CONTENTS

Demographic Transition, Demographic Dividend, and Lewis Turning Point in China

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Cai Fang  (4)

The Corporate Governance Role of Media: Empirical Evidence from China

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Li Peigong and Shen Yifeng  (14)

Split-Share Structure Reform, Voluntary Disclosure and Corporate Governance

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Xueyong and Liao Li  (28)

Regulation, Multitask-Principal-Agent and Optimal Incentive Contract Design on Commercial

Bank Governance¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Jiang Hai, Zhu Tao and Li Donghui  (40)

Jump Dynamics in Stock Returns¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Chen Langnan and Sun Jianqiang  (54)

Market Monopoly Powers, Government Expenditure's Structure and Optimal Fiscal

 and Monetary Policies¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­  Jia Junxue and Guo Qingwang (67)

Evaluation Research of the Cost Difference of Regional Public Affairs' Development in China

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­  Fu Runmin, Chang Bin and Miao Xiaolin (81)

The Size, Causes and Effects of the Hidden Economy: An Empirical Investigation

from Provinces of China¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Yang Canming and Sun Qunli   (93)

Home Market Effect Underlying Spatial Distribution of Industries and Its Implication in

Regional Coordinated Development¡­¡­¡­¡­¡­¡­¡­Fan Jianyong and Xie Qiangqiang    (107)

Economic Development Pattern Change Impact on China's Carbon Intensity

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Youguo   (120)

Subjective Games and Endogenous Evolution of Institutions¡­¡­¡­¡­¡­¡­¡­Huang Kainan    (134)

The Methodology and Current Situation of Industrial Linkages in East Asia: A Review on the

International/Inter-country Input-Output Model¡­¡­¡­¡­ Li Xiao and Zhang Jianping     (147)

Demographic Transition, Demographic Dividend,

and Lewis Turning Point in China

Cai Fang

(Institute of Population and Labor Economics, CASS)

Abstract:The disagreements on changed stages of demographic transition and the role of demographic dividend in dual economy development often lead to divarication among scholars about China¡¯s development stages. This paper tries to reveal the nexus between demographic transition and dual economy development: the common starting points, close related processes, and identical characteristics of stages. Based on the empirical evidence of population dynamics, the paper proves the judgment of diminishing demographic dividend and incoming Lewis turning point in China. It also argues that the further economic growth and thus faster entrance of highª²income cavalcade is the key and only avenue to close the ¡°aging before affluence¡± gap. Accordingly, the paper concludes with proposing measures of exploiting potentials of first demographic dividend, creating conditions for second demographic dividend, and tapping new sources of economic growth.

Key Words:Demographic Transition; Demographic Dividend; Lewis Turning Point; Aging Before Affluence

JEL Classification:J11£¬O53

The Corporate Governance Role of Media£º

Empirical Evidence from China

Li Peigong and Shen Yifeng

£¨Department of Finance, School of Management, Xiamen University£©

Abstract:Using a unique sample, we empirically test the corporate governance role of the media in China. Results indicate that the media takes a positive part in improving corporate governance and protecting minority shareholders. The probability for listed companies to redress violations of corporate governance increases as the number of media exposure climbs. Interestingly, we find that politically-oriented media has greater influence over the firms violating governance rules than the commercially-oriented ones do. Besides, coverage with continuation and coverage with comments both exhibit better governance effects. We further investigate the mechanism under which the media shape its governance role in China. Evidence shows that the basic mechanism is the involvement of administrative organizations, which is motivated by the media exposure of governance violations of the listed firms. This finding is in line with the literature of administrative governance, and meanwhile provides empirical evidence supporting the effectiveness of administrative governance mechanisms in the transitional economies. Our paper provides new foundation for understanding the mechanisms that shape the corporate governance role of the media and advice on how to make the most use of governance role of media in the transitional economies.

Key Words:Media; Corporate Governance; Social Surveillance

JEL Classification:G34, D21, L51

Split-Share Structure Reform, Voluntary

Disclosure and Corporate Governance

Zhang Xueyong and Liao Li

(School of Finance at Central University of Finance and Economics;

School of Economics and Management at Tsinghua University)

Abstract:This paper empirically studies the effect of split-share reform on voluntary disclosure in China, using difference-in-difference model, which can help us to judge whether split-share reform better corporate governance. The empirical evidences indicate the voluntary disclosure level has improved significantly after split-share reform. However, the further study finds that the improvement only happened to non-financial information voluntary disclosures, not to financial information voluntary disclosures, which we attribute the difference to the existing of proprietary cost of information disclosures. What¡¯s more, by calculating the corporate governance index (CGI), we find the direct positive relationship between split-share reform and CGI. Thus, splitª²share reform improves non-financial information voluntary disclosures by improving corporate governance.

