¡¡¡¡¡¡¡¡¡¡¡¡Economic Research Journal (Monthly)Vol.43 No.8 August, 2008

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

The Evolution of China¬ðs Financial Assets Structure: 1991¡ª2007

ª«---------------------------------------------Yi Gang and Song Wangª« (ª©4ªª)

Determinants of Factor Shares in China¬ðs Industrial Sector

ª«-------------------------Bai Chongª²En, Qian Zhenjie and Wu Kangpingª« (ª©16ªª)

Limited Catchª²up and Economic Growthª«-------------Yang Rudai and Yao Yangª« (ª©29ªª)

Study on the Effectiveness of Government Regulation of China¬ðs Grain Market: A Case Study of Wheat--------------------------------ª«Yang Ju, Wang Xinkui and Geng Hongzhou ª« (ª©42ªª)

Indigenous R£¦D£¬Technology Imports and Productivity: Evidence from Industries across Regions of China-----------------------------------------------------------------------Wu Yanbingª« (ª©51ªª)

What Determines the Net Interest Margins of Chinese Commercial Banks?

-----------------------------ª«Zhou Kaiguo, Li Tao and He Xingqiangª« (ª©65ªª)

Splitª²Share Structure Reform and Interests of Private Ultimate Controllers

¡ª¡ªEvidences from China¬ðs Publicª²Trade Firmsª«

------------------------------------------------------------Liao Li and Zhang Xueyongª« (ª©77ªª)

An Empirical Study of the Relation between Economic Growth, Economic Policies and Firm Performanceª«

----------------------------------------------Jin Qinglu, Li Ronglin and Wan Hualin ª« (ª©90ªª)

Is Chinese Inflation Pushed by Wages: An Empirical Research Based on Excess Wage

---------------------------------------------------------------------------ª«Fan Zhiyongª« (ª©102ªª)

Floating Standard Exchange, Dual Exchange Rates and China¬ðs Economy: 1870¡ª1900

ª«--------------------------------------------------Guan Hanhuiª« (ª©113ªª)

A New Decomposition of Giniª²Coefficient by Population Subgroups

ª«-----------------------------------------------Cheng Yonghongª« (ª©124ªª)

The Specification of Population Regression Models in Econometric Application Studies

------------------------------------------------------ª«Li Zinaiª« (ª©136ªª)

From Ex ante Inefficiency to Ex post Inefficiency:Comparing Several Classical Types of Models of Incomplete Contract Theory

ª«----------------------------------Jiang Shicheng and Fei Fangyuª« (ª©145ªª)

A Summary of the Forum of Regional Economic Cooperation and Development

ª«---------------------------Chen Xiqiang, Xie Ruhe and Zhang Renshouª« (ª©157ªª)

The Evolution of China¬ðs Financial Assets Structure: 1991¡ª2007

Yi Gang and Song Wang

(China Center for Economic Research, Peking University)

Abstract: In 1996, the first author of this essay manifested that financial assets structure of China which was then dominated by indirect financing had led to many problems in the economy. After more than ten years of financial reform, has the financial assets structure been improved? Can the existing financial assets structure accommodate the development of Chinese economy? This paper tries to answer above questions by reanalyzing the current financial structure in China. It is found that the financial asset structure of China has experienced obvious improvement. Meanwhile£¬the new structure has brought some new problems which ought to be resolved by further improvement of monetary market and capital market. In the coming ten years, the optimal path for the development of China¬ðs financial market is through twoª²way opening.

