CONTENTS

The Effect of Citizenization of Rural Migrant Workers on the Domestic Demand

and Economic Growth¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Research Groupª«  (ª©4ªª)

The Redistribution Effects of New Countryside Construction Policies in China

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Wang Zhen       (ª©17ªª)

The Measurement of the Bubble in Urban Housing Market in China

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Lv Jianglinª«    (ª©28ªª)

Long-run Equilibrium, Reversed Price Transmission and Monetary Driving

¡ª¡ªPrice Transmission Mechanism of Different Stages in China

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Zhang Chengsiª«      (ª©42ªª)

Population Dynamics and Precondition for Financial Crisis

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Tang Yinan and Chen Pingª«    (ª©53ªª)

Why China Lack of Creative Destruction?

¡ª¡ªEvidence from the Listed Firms' Specific Information

ª«  ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Deng Kebin and Ding Zhong ª«     (ª©66ªª)

A Study on Institutional Barriers of Chinese Companies Going Global

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Jianhong and Zhou Chaohongª«    (ª©80ªª)

Mechanism of FDI Spillover, Path of Technical Progress and Performance of Economic Growth

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Fu Yuanhai, Tang Weibing and Wang Zhanxiangª«   (ª©92ªª)

Excess Demand or Appropriate Demand£¿

¡ª¡ªHealth Insurance, Medical Care and Mortality of the Elderly in Urban China

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Huang Feng and Gan Liª«     (ª©105ªª)

Complementary R&D, Limited Patent Breadth and ¡°Paradox of Thrift¡±: An Extended

      Quality-improving Endogenous Growth Model

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Kou Zonglai and Shi Leiª«    (ª©120ªª)

The Functional Distribution Theory based on the General Theory of Value

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Cai Jiming and Jiang Yongjiª«   (ª©132ªª)

Patterns of Technology Transfer and Longª²run Growth: An Interpretation to Stagnation of Traditional China

ª«    ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ Dai Qian and Li Tangª«   (ª©143ªª)

The Effect of Citizenization of Rural Migrant Workers on the

Domestic Demand and Economic Growth

Research Group of Development Research Center of the State Council

Abstract: Based on a theory model which distinguish the native city labors, the rural migrant workers and the farmers, this paper analyzes how the current pattern of urbanization is harmful to the economic growth. The model shows that citizenization of rural migrant workers will increase the scale of the city, narrow the income disparity between urban and rural labor, and accelerate the accumulation of the human capital. As a result, it is helpful for attaining higher level of economic growth. Then we simulate the effect by using a CGE model. The simulation results show that citizenization of 10 million migrant workers can increase the GDP growth rate at about 1 per cent. It also shows that citizenization of migrant workers can promote consumption and investment, which will expand domestic demand significantly and decrease the degree of dependence on foreign trade. In addition, citizenization can increase the share of service sector and optimize the economic structure.

Key Words: Rural Migrant Workers£»Citizenization£»Economic Growth£»CGE model

JEL Classification: J21,J24,O18

The Redistribution Effects of New Countryside

Construction Policies in China

Wang Zhen

(Development Economics Division, Institute of Economics, Chinese Academy of Social Sciences)

Abstract:The paper attempts to analyze and evaluate the redistributive effects of these policies, including the tax reduction, subsidy to grain producers, and subsidy to participants in the NCMS, in the process of building a new countryside in China based on three years survey datasets. The results show that these policies have trended to show positive redistributive effects, both within rural residents and between rural and urban residents. The results of UL decomposition method of redistributive effects show that the vertical effects of the net subsidy are the main source to the total redistributive effects changes. The results of the Theil index decomposition show that the between group effects are the main source for the total index changes.

Key Words:New Countryside Construction; Redistribution Effects; UL Decomposition; Theil Index Decomposition

JEL Classification:H23

The Measurement of the Bubble of Urban Housing Market in China

Lv Jianglin

(School of Finance and statistics, Jiangxi University of Finance and Economics)

Abstract:In this paper we examine the applicability of some indexes such as housing-price-to-ª²rental ratio, vacancy rate that always used by academic circle to measure the bubble of housing market. We demonstrate that these indexes are all unsuitable to be the direct and accurate index to measure the bubble level of China's urban housing market because of the objective conditions of the country, and that the most suitable index for measuring the bubble level of housing market under the current condition is the housing-price-to-income ratio. We construct a model to measure the reasonable limit of hosing-price-to-income ratio£¬then based on China¡¯s current mortgage loan¡¯s rate level and period and down payment ratio, deriving that the country's urban resident¡¯s sustainable housing-price-to-income ratio limit is no more than 7. Then using statistics data£¬we figure out current hosing-price-to-income ratio of our country¡¯s major cities£¬and draw the conclusion that in recent years the country¡¯s urban housing market exists bubble overall, especially at present urban housing market bubble is very significant. Part of the First-tier city¡¯s bubble is so amazing and contains huge financial risk. Based on above analysis, we put forward some policy suggestions.

