CONTENTS

Urbanization, Industrial Efficiency and Economic Growth

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Research Group on China's Growth and Macroeconomic Stability            (4)

Public Education Policy, Economic Growth and Human Capital Premium

ª«..................................................................................................Guo Qingwang and Jia Junxue (22)

Human Resources Evaluation and Development in the West Minority Area of China

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Yang Lin, Wu Youde, Luo Huasong, Chang Zhiyou and Xue Yongjun             (36)

Research on the Relationship between Fiscal Expenditure and Inflation Based on

Provincial Panel Data¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Zhao Wenzhe and Zhou Yean              (48)

Monetary Policy and Asset Price Volatility£ºTheoretical Model and Empirical Study in China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..Zhou Hui and Wang Qing             (61)

Market Structure and Banking Industry Performance in China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­...Xu Zhong, Shen Yan, Wang Xiaokang and Shen Minggao            (75)

The Stimulating Effects of R&D Subsidies on Independent Innovation of Chinese Enterprises

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..An Tongliang, Zhou Shaodong and Pi Jiancai             (87)

Examining the Impact of Business Entrepreneurship and Innovation Entrepreneurship

on Economic Growth in China

ª«...................................Li Hongbin, Li Xing, Yao Xianguo, Zhang Haifeng and Zhang Junsen         (99)

State Ownership, Preferential Tax, and Corporate Tax Burdens

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..Wu Liansheng            (109)

Who Entered Highª²wage Industries? The Role of Social Network, Hukou

and Labor Productivities¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Chen Zhao, Lu Ming and Hiroshi Sato             (121)

Some Social Mechanisms of Improving the Ability of Punishment and Maintenance of

  Cooperation in Human Groups¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­....Wei Qian              (133)

An Estimation of China's GDP from 1600 to 1840

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­...Liu Ti            (144)

A Summary on the 7th Forum of Law and Economics

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Li Guangyu, Wei Jian and Ma Ling             (156)

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Urbanization, Industrial Efficiency and Economic Growth

Research Group on China¡¯s Growth and Macroeconomic Stability

Abstract:Given the low cost industrialization is about to be over and the high cost urbanization has just started, we examine the agglomeration effect of urbanization and the impact of increasing cost on industrial competitiveness, as well as the relationship between urbanization and industrial competitiveness. From the above analysis we find that the agglomeration effect of urbanization has positive effect on the competitiveness of industry and service sector while wage cost has negative effect on them, and the housing cost has the negative effect on the competitiveness of service sector. In order to achieve sustainable growth, it¡¯s much needed to prevent the urbanization cost from growing too fast and transform the urbanization model to advance the process of urbanization in line with the process of industrialization.

Key Words:Urbanization; Agglomeration Effect; Industrial Competitiveness; Sustainable Growth

JEL Classification:O110,O140,O180

  Public Education Policy, Economic Growth and Human Capital Premium

Guo Qingwang and Jia Junxue

(China Financial Policy Research Center, Renmin University of China)

Abstract:This paper establishes a human capital accumulation model including two stage education and analyzes the effects of public education policies on economic growth and human capital premium by numerical simulation. Our analyses suggest that: (1) the allocation policy favoring basic education and higher education size expansion policy have negative effects on human capital premium;(2) there exists higher bound on public education expenditure, basic education expenditure and higher education size from economic growth views;(3)public education policies have no effect in improving higher education opportunity equality. In addition, the empirical study based on the relevant data of Chinese provinces indicates that the allocation policy favoring basic education exert significant positive effects on the economic growth, public education expenditure has significant positive effects on human capital premium, and higher education size expansion policy has negative effects on human capital premium.

Key Words:Public Education Policy; Economic Growth; Human Capital Premium

JEL Classification:H520,O110,J310

Human Resources Evaluation and Development

in the West Minority Area of China

Yang Lin, Wu Youde, Luo Huasong, Chang Zhiyou and Xue Yongjun

(Yunnan Normal University and Yunnan University)

Abstract:This paper summarizes the general features of human resources systematically in the western China, makes a comprehensive quantitative evaluation of human resources, analyzes the state and trend of demand and supply equilibrium of in the west minority area to reflect the exploiting effect of human resources in the west minority area by analyzing the relationship between human capital investment and economic growth. We also analyze ¡°Inner Mongolia phenomenon¡±. On this basis, the authors put forward the human resources development countermeasures that conforming to the features of the west minority area.

