¡¡¡¡¡¡¡¡¡¡¡¡Economic Research Journal (MonthlyVol.43No.4April, 2008

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

Technological Progress, Industrial Restructuring and Improvement of National Intermediate Consumptionª¥

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Liu Wei and Cai Zhizhouª©4ªª

State and Nonª²state Sector Wage Differentials and Human Capital Contributions

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Juwei and Xue Xinxin   15ªª

Heavy Industry and Economic Development:The Chinese Planning Economy Revistiedª¥

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­    Yao Yang and Zheng Dongya..26ªª

Government Intervention, Political Connections and the Mergers of Local Governmentª²Controlled ª¥Enterprises

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Pan Hongbo, Xia Xinping and Yu Minggui   41ªª

An Empirical Study of the Institution Rule, Factor Contribution and Determinantsof China's Economic ª¥Growth

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..ª«Li Fuqiang, Dong Zhiqing and Wang Linhui   53ªª

Trade Expansion of China and India:Threat or Opportunity?ª¥

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Wan Guanghua, Mahvash Saeed Qureshi and Fu Runmin66ªª

Can Export Tax Rebate Be A Robust Policy Recommendation towards An InternationalMultiª²market ª¥Oligopoly?

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Ma Jie and Li Fei ª«ª©78ªª

The Impact of Corruption in Host Country on Multinational's Entry Modeª¥

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Xue Qiuzhi and Han Bingjie  88ªª

Product Market Competition and Dynamic Capital Structure Adjustmentª¥

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Jiang Fuxiu, Qu Yaohui, Lu Zhengfei and Li Yanª©99ªª

A New Type of Principle Breach and Corruption and Its Governance in the Building of¡°New Socialist Countryside¡±

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Xie Bing, Ren Shengde and Zhang Junbiaoª«ª©111ªª

The Empirical Study on Chinese Aª²H Share Premium

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Hu Zhanghong and Wang Xiaokun 119ªª

Marketization, Government Intervention and Stock Liquidity Premium Distribution

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­Qu Wenzhou, Xu Nianhang, Guang Jiaxiong and Wu Shinongª«132ªª

Energy Development and Economic Growth in Western China: An Empirical Analysis Based on the ª¥Resource Curse Hypothesis

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Shao Shuai and Qi Zhongyingª«ª©147ªª

Technological Progress, Industrial Restructuring and Improvement of

National Intermediate Consumption

Liu Wei and Cai Zhizhou

(Economics School, Peking University)

Abstract:An analysis is made in this paper with the data of input-out tables in China from 1992 to investigate the trend of intermediate consumption. It is analyzed according to three industries how technical change and industrial restructure as well as price changes influence intermediate consumption of China through the time series of direct consumption coefficient matrix and intermediate demand coefficient matrix. A conclusion is derived that the technical change contributed to the improvement of efficiency of economic growth during the period. However, the national intermediate consumption coefficient at current price increased due to the changes of relations among various prices and the increase of percentage of the secondary industry with a higher intermediate consumption. It is necessary to coordinate the developments between technical change and industrial restructuring to reduce national intermediate consumption in order to remain the sustainable development. The measures to reduce the level of national intermediate consumption are discussed and investigated.

Key Words: Input-out Table£» Intermediate Consumption£» Industrial Structure£» Economic Growth

JEL Classification:C670,O390

State and Non-state Sector Wage Differentials and

Human Capital Contribution

Zhang Juwei and Xue Xinxin

(Institute of Population and Labor Economics, Graduate School, CASS)

Abstract:

This paper analyses wage differentials between state-sector and non state-sector in China using household survey data. The decomposition of the wage differentials between the two sectors show that there are more than 80% wages advantages come from the advantages of human capital of state-sector. This indicates that human capital has been the key factor in state-sector wage determination. But the contribution of human capital across the wage distribution is not uniform. It declines monotonically with movement down to the left of the conditional wage distribution, and accordingly the wage premium increase monotonically with movement down to the left of the conditional wage distribution. At the high tail of the wage distribution, where the high skilled labors concentrate, the wage differentials completely come from character differentials. While at the low tail of the wage distribution, where the low skilled labors concentrate, a large part of the wage differentials can't be explained by the human capital, which is called wage premium. This study confirms the phenomenon is caused by the ¡°shared pattern" wage determination process within the state-owned sector. This pattern is inclines to depressing the high skilled labors' rewards and lifting the low skilled labors'. So the state-sector should intensify the roles of human capital in wage determination process to improve the efficiency and to strengthen the competition.

