Public Expenditure, Taxation and Longª²run Growth

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Yan Chengliang and Gong Liutangª« (ª©4ªª)

Allocation Choice and Fiscal Influence of Intergovernmental Tax Decentralization

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­L¨¹ Bingyangª« (ª©16ªª)

Piecemeal Reform and the Complicated Interactions of Public Policies

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Ding Weili and Zhang Yuanª« (ª©28ªª)

Estimation of Speed of Convergence of China's Economy

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhou Yahong, Zhu Baohua and Liu Lihanª« (ª©40ªª)

Total Factor Productivity Performance of Chinese Enterprises

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Yuan Tangjunª« (ª©52ªª)

Economic Power Structure and Optimal Allocation of Productive Factors

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Yishan and Yu Weishengª« (ª©65ªª)

Political Control, Fiscal Subsidy and Moral Hazard: A General Model of Bad Assets in State Banks¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..Yu Qiao and Zhao Changwenª« (ª©73ªª)

Analysis on the Realization Mechanism of Export Miracle in Chinese Coastal Regionsª«Wu ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Qiang and Liu Zhibiaoª« (ª©83ªª)

Impact of Foreign Technology Transfer on Indigenous R&D in China

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Xing Fei and Zhang Jianhuaª« (ª©94ªª)

Power Industry Location Optimization and Integrative Energy Transportation Systemª«

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Lin Boqiang and Yao Xinª« (ª©105ªª)

Capital Structure and Industry Competition: Are Institutions Important?

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Li Ke and Xu Longbingª« (ª©116ªª)

Lucky Number Worship and Asset Price Anomaly

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhao Jingmei and Wu Fengyunª« (ª©129ªª)

Collective Reputation, Credible Commitment and Enforcement: The Case of Seller

Coalition in China's Online Auction Market

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Wu Desheng and Li Weianª« (ª©142ªª)

A Summary for the Forum of Investment and Regulation to Chinese Local Governmentsª«

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Li Guangjie, Hua Xiaoan and Hou Xiaominª« (ª©155ªª)

Minutes of the Editorial Board Meeting in 2009

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Reporterª« (ª©159ªª)

Public Expenditure, Taxation and Longª²run Growth

Yan Chengliang and Gong Liutang

(School of Economics, Central University of Finance and Economi

cs; Guanghua School of Management, Peking University)

Abstract: This paper discusses the growth effect of fiscal policy in an AK model with endogenous labor supply. It is found that fiscal policy could affect the longª²run growth rate through their effects on household's laborª²leisure choice, consumptionª²saving choice, and the proportion of public productive expenditure in total output. Using numerical simulation, it is found that Barro's (1990) invertedª²U relationship between the growth rate and the income tax rate will not hold. Using crossª²province data from 1997 to 2007 in China, the growth effect of various public productive expenditures have been investigated. It is found that the growth effect of public productive expenditure may be quite different among regions and the public productive expenditure may do not have positive growth effect. \=

Key Words: Economic Growth; Fiscal Policy; Taxation; Public Expenditure

JEL Classification:E620£¬H200£¬O400

Allocation Choice and Fiscal Influence of

Intergovernmental Tax Decentralization

L¨¹ Bingyang

(School of Finance, Renmin University of China)

Abstract: On the field of fiscal decentralization study, the study about tax decentralization has long been neglected. This article sums up and compares four contract models about tax decentralization between central government and local government, which are fixed rent contract, share contract, tax sharing contract and agent levying contract. On the aim of respectively maximizing local, central and national fiscal revenue, the article gets three propositions about the tax endeavor and tax decentralization, and proves that central government often faces the choice to maximize the scale of national fiscal revenue or to strengthen the centralization of central government fiscal revenue. The change of tax decentralization in 1994 is from fixed rent contract and share contract dominant contract to tax sharing contract dominant contract, which inpels high tax growth and keeps central government revenue concentration rate stable from then on.