Key Words: Financial Assets Structure; Monetization; Financial Deepening

JEL Classification:E44£¬G20

Determinants of Factor Shares in China¬ðs Industrial Sector

Bai Chongª²En, Qian Zhenjie and Wu Kangping

(School of Economics and Management, Tsinghua University)

Abstract: We setup a monopolistic competition model with CES production function to explain how factor shares are determined by monopoly power, capitalª²output ratio, capitalª²augmenting technical progress, elasticity of substitution, and ownership. Our regression analyses with industrial survey data show that monopoly power and ownership restructure significantly influence factor shares in the industrial sector, while capitalª²augmenting technical progress and capitalª²output ratio do not show significant influence. A byª²product of this research is that we find adequate reason to argue that the elasticity of substitution for the industrial sector is unitary, and therefore the relative price of labor and capital does not significantly affect factor shares.

Key Words: Functional Distribution of National Income; Factor Shares; Capital Share; Elasticity of Substitution; System GMM Estimation

JEL Classification:E13, E25, C23

Limited Catchª²up and Economic Growth

Yang Rudaiª¬ª©1,2ªª and  Yao Yangª¬2

(1.Xiangtan University; 2.CCER, Peking University)

Abstract: This paper investigates the relationship between countries¬ð trade patterns and their economic performances. We propose the concept of limited catchª²up and construct the limited catchª²up index (LCI) for 112 countries/regions in the period of 1965¡ª2005. The successful stories of South Korea and Chinese Taiwan and comparison of China, India and Argentina show the advantages of limited catchª²up. Econometric analysis shows that limited catchª²up contributes significantly to better economic growth, and its shortª²term effect is larger than its longª²term effect.

Key Words: Trade; Economic Growth; Limited Catchª²up

JEL Classification:F02,F43,O33

Study on the Effectiveness of Government Regulation of China¬ðs

Grain Market: a Case Study of Wheat

Yang Juª¬a,  Wang Xinkuiª¬a and  Geng Hongzhouª¬b

(a. Shanghai Institute of Foreign Trade,  b. Market Operation Regulation of Chinese Ministry of Commerce)

Abstract: To evaluate how effective Chinese government regulation is on the domestic grain market under world economic integration, we conducted a series of tests. There included unity root test, VAR, GARCH model, variance decomposition, coª²integration test, together with  volatility analysis to test daily data of the domestic and foreign wheat market from January 2001 to September 2007 and test monthly data of spot and futures of domestic and foreign wheat from June 1993 to March 2007. The results reveal some interesting features unique to China¬ðs wheat market. In particular, This paper provides substantiates that the absence of longª²term equilibrium between domestic and foreign market can be maintained is the premise for using effective government regulation. Therefore, a standard is necessary for judging the necessity of regulation so as to avoid the negative effects and harm caused by inadvertent government regulation.

Key Words: Grain Market; Government Regulation; Coª²integration; Equilibrium

JEL Classification:F275£¬F830

Indigenous R£¦D£¬Technology Imports and Productivity:

Evidence from Industries across Regions of China

Wu Yanbing

(Institute of Economics, Chinese Academy of Social Sciences)

Abstract£ºThe paper is dedicated to probing into the effects of indigenous R&D, foreign and domestic technology imports on industrial productivity across regions of China by using the provinceª²level panel data from 1996 to 2003. Based on the expanded production function and calculating the stocks of R&D and technology imports, the paper finds that indigenous R&D and foreign technology import have significantly positive effects on productivity and domestic technology import have no significant effects on it by using fixed effects and first difference models. The paper also finds that the lower absorptive capacity of indigenous R&D cumbers the productivity growth. The relationships among R&D, foreign technology import and productivity also take on different patterns in different regions: R&D has significantly positive effects on productivity only in central and east regions, while foreign technology import has significantly positive effects on productivity only in west regions. Different technical development and innovation capacity in different regions may be the main reasons of the phenomena.

Key Words£ºIndigenous R&D; Foreign Technology Import; Domestic Technology Import; Productivity

JEL Classification£ºD21, L60, O31

What Determines the Net Interest Margins of Chinese Commercial Banks?