Key Words:West Minority Area; Human Resources Evaluation; Factors and Principal Components Analysis

JEL Classification:J24£¬R58£¬J15

Research on the Relationship between Fiscal Expenditure

and Inflation Based on Provincial Panel Data

Zhao Wenzhe and Zhou Yean

(Renmin University of China)

Abstract:The paper researches the relationship between local government spending and inflation by analyzing the different types of provincial fiscal expenditure from 1992 to 2006. From the perspective of intergovernmental fiscal competition, The paper analyzes the mechanism of ¡°wealth effect¡±, ¡°seignorage effect¡±, ¡°productive effect¡± and ¡°home demand effect¡± of local government spending, and put forward three hypothesizes. Through dynamic panel data model to test the three hypothesizes, the result shows that centralization of fiscal revenue weakens the effect of fiscal competition on inflation; centralization of fiscal expenditures strengthens the effect of fiscal competition on inflation; because of the ¡°productive effect¡± and ¡°home demand effect¡±, fiscal competition leads to the future inflation to decrease; there exists reverse causality between local fiscal expenditure and inflation, because local governments adjust local public spending reversely according to previous inflation. Even considering the reverse causality, hypothesis 1 and 2 are still binding.

Key Words:Fiscal Expenditure Competition; Inflation; Wealth Effect; Seignorage Effect; Productive Effect; Home demand Effect

JEL Classification:H710£¬H720£¬E420

Monetary Policy and Asset Price Volatility£ºTheoretical Model

and Empirical Study in China

Zhou Hui and Wang Qing

(Zhejiang University of Finance & Economics£»School of Finance,

Southwestern University of Finance & Economics)

Abstract:Through the ultimate goal of the current monetary policy of the central bank and the game relationship between the central government and local governments in the real estate market, this paper deduces four inferences in article. Based on the BEKK model and the GARCH mean value equation model, this paper empirically analyzes the volatility correlations among real estate price, money supply and economic growth, and examines the impact of various volatilities on economic growth. It has been found that the volatility of real estate price and the co-movement between real estate price and money supply have significant impacts on GDP growth rate, and furthermore lead to decline of GDP growth rate. The volatility of real estate price growth rate does not significantly affect economic growth rate volatility, while the co-movement between money supply and real estate price changes sharply, and the coª²movement between real estate growth rate and economic growth rate does not show significant influence on economic growth rate¡¯s volatility. Furthermore, monetary policy has different controlling effect on real estate price in different cities. The conclusion is that the volatility of real estate price should be controlled, but currently it is not necessary for the central bank to directly intervene in real estate price. To deal correctly with the game relationship between central government and local government in the real estate market is the main content to improve the efficiency of real estate management.

Key Words:Asset Price Volatility£» Monetary Policy; Real Estate Sales Price Index; Money Supply

JEL Classification:E520£¬G120

 Market Structure and Banking Industry Performance in China

Xu Zhong£¬Shen Yan£¬Wang Xiaokang and Shen Minggao

(People¡¯s Bank of China) (CCER, Peking University)

Abstract:The paper examined the relationship between the market structure and performance of the banking industry in China. In the study, we found positive relationship between market share and return to bank assets, and negative relationship between market concentration and return to assets. Using loan overdue as an indicator for bank performance, we found that the market with higher concentration posted with higher ratio of non-performance loan (NPL). This supported the¡°relative market strength¡± hypothesis on market structure and banks¡¯ performance. In addition, the study found that efficiency had been an importance factor in determining financial institution performance, measured by both return to assets and NPL ratio. Besides, reduced market concentration can improve banks¡¯ efficiency and reduce their NPL ratio. Therefore, further market opening, entry criteria relaxing and competition enhancing will improve efficiency of financial institutions, and in turn, the efficiency of the banking industry in China.

Key Words:Market Structure£» Efficiency£» Banking Industry Competition£» Performance

JEL Classification:G210, L100

The Stimulating Effects of R&D Subsidies on Independent Innovation

of Chinese Enterprises

An Tongliang, Zhou Shaodong and Pi Jiancai

(Department of Economics, Nanjing University)

Abstract:In those catchingª²up countries, exemplified by China, who are running after developed countries in terms of technology, governments always consider R&D subsidies as a critical measure to stimulate enterprises to carry out independent innovation. However, enterprises in reality often send out false innovation type signals so as to attain government subsidy. This paper builds up a dynamic and asymmetric information game model between enterprises and policy makers, with an attempt to depict enterprises¡¯ strategies to acquire R&D subsidy and to analyze the subsidy¡¯s stimulation effect. It indicates that the primary innovation subsidy would exert a ¡°negative¡± stimulating effect if enterprises and government share asymmetric information, and meanwhile the special human capital for primary innovation is excessively cheap. Faced with the problems of false signals sent by enterprises, as well as the exorbitant distinguish cost, the best subsidies scheme for government is to achieve the separating equilibrium through increasing the special human capital price. The conclusion provides predictable methods to distinguish enterprises¡¯ real innovation types, and feasible policy suggestion to enhance government R&D subsidies efficiency.

