¡¡¡¡¡¡¡¡¡¡¡¡Economic Research Journal (Monthly) Vol.43 No.6 June, 2008

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

The Political Economy of Emission in China: Will a Low Carbon Growth Be Incentive Compatible in Next Decade and Beyond?

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Cai Fang, Du Yang and Wang Meiyanª« (ª©4ªª)

Enterprise Evolution: Important Path of Industrial TFP Growth in China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Li Yuhong, Wang Hao and Zheng Yuxinª« (ª©12ªª)

Exchange Rate Regime and Monetary Policy: A Proposal for Small and Less Developed Economies¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..Gong Gang, Gao Jian and He Xuezhongª« (ª©25ªª)

The Effects of Intergovernmental Assignments of Public Revenue and Expenditure Responsibility

on the Regional Economic Growth

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Jia Junxue and Guo Qingwangª« (ª©37ªª)

The Optimal Transfer Shares of Stateª²owned Firms to Social Secuity Fund

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Yang Jun and Gong Liutangª« (ª©50ªª)

Telecommunications Investment: Infrastructure, Network Effect and Regional Disequilibrium

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Luo Yuze, Rui Mingjie, Luo Laijun and Zhu Shanli (ª©61ªª)

The Ineffective of Public Policies and Excessive Concentration of Production and Population

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Fan Hongzhongª« (ª©73ªª)

Spillover Effects of the Three Growth Poles on the Inland Regions of China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Pan Wenqing and Li Zinaiª« (ª©85ªª)

Does Foreign Direct Investment Benefit Chinese Indigenous Firms? Effects and Channels

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Lu Jiangyongª« (ª©95ªª)

Entrepreneurs' Human Capital and Institution Selection and Innovation in PrivateEnterprises in China¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Liu Jianxiongª« (ª©107ªª)

The Determinants of Capital Structure and Equity Financing Preference in Listed

Chinese Companies¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..Xiao Zezhong and Zou Hongª« (ª©119ªª)

Analysis on the Influence of Governance Structure to Familyª²controlled Tunnelin

g Behavior of Chinese Private Listed Companies

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Shen Minghaoª« (ª©135ªª)

Experimental Researches of Sequential Decisionª²Making under Imperfect Information

¡ª¡ªExperimental Tests of the Bayesian Model for Herd Behavior

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Zhu Xianchen, Li Yanqi and Zeng Huaxiangª« (ª©145ªª)

Theoretical Development and Application Research on Law and Economics:

A Summary of the 6th Law and Economics Forum

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Shi Jinchuan and Dong Xuebingª« (ª©157ªª)

The Political Economy of Emission in China:

Will a Low Carbon Growth Be Incentive Compatible in Next Decade and Beyond?

Cai Fang, Du Yang and Wang Meiyan

Abstract:

The effectiveness of emission reduction policy lies on the endogenous demands for

change in growth pattern and requirement for better environment. Only when economic development moves to the stage at which economic growth becomes productivityª²driven, can the policy package aimed to significantly reduce greenhouse gas emission be incentive\|compatible with the development motivation of local governments and behavior of enterprises. By estimating the Environment Kuznets Curve, which predicts the turning point of emission from increase to decline, this paper examines the induced need for the Chinese economy to implement emission reduction strategy.The results show that it is not enough to wait for the turning point to come, unless the policy implementation can be further strengthened in order to make incentive compatible among the central and local governments, enterprises, and people.

Key Words:Emission Reduction; Environmental Kuznets Curve; Economic Growth Pattern

JEL Classification:O130, Q280, R580

Enterprise Evolution: Important Path of Industrial TFP Growth in China

Li Yuhongª¬1, Wang Haoª¬2 and Zheng Yuxinª¬1

£¨1. Institute of Quantitative & Technical Economics, CASS£»

2. School of Business, University of International Business and Economics£©

Abstract:This paper studied the change in industrial TFP in China from 2000 to 2005 from an evolutionary point of view. It analyzed the respective contributions to industrial TFP growth of technical progress and resource reallocation, employing BHC and shiftª²share approach with firmª²level data. It found that the TFP of surviving firms tops and the TFP of entering firm grows fastest while the TFP of the exiting firms remains lowest and rises slowest. It also found that technical progress of the surviving firms accounts nearly 50% for TFP growth while reallocation of resources mainly due to turnover of firms contributes the other half. On one hand it shows the significance of competition mechanism and investment to the quality of economic growth, on the other hand in the long run it is very important to realize a sustainable domestic industrial development that the incumbents build up the self innovation ability and quicken the pace of technical progress with the weakening potential of institutional reform and the maturing of industry during transition.