Key Words:State-sector; Non-state-sector; Wage Differentials; Human Capital

JEL Classification:J420£¬J240£¬J310

Heavy Industry and Economic Development:

The Chinese Planning Economy Revisited

Yao Yang and Zheng Dongya

(China Center for Economic Research at the Peking University)

Abstract:

China's heavy-industry development strategy was heavily criticized since the end of the 1970s.This paper starts with the premise that heavy industry has significant positive externalities by contributing to the round-about production of light products so subsidizing heavy industry is worthwhile for the economy. Based on a dynamic general equilibrium model, we study the optimal term and rate of subsidy for the heavy-industry development strategy. We calibrate the model with the Chinese data, and then make two policy experiments. One is the market-based strategy without any subsidy, and the other is the heavy-industry development strategy with optimal term and rate of subsidy. The results are then compared with the performance of what had actually happened in China in terms of the sum of discounted utility of all the residents. We find that the result of the actual Chinese practice is indeed worse than the result of the market-based strategy. However, the optimal heavy-industry development strategy yields a smaller rate and a much shorter term of subsidy than the actual figures, and its result is even better than that of the market-based strategy.

Key Words:Heavy-Industry Development Strategy£»Transition£»Two-Stage Optimal Control Method; Calibration

JEL Classification:O38£¬P36£¬C61£¬E27

Government Intervention, Political Connections and the Mergers

of Local Government-Controlled Enterprises

Pan Hongbo, Xia Xinping and Yu Minggui

(Economics and Management School, Wuhan University;

School of Management, Huazhong University of Science and Technology)

Abstract:

Using a sample of mergers with local government-controlled acquirers and unlisted target firms from 2001 to 2005, we examine the effects of local government intervention and political connections on the performance of local government-controlled acquirers. We find that local government intervention has a negative impact on the performance of local government-controlled acquirers with good operating performance before merger announcement, while a positive impact on the performance of local government-controlled acquirers with poor operating performance before merger announcement. These results indicate that local government has motive to grab or help the local government-controlled firms providing support for the ¡°grabbing-hand model" and ¡°helping-hand model". We also find that political connections have positive effects on the performance of local government-controlled acquirers with good operating performance before merger announcement, which indicates that political connections can be used as the substitution of

investor protection to prevent the local government from expropriating the firms.

Key Words:

Government Intervention; Grabbing-Hand; Political Connections; Local Government-Controlled Enterprises; Mergers

JEL Classification:G32, G34, G38

An Empirical Study of the Institution Rule, Factor Contribution

and Determinants of China's Economic Growth

Li Fuqiang, Dong Zhiqing and Wang Linhui

(Institute of Quantitative & Technical Economics, Chinese Academy of Social Sciences; Business School, Jilin University; School of Economics, Northeast Normal University)

Abstract:

Based on the characters of Chinese marketization and the reform of the property institution, and combined the models of Rome and Barro et al., the paper induces the institution into the endogenous growth model, to study the relationship of the factor development and economic growth. The model shows that the development of the institution is more perfect, economic growth lies more on the development of the human capital and the technical progress. As the institution is poorer, economic growth is more limited to the development of the institution. Used the log-level model with the form of the pure property institution or the combination of the property institution and the capital, it is to compare the relationship of the capital, human capital, technology, institution and financial factor and so on. The results of OLS and GMM point out that the capital, human capital and the property institution are the main determinants of China's economic growth, and the empirical study based on the panel data shows the results are robust. At the same time, it shows that the institution not only has effect on economic growth directly, and makes combination of the capital and the human capital to promote economic growth. Namely, the function of the capital is including with the contribution of the institution, and the institution is the determinant of China's economic growth.