Zhou Kaiguoª¬a, Li Taoª¬b and He Xingqiangª¬a

(a. Lingnan College, Sun Yatª²sen University;

b.School of Finance, Renmin University of China)

Abstract£ºThis paper conducts an empirical study on the determinants of Chinese commercial banks¬ð net interest margins with the panel data during the period of1996¡ª2003, applying the extension of Ho and Saunders (1981) model, which originally identifies the fundamental elements affecting net interest margins. We introduce average operating costs, asset scale, and other factors induced by market imperfection into the fixed effects model. The results discover that the determinants of net interest margin include market competition structure, average operating costs, degree of risk aversion, transaction size, implicit interest payments, opportunity cost of reserve, management efficiency, and asset scale. The empirical results are valuable to both the commercial bank¬ðs management for their enhancing profitability and the government regulators for their making policy to improve social welfare. Finally, some policy implications are proposed based on the empirical results.

Key Words£º Commercial Banks; Net Interest Margin; Determinant

JEL Classification£ºG21, G28

Splitª²Share Structure Reform and Interests of Private Ultimate Controllers

¡ª¡ªEvidences from China¬ðs Publicª²Trade Firms

Liao Li and Zhang Xueyong

(School of Economics and Management & China Center for Financial Research, Tsing

hua University)

Abstract£º

The worst weakness resulting from splitª²share structure in China is the inconsistency between controller¬ðs private benefits and firm¬ðs value, which induces serious agentª²costs. The spli share structure reform that has been implemented from April 2005 removes market fraction and helps to eliminate the confliction from the view of theory. This paper constructs a ¡°difference in difference¡± model by adopting the China¬ðs public trade firms ultimately controlled by families and the analysis framework of pyramidal ownership. The empirical results indicate the splitª²share reform indeed improves publicª²trade firms governance and help to remove the confliction between the ultimate controller¬ðs benefits and firm¬ðs valuation£¬regarding to those firms ultimate controlled by families.

Key Words£º Splitª²Share Structure Reform£»Pyramidal Ownership£»Excess Debt£»Difference in Difference

JEL Classification£ºG280£¬G320£¬M410

An Empirical Study of the Relation between Economic Growth,

Economic Policies and Firm Performance

Jin Qinglu, Li Ronglin and Wan Hualin

(Institute of Accounting and Finance, Shanghai University of Finance and Economi

cs;Shanghai Lixin University of Commerce)

Abstract£ºBased on Chinese listed companies sample over the period from 1995 to 2004, we examine the relation between economic growth, economic policies and firmª²level accounting performance and stock return. By constructing ISª²LM model, we estimate the fiscal policy multiplier (government expenditure multiplier, transfer payment multiplier, tax multiplier) and monetary policy multiplier so as to appropriately measure the effects of fiscal and monetary policies. On the basis of the changes in fiscal and monetary policies, we investigate the influence of the economic growth, economic policies on the accounting performance and stock return, and find that there is a significant link between economic policies and firm performance, although there is some variations among different economic policies. In addition, after controlling the influences of the economic policies on firm performance, we observe that the macro economic growth doesn¡¯t deviate from the micro firm performance, this finding is not consistent with some prior researches, but it is consistent with classical economic theory.

Key Words£º Economic Growth; Economic Policy; Accounting Performance; Stock Return

JEL Classification£ºE44, E52, E62

Is Chinese Inflation Pushed by Wages:

An Empirical Research Based on Excess Wage

Fan Zhiyong

(School of Economics, Renmin University of China)

Abstract: Different opinions about the originations of the inflations began from the year of 2007 indicate different policies against further inflation. VAR research based on the import price, money supply, excess wage and inflation finds no solid evidences for the school of costª²push inflation. Further evidences from sector data also confirm the basic conclusions of the VAR research. There is no ¡°wageª²inflation¡± vicious circle in China yet. Money supply instead of excess wage made the most contribution for current inflation.