Key Words :Fiscal Decentralization; Share Contract; Taxª²sharing

System

JEL Classification:E620, H210

Piecemeal Reform and the Complicated Interactions of Public Policies

Ding Weili  and Zhang Yuan

(Queen's University, Canada; Fudan University)

Abstract: In many settings, policymakers are unable to restrict the effect of a particular policy to targeted economic agents or regulated economic behaviors only. Further, policies could interact with each other in the public domain thereby complicating implemented impacts. To illustrate this challenge we consider the issue of affordable housing provision which is getting increased attention from Chinese policymakers. We set up a Tiebout style general equilibrium framework to illustrate the impact of the affordable housing provision policies together with the public school admission policies on the community formation of urban China. We demonstrate the risks of ghettoizing urban Chinese landscapes from the interaction of the current housing policy and school admission policy, probably the unintended consequence by either policy, and make our recommendations to ways that would counteract those risks.

Key Words: Peer Effects£» Neighborhood Effects£» Ghettoization£» Social Housing Allocation Policies; School Admission Policies

JEL Classification:O18£¬J18£¬R50

Estimation of Speed of Convergence of China's Economy

Zhou Yahongª¬a, Zhu Baohuaª¬b and Liu Lihanª¬a

(a: School of Economics, Shanghai University of Finance and Economics; b: School of Economics, Shanghai JiaoTong University)

Abstract: It is well known that Neoclassical growth model implies that, in longª²run, economy may converge or diverge Convergence means that the growth rate for output per capita only depends on growth path determined by the exogenous technological progress rateª± While the divergence means that economy would exhibit accelerated growth rate and the growth rate of output per capita is increasing One way to judge whether the economy is in convergence or divergence state is to estimate the speed of convergenceª± Based on a semiª²parametric varying coefficient panel data model, by using provincial level data in China from 1978 to 2006, this paper shows that, on one hand, China's economy is diverging with high growth rate now, and on the other hand, there exists the tendency for convergence in richer areas, and the trend of catching up effect in the poorer areas. Furthermore, for the conclusions obtained in this paper, we give economic explanations, which is related to resource restriction and government policy.

Key Words:Speed of Convergence; Varying Coefficient Model; Panel Data; Semiª²parametric Estimation Method

JEL Classification:C14, C33, O47

Total Factor Productivity Performance of Chinese Enterprises

Yuan Tangjun

(School of Economics, Fudan University; Institute of Economic Research, Hitotsubashi University)

Abstract£ºUnlike most empirical studies on productivity that assume capital stock is an ideal proxy for capital service, we first estimate capital service using the financial data from the Chinese listed companies, and then apply it in our production function analysis with other input and output variables from the same source. Different from studies using aggregate industry data that suggest a cross board improvement in productivity since the late 1990s, especially following China¬ðs WTO entry, our findings show that during the period 1999¡ª2004 only the Chinese enterprises in some capital intensive industries, such as machinery, electronics and basic chemicals, showed some improvement in their productivity performance, whereas those in labor intensive industries, such as food and textiles, demonstrated a stagnation or decline in productivity. We argue that existing distortions in resource allocation are likely the major factors behind the unsatisfactory performance in the Chinese listed companies. Our international comparison exercise also suggests that in machinery and electronics industries, the Chinese enterprises are substantially less competitive than their Japanese and Korean counterparts. This on the other hand means that there is a great potential for the Chinese enterprises to increase their international competitiveness should the distortions are removed.

Key Words£º TFP; Capital Service; International Competitiveness; Factor Market Distortion

JEL Classification£ºD24, L25, O53, O57

Economic Power Structure and Optimal Allocation of Productive Factors

Zhang Yishan and Yu Weisheng

(Quantitative Research Center of  Economics,  Jilin University; Business College, Jilin University)

Abstract£ºThe basic objective of people¬ðs economic activities is to maximize interests while such interests are obtained through distribution. Emergence of interest distribution mechanism is in turn the result of power games, and the setup of power determines that of distribution, both the distribution system and the power system are identical. To attain full utilization and optimal allocation of resources so that social interests and welfare are optimized, the basic way is to realize, at the same hierarchy level, power reciprocity among different economic agents and meanwhile to make sure that power and responsibility are symmetric for the same economic agent. Borrowing the game theories, this paper proves the above arguments, with mathematical derivation.