Key Words:Housing Market£»Bubble£»Housing-price-to-income Ratio

JEL Classification:E44, E52, E63

Long-run Equilibrium, Reversed Price Transmission, and Monetary Driving

¡ª¡ªPrice Transmission Mechanism of Different Stages in China

Zhang Chengsi

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

Abstract: This paper employs vector cointegration method to analyze the nature of price transmission mechanism of different stages of processing and the driving mechanism of money on the different prices over 1998¡ª2009. Empirical results show that there is a long-run equilibrium among the underlying prices. The prices in the early and intermediate stages have a significant causal relationship on the price in the late stage, while the reversed price transmission occurs between the underlying prices. In addition, money supply imposes significant impact on the price of the early stage, but manifests no significant driving force on the price of the late stage. This finding implies that albeit money does not have direct pressure on consumer price, it can pass the pressure through the price in the early stage of processing, which provides important implications to inflation forecasting and policy making.

Key Words: Long-run Equilibrium; Reversed Price Transmission; Cointegration Analysis; Inflation

JEL Classification: E31, E52, E58

Population Dynamics and Precondition for Financial Crisis

Tang Yinan^a,b  and Chen Ping^a,cªª

(a. Center for New Political Economy, Fudan University; b. School of Economics, Fudan University; c. National School of Development, Peking University)

Abstract: The trend collapse and mass panic are typical features of a financial crisis, which can be studied by population dynamics. The birth-death process is introduced for modeling non-stationary process. The transition probability in master equation can be determined by empirical observations. Efficient market hypothesis (EMH) corresponds to a linear transition probability while real market has a nonlinear transition probability. The model can be solved by high moment expansion. The warning signal of financial crisis can be derived from the precondition of the dynamical solution.

Key Words: Population Dynamics£»Birth-death Process£»Financial Crisis£»High Moment Divergence£»Trend Collapse

JEL Classification: C51,D53,D84,G01

Why China Lack of Creative Destruction?

¡ª¡ªEvidence from the Listed Firms¡¯ Specific Information

Deng Kebin^a  and Ding Zhong^b

(a. School of Finance and Economics, Guangdong University of Foreign Stu

dies; b.Institute of Industrial Economics, Jinan University£©

Abstract: The economy in China has got rapid growth, but as is well known to us that the lack of creative destruction is the truth. This paper makes a deep analysis based on the theory of firm specific information. Through computing the technical innovation output indicator of the listed companies composed of technical efficiency output and technical progress output, and getting R square from CAPM regression which represents technical innovation input and firm-specific information, we make an empirical analysis. And we find that the leader of technical innovation in China is not the small company but the large company, and large companies do not have innovation power as it is in a monopoly position which makes innovation efficiency low. Then the companies in China would like to adopt technical efficiency improvement rather than creative destruction. Medium size companies have more motivation to conduct creative destruction activities small-size companies prefer to technical efficiency improvement; small and medium-size companies do not have enough innovation input, which makes innovation output lower. Thus the key of solving the problem that China is lack of creative destruction is to decrease the policies siding with large companies, and to support small and medium-size companies more.

Key Words: Creative Destruction; Firm-specific Information; R Square; Technical Progress; Technical Efficiency

JEL Classification: G12,G14,O33

A Study on Institutional Barriers of Chinese Companies Going Global

Zhang Jianhong^a and Zhou Chaohong^b

(a: Yunnan University of Finances and Economics, Nyenrode University; b: Utrecht University)

Abstract£ºBased on cases of Chinese overseas acquisitions, this study investigates how institutional factors influence internationalization process of Chinese enterprises. The general finding of this study is that, institutions not only affect the implementation of internationalization strategy directly, but also indirectly moderate the effect of other factors. The empirical finding of the current study is three-folds: a) institutional quality of host countries does not influence the outcome of acquisition attempt, however, it has a negative moderating effect on other factors that influence the outcome of a deal, such as industrial protection and experience; b) while state ownership is negatively associated outcome of acquisition, this negative relation is stronger in the host countries with a higher level of market freedom and democracy; and c) while industrial protection in host countries has negative effect on outcome of acquisition, the state ownership of an acquirer enhances this negative effect. The paper increases understanding of the impact of institutions on the internationalization process, and helps to set up and implement the ¡°go global¡± strategy.

Key Words: Institutional Factors; Moderating Effect; Internationalization; Overseas Acquisitions

JEL Classification£ºF23

Mechanism of FDI Spillover, Path of Technical Progress

and Performance of Economic Growth

Fu Yuanhai^a, Tang Weibing^a and Wang Zhanxiang^b

(^a School of Economy and trade, Hunan University of Commerce;

^b Jiangxi University of Finance and Economics)

Abstract£ºDomestic enterprises choose a different path of technological progress under a different mechanism of FDI spillover, which have a different impact on the performance of domestic economic growth (measured by the input-output ratio). The empirical test was made by using panel data of 27 manufacturing industries from 1999 to 2007 in China, The results showed that the transfer and spread of intermediate products¡¯ technology reflected in the localization of foreign firms¡¯ production has a positive effect on performance of economic growth. The spillover effect (mainly competitive effect)that is reflected by the depth of foreign investment participation can increase the performance of economic growth, but also far less than the role of technology transfer, or has a negative effect on the performance of economic growth sometimes. If local enterprises improve the technical level by introducing advanced technology instead of imitating, roles of the spillover effect might change. The study also found that the relative technological capability and the relative level of the value-added rate of domestic enterprises, the aggregation level of FDI, and the depth of industry concentration are important factors which influence effects of the technology transfer and diffusion and spillover effects on the performance of economic growth.