Key Words: Inflation; Demand Pull; Cost Push; Excess Wage

JEL Classification:E24, E31, E51

Floating Standard Exchange, Dual Exchange Rates

and China¬ðs Economy: 1870¡ª1900

Guan Hanhui

(School of Economics, Peking University£»School of Economics and Management, T

singhua University)

Abstract: Chinas monetary system evolved from bimetallism of silver and copper to silver standard, then to paper money standard since Ching Dynasty, which is obviously different with the    evolution of monetary system in western countries, where monetary system evolved from bimetallism of gold and silver to gold standard, then to paper money standard. 1870¬ðs later, most western countries gave up bimetallism of gold and sliver one after another, and adopted gold standard, which resulted in the regime of dual exchange rates in China, namely, exchange rate of silver to gold in foreign trade and exchange rate of silver to copper in domestic trade. Dual exchange rates brought the phenomenon of trade deficit in company with depreciation, which is not accordance with economic theory. It also brought disadvantages to our country through enhancing the burden of foreign loans and reparations and impoverished grass roots people. Based on Zheng Youkui sresearch, also under the background of new development in monetary theory and historical data, we analyze the effects of regime of dual exchange rates on China¬ðseconomy between 1870 and 1900ª± Finally, this article makes clear the inherent defects of bimetallism in China by comparing it with bimetallism in western countries.

Key Words: Bimetallism£»Dual Exchange Rates£»Economy

JEL Classification:F129£¬F752£¬F829

A New Decomposition of Giniª²Coefficient by Population Subgroups

Cheng Yonghong

(School of Public Administration, Renmin University of China)

Abstract:This paper demonstrates a new decomposition of the Giniª²coefficient under multiª²subgroups. The main contents are as follows. First, the fundamental reasons of imperfections on present decomposition methods are analyzed. Second, a new decomposition of Gini coefficient under multiª²subgroup without overlap term is proposed. Third, the reliable theoretical basis and the clear economic significance of the betweenª²group inequality index are proposed and proved. Lastly, the meaning of welfare economics behind the decomposition and the betweenª²group inequality index are explored.

Key Words: Gini coefficient; Betweenª²group Measure of Inequality; Welfare Losses

JEL Classification:D63, D31, C43, O15

The Specification of Population Regression Models

in Econometric Application Studies

Li Zinai

(School of Economics and Management, Tsinghua University)

Abstract: Taking the target of econometric population models specification as the starting point, the paper analyses and evaluates the study target guidance, the economics theory guidance and the data guidance of the population models specification, and advances some important criterions about the population models specification. For example, the population model must be sole, general and realistic, and must pass the statistical testing by the data. Finally, the paper raises a new theory, i.e. the population models specification must be directed by the dynamic relationship in economy system.

Key Words:Econometric Models£» Population Regression Models£» Economics Theory Guidance£»Data Guidance£» Dynamic Relationship Guidance

JEL Classification:C100, C500, A200

From Ex ante Inefficiency to Ex post Inefficiency:

Comparing Several Classical Types of Models of Incomplete Contr

act Theory

Jiang Shicheng and Fei Fangyu

(Economic School of Shanghai Jiao Tong University)

Abstract: We classify the incomplete contract theory first to 4 types in terms o

f the ex ante and ex post contractibility and the ex ante and ex post inefficiency: ex ante inefficiency model with ex ante nonª²contractible but ex post contractible actions, ex ante and ex post inefficiency model with ex ante and ex post nonª²contractible actions, ex ante and ex post inefficiency model with partialª²contractible actions, ex ante and ex post inefficiency model with ex post unverifiable payoffs. We analyze the difference and similarity of these models and compar

e what phenomena these models explain. The GHM model has been criticized for its assumptions, especially for the assumption of ex post contractibility. To analyze the topics of authority, delegation and hierarchy, we must depart from a world in which Coasian renegotiation always leads to ex post efficiency, and focus on the much more complex ex post inefficiency.

Key Words:Incomplete Contract; Ex ante Inefficiency; Ex post Inefficiency

JEL Classification:D230£¬L140£¬L20