Key Words:Split-share Reform; Voluntary Information Disclosure; Transparency; Corporate Governance

JEL Classification:G280, G320, M410

¡¡

Regulation£¬Multitaskª²Principalª²Agent and Optimal Incentive

Contract Design on Commercial Bank Governance

Jiang Hai£¬Zhu Tao and Li Donghui

£¨Institute of Finance, Ji'nan University£» Department of Finance, University of New South Wales£©

Abstract:The governance mechanism and incentive contract design of commercial banks are distinctly different from ecumenical enterprises due to strictly regulated by government. Governance mechanism of commercial banks has improved recently in China, but their incentive and constraint systems are still not reasonable. This paper abstracts two prominent characteristics from the ordinary specialties on commercial banks governance: multi-principal agent and multitask, then establishes a multitask-multi-principal agent model based on Holmstrom and Milgrom¡¯s initial research to analyze the optimal incentive contract design on commercial banks. The empirical results support the hypothesis that compensational incentive mechanism associating with financial performance of commercial bank has set up but the incentive mechanism relating to risk control not yet in Chinese banking system. Thus current incentive contract design on commercial banks in China could induce top-managers to put more effort on financial performance and less effort on risk management.

Key Words:Commercial Banks; Regulation; Principal-Agent; Compensation Incentive

JEL Classification:G21, G28, G32, D86

Jump Dynamics in Stock Returns

Chen Langnan and Sun Jianqiang

(Institute for Economics, Lingnan College, Sun Yat-Sen University;

School of Economics and Commerce, South China University of Technology)

Abstract:This paper develops a mix GARCH-jump model to investigate the jump dynamics in stock market returns. The conditional variance of returns consists of jumps and GARCH components which capture the smoothly changes. We synthesize the jump feedback in the GARCH component and the volatility feedback in the jump component. We provide empirical evidence of the feedback effects. The model also captures the time-variation and clustering effect of the jumps, and the traditional asymmetry and shift effect of volatility.

Key Words:Stock Return; Jump Dynamics; ARVI-GARCH-Jump£»Feedback Effect

JEL Classification:C22£¬G15

Market Monopoly Powers, Government Expenditure¡¯s

Structure and Optimal Fiscal and Monetary Policies

Jia Junxue and Guo Qingwang

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

Abstract:This paper studies optimal fiscal and monetary policy under imperfect competition in a stochastic dynamic economy with government consumption and productive expenditure. Our theoretical analysis suggests that the Friedman rule ceases to be optimal even under perfect competition, which is mainly due to the productive externalities of government productive expenditure. The simulation analysis based on Chinese economy supports this results and suggests that the optimal labor income tax rate and the ratio of government productive expenditure to total government expenditure are stable over the business cycle and the inflation rate is highly volatile, which is significantly affected by market monopoly powers and the degree of risk aversion and public service¡¯s congestion.

Key Words:Market Monopoly Powers; Government Expenditure¡¯s Structure; Optimal Fiscal and Monetary Policies

JEL Classification:E620, E630, H530

Evaluation Research of the Cost Difference

of Regional Public Affairs¡¯ Development in China

Fu Runmin£¬ Chang Bin and Miao Xiaolin

(Yunnan University of Finance and Economics)

Abstract:The equalization of basic public services is the essential requirement of public finance system. After the beginning of the reform of tax-sharing system in 1994, in order to narrow the financial disparity among regions and then to achieve the equalization of public services, the transfer payment system form central government to local government was established. However, due to the regional differences in natural, economic, and social conditions, there are differences in the unit cost of public affairs¡¯ development; that is to say, to apply the same public services to different regions requires different cost. By this reason, it is hard to realize the financial equity among regions and then the equalization of public services if we don¡¯t consider the cost in public affairs¡¯ development. Based on the previous researches in and out, we search for the reasons why there are differences in the cost of public affairs¡¯ development from the following perspectives: the influence of the cost of public affairs¡¯ development to the public services; the factors of resulting in the cost differences in the public affairs¡¯ development. Then we set up an evaluation system of cost differences concerning with natural, economic and social conditions. After we carry out an empirical measurement of our 30 provinces in China and 129 counties in Yunnan province with the method of Factor analysis, Entropy-right method, we get the cost difference coefficient of public affairs¡¯development for different regions in China. In the end we put forward our future prospects for this research.