Key Words£º FDI Spillover Mechanism; Depth of Product Localization; Depth of Foreign Participation; Path of Technological Advancement; Performance of Economic Growth

JEL Classification£ºF21£¬F40

Excess Demand or Appropriate Demand£¿

¡ª¡ªHealth Insurance, Medical Care and Mortality of the Elderly in Urban China

Huang Feng and Gan Li

(Research Institute of Economics and Management, Southwestern University of Finance and Economics; Department of Economics, Texas A&M University and NBER)

Abstract£ºThe paper investigates the relationship between health insurance, medical expenditure and mortality among the elderly in urban China. Using the latest waves of Chinese Longitudinal Healthy Longevity Survey (CLHLS), we find that the out-of-pocket medical expenditures of insured elderly are 43 percent lower than that of the uninsured elderly; but the total medical expenditures are 28¡ª37 percent higher compared to uninsured. Based on Cox proportional hazard model, the insured elderly face a hazard 19% lower than the uninsured. According to extended Kaplan-Meier survival curve, the extended mean survival time of the insured elderly is 154 months and is noticeably larger than mean of uninsured, 94 months. Those findings suggest that increased medical expenditures significantly and effectively improved the health and longevity of the insured old people. Therefore, the public health insurance policy should make more effort to meet the reasonable medical care demand.

Key Words£ºHealth Insurance; Medical Expenditure; Two-part Model; Sample Selection Model; Cox Proportional Hazard Model

JEL Classification£ºI100£¬H510

Complementary R&D, Limited Patent Breadth and the ¡°Paradox of Thrift¡±:

An Extended Quality-Improving Endogenous Growth Model

Kou Zonglai and Shi Lei

(Fudan University)

Abstract: This paper extends classical quality-improving endogenous growth model by introducing R&D complementarities and patent breadth. Each innovation consists of two sequential patent races, ¡°research¡± and ¡°development¡±. While research is the prerequisite for development, only development directly creates profit. Research patentee¡¯s proportional claim to development profit is defined as patent breadth. The corresponding steady-state equilibrium is characterized. Due to R&D complementarities, there arise two important results. First, naturally, positive endogenous economic growth requires that patent breadth be neither too large nor too small. Secondly, in sharp contrast with classical models, the endogenous growth rate we derive has an inverted U shape with interest rate, and hence may decrease or increase in consumer¡¯s time preference rate or intertemporal substitution elasticity. This implies the possibility of the ¡°paradox of thrift¡± even in endogenous growth models.

Key Words: R&D Complementarities£»Patent Breadth£»Paradox of Thrift£»Quality-Improving

Endogenous Growth

JEL Classification: O31; O34; O43

The Functional Distribution Theory based on the General Theory of Value

Cai Jiming and Jiang Yongji

(Center for Political Economy at Tsinghua University)

Abstract: This paper constructs a theory of functional distribution based on the General Theory of Value and intrinsically integrates the determination of general value of products and factors by means of defining factors¡¯ contributions in production process as their respective values in the exchange system of variable laborª²division, where production factors owned by different individuals, and assuming changeable technical coefficients of production, which means that variations of factors¡¯ marginal productivities (measured in marginal product) will give rise to variation of comparative productivity between production sectors and then affect the general value of products. The analysis of this paper gets rid of circular arguments existing in the traditional value theories and provides a more rigorous theoretical foundation for the distribution according to the contribution of production factor.

Key Words: General Value of Product; General Value of Factor; Functional Distribution; Marginal Comparative Productivity of Factor; Distribution according to the Contribution of Production Factor

JEL Classification: D33£¬D46

Patterns of Technology Transfer and Long-run Growth:

An Interpretation to Stagnation of Traditional China

Dai Qian^a,b and Li Tang^b

(a: Economics and Management School, Wuhan University;

b: Center for Economic Development Research, Wuhan University)

Abstract: We argue that stagnation of traditional China was due to her pattern of technological transfer and too much population. Innovations of instruments, diversified goods, and others could improve marginal product of human capital, which in turn encouraged individual to devote more time to skill improvement. Accordingly, traditional China adopted Human-capital Augmenting Innovations. Human-capital alone could not propel long-run growth because of limitations on its diffusion among people and transfer across generations in traditional society. Huge population and systematic Chinese Lineage system could benefit traditional China, while too many people and unfavorable man-to-land ratio brought traditional China into stagnation. Of cause, our hypothesis can be approved by many historical evidences and the simulation results based on our OLG model fits historical evidences well.

Key Words: Traditional China; Patterns of Technology Transfer£»Human Capital£»Man-to-land Ratio

JEL Classification: D91, N15,O33, O53