trust level, by using the global game method. The horizontal can induce the only highª²level trust equilibrium. While in the vertical, when considering the market arbitrator can manipulate the public information, there are multiple eqilibriums in the trust level, and which stability is different in these equilibriums.

Key Words£º Trust£» Social Capital£» Global Game

JEL Classification£ºC790, D890, P170

Revised Leverage Effect Based on Expected News

Chen Langnan and Hong Ruming

(Sun Yatª²Sen University, Guangfa Security Co.)

Abstract£ºThis study establishes a new model called SLEª²GARCH and investigates the revised leverage effect by utilizing this model. This study considers that expected news could also induce asymmetric volatility so as to unexpected news. Therefore, revised leverage effect based on expected news (VLE) is taken into account and a new type of model called switching leverage effect GARCH model is developed. Nine stock market indices such as 000002.SH (Shanghai China), S&P500 (New York), STI (Singapore), FTSE (London), AORD (Australia), GSPTSE (Toronto), IXIC (NASDAQ), HSI (Hong Kong) and N225 (Tokyo) are employed in this study. Empiricalresults show that there is significant VLE in all markets and unexpected news will be adjusted reversely by expected news, which indicates that overreaction toexpected news is presented in the sample markets. Therefore, good expected newswill drive the traditional leverage effect while bad news will alleviates the leverage effect. Bad unexpected news adjusted by expected news will cause greatervolatility than good ones when the expected news is bad enough to cause the reversal effect of VLE.

Key Words£º Volatility; Revised Leverage Effect; SLEª²GARCH

JEL Classification£ºG120, G220

Income Mobility and Income Distribution:

Evidence from Rural China

Zhang Qi, Mi Jianwei and Huang Jikun

(1st: Department of Political Science, Northwestern University, USA2nd, 3rd: Center for Chinese Agricultural Policy, CAS)

Abstract:After taking income mobility into account, income inequality may not be as serious as those found in the existing literature if the poor today has high possibility to become rich tomorrow, and vice versa. Based on a survey data collected in rural China, we found the possibility of the poorest 25% to climb up to higher income status increased, which means many of them wouldn't stay as the poor as they used to be as time passed. But the upward mobility of those of the middleª²income has gradually become stagnant. We then decompose the change of income inequality between the wealthy and the poor into two parts: the income change of those who remaining in the wealthy group and the poor group persistently, and the change due to the shift of income status of those whomove upward to wealthy group or downward to the poor group. We found that the contribution of the income mobility to inequality is increasing. We also construct a multinomial logit model to identify the factors which may influence the probability of moving upward, downward, or staying stagnant. We found household dependent population ratio, human capital endowment, and land rental market participation, have significant effects on the income mobility of rural residents in China.

Key Words: Income Mobility; Income Distribution; Decomposition of Income Disparity

JEL Classification:D31, Q10

A Review of Bi\|polarization Measurement and Income Biª²polarization in China

Hong Xingjian and Li Jinchang

(School of Statistics, Zhejiang Gongshang Unversity)

Abstract:

There are diverse opinions in academia about income biª²polarization. Though many scholars' views are from discussions of Marx and Deng Xiaoping, but they don't catch on them entirely and can't grasp the precise meaning of biª²polarization. The fundamental character of biª²polarization is that a uniform societybreaks up into two groups, and biª²polarization is severer when the disparity within each group is smaller, the gap between the groups is bigger, or the size of the two groups is evener. So biª²polarization is distinct from income inequalityand the poorerricher gap, and every index of income inequality can't be applied to measuring bipolarization. In the end, this paper summarizes the measurement of biª²polarization and studies income biª²polarization of China. The empirical results show that income biª²polarization is increasing, including urbanª²rural, within the urban and the rural, coastalª²inland, interª²industry.

Key Words:Income Biª²polarization£»Meaning£»Measurement

JEL Classification:D31£¬I30