Key Words:Development Cost of Public Affairs; Equalization of Basic Public Services; Factor Analysis; Entropy-right Method

JEL Classification:H41, H50

The Size, Causes and Effects of the Hidden Economy:

An Empirical Investigation from Provinces of China

Yang Canming and Sun Qunli

£¨Zhongnan University of Economics and Law£©

Abstract:Using the province level panel data from China, this paper investigates the size of the hidden economy in China provinces over the period from 1998 to 2007. A multiple indicators and multiple causes model based on the latent variable structural theory has been applied. The model includes the tax burden, a proxy of regulation burden, the unemployment quota and selfª²employment as causes of the shadow economy and the GDP growth rate,the labour force participation ratio as indicators of the hidden economy, The coefficients for the tax burden, unemployment rate and self-employment are found to be positive and significant, The coefficients for the government regulation is found to be negative and significant. The hidden economy on the official economy have some positive effect, and the relationship between hidden economy and labor force participation rate is significantly negative. The empirical results show that the average size of hidden economy measures between 10.5%¡ª14.6% of GDP in the period 1998¡ª2007.

Key Words:Hidden Economy£»Tax Burden£»Income of Households£»Multiple Indicator and Multiple Causes Model

JEL Classification:E26£¬O17£¬H26£¬C23£¬C51

Home Market Effect Underlying Spatial Distribution of

Industries and Its Implication in Regional Coordinated Development

Fan Jianyong and Xie Qiangqiang

(Institute of World Economy, Fudan University)

Abstract:It is well known that Core-Periphery model from New Economic Geography can explain the industrial agglomeration of the current coastal areas. But is it the only mechanism? In this paper we provide another mechanism to explain industrial agglomeration, which is home market effect. Then we not only empirically demonstrate its existence, but also find that agglomeration will not enlarge the regional disparity. It means that agglomeration is compatible with the coordinated development of regional economies. So we suggest that premise of home market effect must be satisfied in the process of cross-regional integrated development. Its important feature is that farmers from inland can be treated impartially in the coastal labor market.

Key Words:Idiosyncratic Demand; Home Market Effect; Cross-regional Integrated Development

JEL Classification:F10, D50, E10

Economic Development Pattern Change Impact

on China¡¯s Carbon Intensity

Zhang Youguo

(Institute of Quantitative Economics and Technical Economics,

Center for Environment and Development, CASS)

Abstract£ºThis paper applies input-output structural decomposition analysis (IO SDA) to analyze how economic development pattern change impact on China¡¯s carbon intensity from 1987 to 2007. The results indicate that the economic development pattern change caused a 66.02% decrease in China¡¯s carbon intensity in the whole study period. Details show that changes in sector energy intensities, direct energy consumption ratio of final demand and energy structure caused the carbon intensity to decrease by 90.65%, 13.04% and 1.16% respectively while changes in industrial structural, aggregated sector structure within industries and within manufacturing sector mix in final demand, changes of import ratio and changes in input mix brought increases of 4.61%, 2.50%, 1.02%, 3.85%, 2.89% and 27.63% in the carbon intensity respectively. The results also imply that a number of policies made by the government to accelerate changing the economic development pattern at present are also helpful for decreasing the carbon intensity.

Key Words: Economic Development Pattern; Carbon Intensity; Input Output Structural Decomposition Analysis

JEL Classification£ºC67, P28, Q54, Q56, R15

Subjective Games and Endogenous Evolution of Institutions

Huang Kainan

(Center for Economic Research, Shandong University)

Abstract£ºClassical games and evolutionary games both presume that agents play in exogenous game form, and they can not explain the endogenous evolution of institutions. The presenting paper focuses on theoretic framework of subjective games, considers that agents play based on their subjective game models, and the evolution of subjective game models can cause the endogenous evolution of institutions. Therefore, subjective games can improve our understanding about influence and effect of which agents-cognition has on the emergence and change of institutions. From the perspective of subjective games, we focus on the two kinds of institutions, and use the subjective games to analyze their endogenous evolution. Finally, the article points out the limitation of subjective games and the future development of them.

Key Words£º Subjective Games; Institution; Endogenous Evolution

JEL Classification£ºB25, C70

The Methodology and Current Situation of Industrial Linkages in East Asia:

A Review on the International/Inter-country

Input-Output Model

Li Xiao and Zhang Jianping

(Economics School of Jilin University)

Abstract£ºAlong with the rising of spatial economics and the rapid development of regional economic integration, the international or inter-country input-output models employed especially in the fields of interregional or multiregional industrial linkages have been increasingly showing their great value. Based on interregional input-output theories, Asian International Input-Output Table (AIIOT) can show clearly a non-competitive industrial interaction trade matrix which is derived from the survey/semi-survey method, and then furnish the applications for investigating the evolution of industries, industrial spreading effects and the decomposition of industrial linkages in East Asia. The paper has respectively clarified the academic orientation and origins of international input-output model, the new developments and composing methods of AIIOT, as well as its practical application in East Asia. So, a literature review on industrial linkages in East Asia has been unfolded here, considering both method and current status, whose important theoretical reference value helps to deepen the understanding of industrial research in East Asia and promote the East Asian economic integration.

Key Words£º Industrial Linkages; Input-Output; East Asia; Asian International Input-Output Table

JEL Classification£ºF200£¬F470