Key Words:Enterprise Evolution; TFP; Technical Progress; Resource Reallocation; Nonparametric Estimation

JEL Classification:D240£¬O470£¬C140

Exchange Rate Regime and Monetary Policy£º

A Proposal for Small and Less Developed Economies

Gong  Gang, Gao  Jian and He Xuezhong

(Nankai University; China Development Bank; University of Technology, Sydney)

Abstract:

We investigate the monetary policy under the assumption that the capital market was open while the exchange rate was fixed. Our purpose is to find whether it is still possible for the economy in this case to keep the effective monetary policy for stabilizing the domestic economy. For this, we suggest two institutional restrictions. Given the restrictions, we demonstrate that the monetary policy can still be effective. The implication of such an institutional design in exchange rate regime is also discussed with special reference to a small and less developed economy.

Key Words: Open Economy Triª²lemma; Monetary Policy; Exchange Rate Regime; Macrodynamic Model

JEL Classification:E120, E320, C620

The Effects of Intergovernmental Assignments of Public Revenue and

Expenditure Responsibility on the Regional Economic Growth

Jia Junxue and Guo Qingwang

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

Abstract:

This paper analyzes the position of the intergovernmental assignments of public revenue and expenditure responsibility based on regional economic growth perspective. Our analyses suggest that:(1) total and social expenditure responsibility assignments have significant adverse impacts on economic growth, economic and maintenance expenditure responsibility division have positive impacts on economic growth, while total revenue responsibility division's effects are implicit, which suggests that the intergovernmental division of public revenue and expenditure responsibility is not better;(2) the intergovernmental assignments of public revenue and expenditure responsibility have significant threshold effects on regional economic growth, which is mainly depends on economic development stage as well as total and social expenditure responsibility;(3) the position of total and social expenditure responsibility assignments has become more better since 1994,while the position of economic and maintenance expenditure responsibility assignments has become more unreasonable.

Key Words:Intergovernmental Assignments of Public Revenue Responsibility; Intergovernmental Assignments of Public Expenditure Responsibility; Regional Economic Growth

JEL Classification:H730, O110

The Optimal Transfer Shares of Stateª²owned

Firms  to Social Security Fund

Yang  Jun

(School of Labor and Human Resources, Renmin University of China)

Gong Liutang

(Guanghua School of Management, Peking University)

Abstract:

Without asymmetric information or externality, the social planned equilibrium is equivalent to the competitive equilibrium in an infinite horizon framework; however, in a finite horizon model, it can be proved that this equivalence will not held yet. Because of the possibility of dynamic inefficiency, the competitive equilibrium is not Paretoª²optimal. This paper introduces the transfer of stateª²owned shares to social security fund in an overlapping generation model to study the optimal transfer of shares. The optimal transfer share of stateª²owned firms to social security fund can be determined by the replication of the social planned equilibrium with the competition equilibrium. The conclusion is greatly helpful for the operation of China's NSSF£¨National Social Security Fund£©in the future.

Key Words:Social Security Fund; Social Planner Economy; Pareto Efficiency

JEL Classification:D400£¬H200£¬H300

Telecommunications Investment:

Infrastructure, Network Effect and Regional Disequilibrium

Luo Yuzeª¬1, Rui Mingjieª¬2, Luo Laijunª¬3 and Zhu Shanliª¬4

(1. China Academy of Telecommunications Research of MII and Guanghua School of

Management, Peking University;

2. Management School, Fudan University; 3. Economics School, Renmin Universi

ty of China;