Key Words£º Power; Responsibility; Contract; Economic Efficiency; Optimal Allocation

JEL Classification£ºP16, P48

Political Control, Fiscal Subsidy and Moral Hazard:

A General Model of Bad Assets in State Banks

Yu Qiao and Zhao Changwen

(Tsinghua University; Sichuan University)

Abstract£ºNationalization and political control over banks become a global trend in the recent financial crisis. Under the circumstances it is meaningful to study long term social cost of political control over banks, although it seems inevitable to have government intervention in bank to stabilize financial market in short run. This paper establishes a general theoretical model to explain bad assets of banks generated through interactions of politicians and bank managers. In specific, the paper reveals that agency problem of politicians is the main cause of bad assets type ¢ò in banks, while moral hazard of bank managers responsible for bad assets type ¢ó. Under political control, moral hazard problem is most likely to worsen off and demonstrates a diverging tendency. At least government has to keep providing subsidy to banks, but finally the fiscal burden will be shifted to public via tax hike or moneyª²printing. Politically and economically, it is a very costly and nonª²sustainable model in long term. This conclusion is not only meaningful for China¬ðs bank reforms in the future, but also has implication to most developed countries in the recent fullª²fledged bailout and nationalization campaigns over banks.

Key Words£º Political Control; Fiscal Subsidy; Moral Hazard; BadAssets

JEL Classification£ºE60£¬H30

Analysis on the Realization Mechanism of Export Miracle

in Chinese Coastal Regions

Wu Qiang and Liu Zhibiao

(School of Economics,  Nanjing University)

Abstract: This paper proposes the realization of export growth miracle in Chinese coastal regions which is featured by the consumer products and caused by massive advanced machinery importing fromforeign countries. This is the rational response of corporations in coastal regions driven by exportª²orientation strategy and facing more rigorous product quality standards in foreign markets while native machinery manufacturers can not offer eligible machinery. This fact can be described as the terms of ¡®importingª²forª²exporting¡¯ or ¡®importingª²induced exporting¡¯. We introduce the preference to product quality into the monopolistic competition trade model, and find after the improvement of product quality, demand from international markets faced by consumer product exporters will increase. Import of eligible machinery can improve the shortª²term profit and exporting size of consumer product exporters, and expand the total industry¡¯s exporting.

Key Words:Consumer Product Exporting; Machinery Importing; Monopolistic Competition; Product Quality Preference

Impact of Foreign Technology Transfer on Indigenous R&D in China

Xing Fei and Zhang Jianhua

(School of Economics, HuaZhong University of Science and Technology£©

Abstract: This article establishes a dynamic game model within the framework of cumulative innovation to explore the impact of foreign technology transfer on indigenous R&D. The game model demonstrates that both FDI and Licensing (include other styles of technology trade) has two effects: positive and negative. Using the industrial panel data on China's both largeª² and mediumª²sized enterprises during 1999¡ª2004 to conduct system GMM estimation, this paper examines these effects. Our results show that technology purchased have both the direct substitute effect to reduce the R&D investment, and the indirect technology spillover effect to promote the indigenous R&D investment; the competition effect of FDI has significant promoting and prohibiting influence in the short term, but not in the long term; the spillover effect of FDI is not significant in either long term or short term. Combining the theoretical and empirical study together, we conclude that technologies we purchased are indeed advanced and our innovation ability has improved through technology imports, and FDI has no significant influences on our innovation activity.