Key Words:Primary Innovation; Secondary Innovation; R&D Subsidies; Stimulating Effect; Best Subsidies Scheme

JEL Classification:D82; L52; O38

Examining the Impact of Business Entrepreneurship and Innovation

 Entrepreneurship on Economic Growth in China

Li Hongbin¹, Li Xing², Yao Xianguo³, Zhang Haifeng¹ and Zhang Junsen⁴

(1. Tsinghua University; 2. Nanjing University of Finance and Economics;

3. Zhejiang University;4. Chinese University of Hong Kong)

Abstract:This paper examines the impact of business entrepreneurship and innovation entrepreneurship on economic growth by employing Chinese provincial panel data over the period 1983¡ª2003. We conduct the system GMM estimations within the growth framework. The estimation results show that both business entrepreneurship and innovation entrepreneurship have positive effects on economic growth, and these effects are shown to be causal after we implement a series of sensitivity and instrumental variable analyses. Our empirical results suggest that it is of vital importance for governments to frame a conducive economic environment for entrepreneurship in order to promote growth.

Key Words:Entrepreneurship£» Economic Growth£» GMM

JEL Classification:L26, O15, O53

State Ownership, Preferential Tax, and Corporate Tax Burdens

Wu Liansheng

(Guanghua School of Management, Peking University)

Abstract: The relationship between state ownership and firm value is one of the most important issues in the fields of economics, finance and accounting. Extant literature examined it from the perspective of corporate performance, but hasn¡¯t got a conclusion that is widely accepted. One of the main reasons is that the detailed channel through which state ownership affects firm value hasn¡¯t been examined. Tax payment is just one of the channels. Little research has examined the relationship between state ownership and firm value from the perspective of corporate tax burden, and tax status hasn¡¯t been taken into account. This paper examined the effects of state ownership and preferential tax on corporate tax burdens. It shows that corporate tax burden increased with state ownership, and state ownership brought heavier tax burdens to firms without preferential tax rate than firms with preferential tax rate. The conclusion has implications to the reform of state owned companies, the tax levy of tax authority and investors¡¯ decisions.

Key Words: Corporate Governance; Corporate Income Tax; Government Intervention

JEL Classification£ºG34£¬ H25£¬ H71£¬ M48

Who Entered High-wage Industries?

The Role of Social Network, Hukou and Labor Productivities

Chen Zhao^a, Lu Ming^b,c,and Hiroshi Sato^d

(a: CCES, Fudan University; b: School of Economics, Fudan University;c: College of Economics, Zhejiang University; d: Hitotsubashi University)

Abstract: This paper finds that social networks, father¡¯s education and political status, and urban household registration status (hukou identity), as well as their own education, experience, age, and gender, help people enter high-wage industries. When contrasting coastal and inland samples, after instrumenting social networks by household political identity (based on classifications during the land reform in the 1950s), we find that social networks are more helpful for entering high-wage industries in coastal regions. The implication of this paper is: breaking industrial entry barriers in the urban labor market is an essential policy in order to control inter-industrial wage inequality in urban China.

Key Words:Industry Monopoly; Labor Market; Inter-industrial Wage Differentials; Social Networks

JEL Classification£ºJ31, J71, Z31

Some Social Mechanisms of Improving the Ability of

Punishment and Maintenance of Cooperation in Human Groups

Wei Qian

(The Center of Economic Research, Shandong University)

Abstract: Unlike any other species, humans cooperate with non-kin in large groups. Many scholars believe that altruistic punishment of some members is the main reason for this phenomenon. Since altruistic punishers must incur their own individual punitive costs to confer benefits on unrelated group members, the successful evolution of altruistic punishment in the crowd requires punishers can carry out severe punishment to traitors at a low cost. But the reality is that the punisher is not always the opponent of the traitor. If human do not be able to inflict serious punishment at a low cost, it is very difficult to insist the faith of relying on punishment to maintain cooperation within the groups. Therefore, it is very important to discuss the evolution of altruistic punishment at more relaxed conditions. In this paper, I make a further analysis on a number of social mechanisms of enhancing the ability of punishment, which is internalization of norms, conclusion of alliance and the intervention of third-party. Based on the model of Gintis (2000), I build a simple mathematical model to analyze the impact of the above mentioned three mechanisms on the evolution of altruistic punishment. My model implies that these three mechanisms can play important roles on the maintenance of cooperation of human society.

Key Words: Cooperation£»Altruistic Punishment£»Internalization of Norms£»Conclusion of Alliance£»Intervention of Third-party

JEL Classification: P200£¬Z130

An Estimation of China¡¯s GDP from 1600 to 1840

Liu Ti

£¨Departmant of History, Fudan University£©

Abstract: This paper estimates China¡¯s GDP from 1600 to 1840 using SNA method. The findings show that Augus Maddison overestimated China¡¯s economic output during that period. GDP per capita in pre-modern China was far below the average European countries, and the gap was continuously widening. In 1600, real GDP per capita in China was 168 gram silver (MYM388 at 1990 level), and decreased to 127 gram silver ($318 at 1990 level). GDP in China from 1600 to 1840 increased by 0.18% per year while GDP per capita decreased about 0.12 per year over the same period.

Key Words: Pre-modern China; GDP; Aggregate Economy

JEL Classification: N15£¬N10

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