4. Guanghua School of Management, Peking University)

Abstract£ºIn this paper we investigate how telecommunications infrastructure investment affects economic growth by estimating a structural model with the data set covering 31 provinces and six years from the year 2000 to 2005. We find that the average marginal effect of telecommunications investment is 2ª±376 percent, which is higher than social infrastructure investment by 6ª±758 percent, but it takes on a decreasing trend. The empirical study on different regions reveals that there is distinct regional disequilibrium that the investment contribution to productivity in the West is much higher than that in the others, which is opposite to the instinct. Therefore, it is imperative to keep increasing investment in the West, make a structural adaptation in the East and stimulate telecommunications consumption in the Middle. Our study breaks through the previous literature and draws a conclusion opposite to Roller and Waverman(2001), which will be helpful for telecommunications investment decisionª²makers.

Key Words£º Telecommunications; Infrastructure Investment; Marginal Contribution; Regional Disequilibrium

JEL Classification£ºL960£¬R100

The Ineffective of Public Policies and Excessive Concentration

of Production and Population

Fan  Hongzhong

(Huazhong University of Science and Technology)

Abstract:Through a model of the flow of capital and population, it is found that without investment control and with the flow of population, policies of reducing the costs of commuting and housing, or favorable policies only for large cities will result in even more excessive concentration, higher cost of commuting and housing. However, the policies may cause false prosperity, that is nominal GDP go up, but a lot of social product is offset by the cost of commuting and housing, the real income and welfare of most people don't change except for land owners.

Key Words:Cost of Commuting and Housing; Nonª²effectiveness; Excessive Concentration

JEL Classification:R230, R130, R590

Spillover Effects of the Three Growth Poles on the Inland Regions of China

Pan Wenqing and Li Zinai

(School of Economics and Management, Tsinghua University)

Abstract£º

Based on the multiª²regions inputª²output approach, this paper researches on the spillover effects of the three growth poles, Pearl River Triangle Area, Yangtze River Triangle Area and Pª²Bohai region, on the inland regions of China The backward linkage shows that about 109 percent of the total repercussion effects induced by the final demand of the three growth poles go to inland regions. Among them, the greater part goes to the central regions and a little to Northeast, Northwest and Southwest. Comparing the spillover effects from the three growth poles on inland regions, we find that Yangtze River Triangle Area has the largest effects, then the Pearl River Triangle Area, and Panª²Bohai region has the smallest one. However, Panª²Bohai region has the largest effects on Northeast and on Northwest, and Pearl River Triangle Area has the largest effects on Southwest. The sectorial comparison shows that the top five sectors with the largest spillover effects on inland regions are almost the same. These top five sectors account for about 40 percent of the overall spillover effects of the three growth poles on inland regions.

Key Words£º Regional Economy; Growth Poles; Inland Regions; Input output Model; Spillover Effects

JEL Classification£ºO400,R100

Does Foreign Direct Investment Benefit Chinese Indigenous Firms?

Effects and Channels

Lu Jiangyong

(School of Economics and Management, Tsinghua University)

Abstract£º

In this paper, we investigate the impact of foreign direct investment (FDI) on productivity of Chinese indigenous firms with a representative sample during 1998¡ª2005. We find foreign presence at county level and region level affects Chinese indigenous firms differently. Our analyses show that headª²toª²head competition with foreign invested enterprises (FIEs), in domestic market and foreign markets, generally reduces productivity of Chinese indigenous firms. Meanwhile, possible technology and skill spillovers within small geographic scopes increase Chinese indigenous firms¬ð productivity. However, whether indigenous firms benefit or suffer from foreign presence depends partially on their ownership: state owned firms suffer the most from foreign presence, while private firm benefit the most.

Key Words£º Foreign Direct Investment; Indigenous Enterprise; Productivity; Spillovers

JEL Classification£ºF210, F230, O300

Entrepreneurs' Human Capital and Institution Selection

and Innovation in Private Enterprises in China

Liu Jianxiong

£¨Postdoctoral Workstation in Institute of Economics and Graduate School, CASS£©

Abstract:Based on the investigation data, this paper, by using the method of Ordered Logistic Regression, analyzes empirically the key factors of the human capital of the entrepreneurs in private enterprises that affect the selection and innovation of the institutions in corporation governance. This paper draws the following conclusions: 1£© the higher of the entrepreneurial human capital, the more likely for their enterprises to adopt modern corporation institutions. 2£© The accumulation of managerial experiences and leadership of the private entrepreneurs is conducive to their selection and innovation of the institutions in corporation governance. 3£© In Chinese private enterprises, the separation of the owners and managers will force the owners to take some measures in property rights to control the managers. 4£© The CPC membership of the founders of private enterprises and the managers is a key factor to the institution selection and innovation in corporation governance.