Key Words:Property Institution; Factor Contribution; Economic Growth

JEL Classification:O11, O17, O47

Trade Expansion of China and India: Threat or Opportunity?

Wan Guanghuaª¬1£¬Mahvash Saeed Qureshiª¬2 and Fu Runminª¬1

(1: Yunnan University of Finance and Economics; 2: IMF)

Abstract:

Focusing on China and India, we assess trade competitiveness and complementarity vis-¨¤-vis each other as well as with the rest of the world. It is found that (a) India faces tough competition from China in the third markets especially in clothing, textile and leather products; (b) there is a moderate potential for expanding trade between the two countries; (c) China poses a challenge for the East Asian economies, the US, and most of the European countries especially in medium technology industries; (d) India appears to be a competitor mainly for its neighbouring South Asian countries; and (e) complementarity exists between the imports of China and India, and the exports of the US, some European States and East Asian countries, especially Japan, Korea, Malaysia, Singapore and Thailand. Also, we observe that the export structure of China is changing with the exports of skill intensive and high technology products increasing and those of labour intensive products decreasing gradually. This suggests that challenges created by China in traditional labour-intensive products might reduce in the long run.

Key Words:International Trade; Export Competition; China; India

JEL Classification:F00, F02, F13

Can Export Tax Rebate be a Robust Policy Recommendation towards

An International Multi-market Oligopoly?

Ma Jie and Li Fei

(Guanghua School of Management, Peking University)

Abstract£º

Export tax rebate is used by a number of national governments since itis a legitimate policy instrument under the rules of the WTO. In this paper, westudy whether it is a robust trade policy towards an international multi-market oligopoly. We show that its effect is equivalent to that of an export subsidy; and it is very sensitive to the mode of product market competition. However, if we consider the case where domestic firms lobby the government for setting their favorable policies by giving the government political contributions (modeled in a common agency framework), then export tax rebate as a robust trade policy can emerge in an equilibrium outcome when the government cares about political contributions sufficiently relative to national welfare.

Key Words£º Export Tax Rebate; International Multi-market Oligopoly; Special Interest Politics; Common Agency

JEL Classification£º F130, D720

The Impact of Corruption in Host Country on Multinational¬ðs Entry Mode

Xue Qiuzhi and Han Bingjie

(School of Management, Fudan University)

Abstract£º

As one of the most important parts of host country investment environment, corruption not only decreases FDI in-flow of host country, but also affects the strategies of multinationals. Building on institutional theory, we predict that MNEs (multinational enterprises) will respond to corruption in host country by selecting particular types of entry mode. Using data on 745 MNE¬ðs subsidiaries in 19 emerging economies, we find that MNEs adapt to the pressure of perceived corruption in country level or industry level via joint ventures (as the controlling share holders or not). We also find that this kind of influence of corruption on entry mode is moderated by MNE s strategic motivations.

Key Words£º Corruption; Entry Mode of MNEs; Strategic Motivations

JEL Classification£ºD730£¬F210£¬F230

Product Market Competition and Dynamic Capital Structure Adjustment

Jiang Fuxiu, Qu Yaohui, Lu Zhengfei and Li Yan

(Renmin University of China£»Guangdong University of Foreign St

udies£»Peking University£»Renmin University of China)

Abstract:

Based on the balanced panel data of Chinese listed firms from 1999 to 2004, the paper studies the relation between product market competition and the adjustment of capital structure. The empirical result shows that product market competition and its change have significant influence on the bias of the firm's capital structure from its target ones. The higher the intensity of product market competition is, the less the bias from the target capital structure will be, and if the competition tends to more intense, the firm's capital structure will be close to the target ones. But we do not find the evidence of the relation between product market competition and the speed of the capital structure adjustment. The paper extended the research of capital structure, and shed some lights on the understanding of the firm's capital structure decision.  