Key Words: FDI; Technology Purchased; Indigenous R&D

JEL Classification:F210, F230, O310

Power Industry Location Optimization and Integrative Energy Transportation System

Lin Boqiang and Yao Xin

(China Center for Energy Economic Research at Xiamen University)

Abstract:The current system of energy transportation is a fragility part for the China's economic development. Traditional energy transportation system including railway, highway and water transportation can not satisfy increasing energy transportation requirement. It is an urgent matter to construct a modern energy transportation system that integrates electricity transmission. China is a large country and its energy resource distribution is very uneven. In addition to performing basic function of energy transportation, the proposed modern integrative energy transportation system will play an important role in optimal allocation of energy and environmental resources. By analyzing the problems of current energy transportation in China, we found that the current transportation system, which mostly relies on railway coal transportation£¬is not the best choice. In this study, applying a fuzzy multiª²objective and multiª²index transportation model, we propose an energy transportation system to optimize time cost, system loss and investment requirement. The proposed integrative energy transportation system will require changes of present power plant location principle that balances power demand and supply at local level. The new integrative energy transportation system will result in increasing the share and efficiency of power transmission between regions.

Key Words:

Integrative Energy Transportation System£» Social Cost£» Power Transmission

JEL Classification:C61£¬ Q43£¬ L94

Capital Structure and Industry Competition: Are Institutions Important?

Li Ke and  Xu Longbing

(School of Finance, Shanghai University of Finance and Economics, Shanghai 20043

3, China)

Abstract:This paper provides evidence about the relationship of institutional environment, capital structure, and industry competition. We test the impact of institutional environment and capital structure on industry competition by using the sample formed by the listed firms in the manufacture industry. Under controlling the endogeneity problem, the paper finds that institutional environment and capital structure are important to industry competition. High debt negatively affects corporate position in industry competition. Institutional environment makes a positive effect on corporate industry competition by reducing financing restrictions. Financing constrains also change the corporate behavior in industry competition, but the sensitivity of behavior to financing constrains is different between two types of institutional environment. Our evidence suggests the institutional environment and capital structure have significant effect on the corporate competition behavior, thus are important for real economy.

Key Words:Institutional Environment; Capital Structure; Industry Competition; Financing Restriction

JEL Classification:G32, G38, D43, E44

Lucky Number Worship and Asset Price Anomaly

Zhao Jingmei and Wu Fengyun

(School of Finance, Southwestern University of Finance and Economics;

School of Economics and Management, Southwest Jiaotong University)

Abstract:Would ¡°Lucky Number Worship¡± has a significant impact on stock price? We study the stocks with trading codes ended with ¡°8¡±listed in Shanghai Stock Exchange. Our finding is that the ¡°Lucky Number Worship¡± does have impacts on investment behaviors and stock prices.On one hand, ¡°fortune codes are expensive¡±. Onthe other hand, ¡°fortune codes do not beget fortune¡±. Our study could help with investment decisions and enrich to some extent the research on the relationship between culture and finance, irrational behavior and market efficiency. Key Words:Number Worship; 8ª²Effect; Priceª²Earning; Return; Price Anomaly

JEL Classification:G140, G190, G120

Collective Reputation, Credible Commitment and Enforcement:

The Case of Seller Coalition in China¡¯s Online Auction Market

Wu Desheng and Li Weian

(Center for Studies of Corporate Governance, School of Business, Nankai Univers

ity)

Abstract: This paper analyzes the function of seller coalition on online auction site Taobao in contract enforcement. Severe prisoner¡¯s dilemma exists in online auction sites. Sellers and Taobao established seller coalition to solve this problem as response. Seller coalition can use its collective reputation as hostage to undertake credible commitment to buyers: sellers belonging to a coalition will not cheat buyers; if a seller cheats buyers, coalition will punish him. Coalition systems increase punishment buyers can inflict on sellers and enhance the role of reputation mechanism. Under certain condition, commitment undertaken by coalition is credible. This paper explores how private parties establish institution to selfª²discipline and provide credible commitment, and therefore enhance the enforcement.

Key Words: Online Auction; Collective Reputation; Credible Commitment; Coalition

JEL Classification:D44, D74, L14