Key Words:Entrepreneurial Human Capital; Private Enterprises; Institution Selection and Innovation

JEL Classification:C250£¬M130

The Determinants of Capital Structure and Equity Financing

Preference in  Listed Chinese Companies

Xiao Zezhong and Zou Hong

(Xiangtan University; City University of Hong Kong)

Abstract:

This paper investigates the share issuing preference conjecture and determinants of capital structure in listed Chinese firms. It provides a method to formally test the share issuing preference and obtained strong evidence that supports the hypothesis. The results indicate that although in general state ownership, legal person ownership and foreign ownership do not have a significant effect on capital structure, a high level of state ownership is associated with a high level of long term debt. These results are inconsistent with the argument in the literature that the high level of state ownership is a cause of the share issuing preference. Additionally, the variables (firm size, asset tangibility, growth and profitability) that are found to be important in developed countries al

so play a similar role in capital structure decisions in listed Chinese firms. However, they are associated with leverage in ways different from those in other developing counties.

Key Words:Agency Theory£»Capital Structure; Financing Behavior; Pecking Order Theory; Static Tradeª²off Theory

JEL Classification:G320,G340

Analysis on the Influence of Governance Structure to Familyª²controlled

Tunneling Behavior of Chinese Private Listed Companies

Shen Minghao

(Guangzhou University of Foreign Studies)

Abstract:

In the paper, we choose the whole body of 280 private listed companies by the end of 2004 as research subjects and distinguish Capitalistsª²controlled£¨CFB£© from Entrepreneurs ª²controlled £¨EFB£©.The results of regression analysis on family occupying of listed companies' capital show: capitalistª²families incline to conduct tunnel behavior by the means of establishing multiª²layer control chain; members of the entrepreneurª²families working in listed company is conducive to the formation of collusion, digging tunnel and transferring resources; companies whose controlling shareholders exist in the form of enterprise groups suffer from being emptied more seriously; in familyª²controlled listed companies, independent directors have not played an effective supervisory role; the equity ratio of general manager and intensity of the tunneling behavior show Uª²shaped relationship, ¡°the incentive effects of regulation" and ¡°collusion draining effect" existing. We find the more the business is controlled by capitalist, the more possible tunnel behavior is to be cnducted. So we think the listed companies should be classed and supervised separately.

Key Words:Tunneling Behavior; Affiliated Transactions; Governance Structure; Familyª²controlled; Manipulative Shareholder

JEL Classification:D230£¬ G320£¬G390

Experimental Researches of Sequential Decisionª²Making under

Imperfect Information

¡ª¡ªExperimental Tests of the Bayesian Model for Herd Behavior

Zhu Xianchen, Li Yanqi and Zeng Huaxiang

(School of Economics and Management£¬ Nanjing University of Science and Technology)

Abstract:

¢Telen and Kariv(2004a) established the Bayesian Learning Model addinga setup with continuous signal and discrete action, which is in allusion to the social learning setting with sequential decisionª²making under imperfect information. The Bayesian Model, however, can't be used to explain the experiments' results well. This paper attempts to study whether sequential individuals' behavior under imperfect information accords with the prediction of the Bayesian Model by doing economic experiments. By designing and organizing two kinds of sequential decisionª²making experiments under imperfect information, we imitate and test the general Bayesian Model. The results show that decisionª²maker isn't able to calculate his own optimal decision when he can only get the information of his immediate predecessor's action. Individuals' behavior can be described by normal distribution approximately. The distribution of individuals' behavior in different decisionª²turns doesn't have significant differences, and they are only able to do the Bayesian calculation in one step simply.

Key Words:Imperfect Information; Bayesian Model; Experimental Economics; Herd Behavior

JEL Classification:C910, C920, D820