Key Words:Product Market Competition; Capital Structure; Dynamic Adjustment; Aimed Capital Structure; Adjustment Speed

JEL Classification:D410£¬G320

A New Type of Principle Breach and Corruption and Its

Governance in the Building of ¡°New Socialist Countryside¡±

Xie Bingª¬a, Ren Shengdeª¬b and Zhang Junbiaoª¬a

£¨a Huazhong Agriculture University; b: The Journal of the Supervision in China£©

Abstract:

After the Agricultural Tax has been canceled, the development of villages and towns has been restricted by the financial funds. Therefore, the National Policy Special Funds have been the new focuses of the governments' attention in villages and towns. As a new type of corruption, the rent-seeking in the process of the application of National Sustaining Countryside Construction Fund has been aware and used by more and more departments and individuals. In this paper, the theories of the Rent-seeking and the New Institutional Economics are used to analyze the form and the essence of this new kind of corruption. At last, suggestions of the corruption governance are given.

Key Words:Building of New Socialist Countryside; Corruption; Governance

JEL Classification:D730£¬R500£¬H700

The Empirical Study on Chinese A-H Share Premium

Hu Zhanghong and Wang Xiaokun

(CCB International (Holdings) Limited)

Abstract:

This paper describes the pattern of A-H share premium of 45 A-H listed firms since their listing dates, and empirically explores the reasons of A-H share premium from the perspectives of company, market, interest, investor and important policy. The empirical results suggest that A-H share premium first increases then decreases in the testing period; the Liquidity Hypothesis and Asymmetric Information Hypothesis are more powerful in explaining A-H share premium; the market volatility and interest change have significant effects on A-H share premium, but investor structure and corporate governance have no significant effect; and after controlling other factors, the share merger reform, QDII policy and Through-Train policy have no significant effect on A-H share premium. The result further proves that the market segmentation and capital flow restrictions are the determinants of A-H share premium.

Key Words:

A-H Share Premium; CAPM Model; Share Merger Reform; QDII; Through-Train

JEL Classification:G14

Marketization£¬Government Intervention and Stock Liquidity Premium Distribution

Qu Wenzhouª¬a, Xu Nianhangª¬b, Guang Jiaxiongª¬a and Wu Shinongª¬a

£¨a: School of Management, Xiamen University; b: Guanghua School of Management,

Peking University)

Abstract:

Based on Game Theory and the background of non-tradable share reform, we develop theoretical models about compensation ratio in equilibrium under the condition with and without government intervention respectively, and analyze the effect of government intervention on the interest of tradable shareholders. We also collect 1004 reformed firms to test the relationship between government intervention and compensation ratio. Our three main conclusions are: (1) theoretical models show that government intervention reduces the level of compensation ratio in equilibrium, and thus expropriates the interest of tradable shareholders; (2) model simulation from ª«Baogang Stockª« shows that the loss to tradable shareholders is about one-quarter of compensation ratio every share under the condition of government intervention; (3) the empirical evidence shows that as the level of government intervention rises, the compensation ratio of state-controlled firms decline, supporting our theoretical models and hypothesis.

Key Words:

Marketization; Government Intervention; Liquidity Premium

JEL Classification:C70, D60, G18

Energy Development and Economic Growth in Western China:

An Empirical Analysis Based on the Resource Curse Hypothesis

Shao Shuai and Qi Zhongying

(School of Management, Harbin Institute of Technology)

Abstract:

Based on resource curse hypothesis, this paper carries out an econometric analysis on the relationship and its transmission mechanism between energy development and economic growth with cross-province panel data over 1991¡ª2006. Results reveal that since 1991, evident resource curse effect from energy development has really appeared as a result of the negative significantly correlation between energy development and economic growth. Though, before the implementation of the western development strategy, energy development acted negatively on openness, S&T innovation and human capital input, the effect was yet uncreated. However, after the implementation of the strategy, the effect emerged evidently as a result of the enhanced negative effect of energy development on S&T innovation and human capital input. Moreover, further tests indicate that energy development impedes economic growth mainly through three indirect transmission channels: the crowding-out effect towards human capital input and S&T innovation, and the weakening of institution aroused by rent-seeking and corruption. And among them, human capital input is the most important transmission factor.

Key Words:Energy Development£»Economic Growth£»Resource Curse£»Transmission Mechanism

JEL Classification:O130£¬O180£¬Q320£¬Q430