Pub Date : 2018-05-02DOI: 10.3868/s060-007-018-0016-5
Yuying Jin, Dong-An Zhao
We define and quantify for the first time over-credit at the firm level, which refers to the case in which the amount of bank credit that a firm obtains exceeds its expenditure on corporate investment for the year. Then, we explore how over-credit affects corporate investment to determine whether credit expansion in China is consistent with the principle of finance serving the real economy. The results show that over-credit promotes firm investment, and this effect was enhanced by the housing boom. However, the effect of the property market reversed after 2012, owing to Chinai¯s economic transition from a quantitative to a structural mismatch between supply and demand. Finally, we explore how over-credit affects the capacity utilization ratio and whether it has aggravated the overcapacity problem in China. The results show that over-credit reduces firmsi¯ capacity utilization ratio. This finding indicates that excessive credit expansion has exacerbated the overcapacity problem in China.
{"title":"Does Over-credit Stimulate Corporate Investment? Evidence from Listed Companies in China","authors":"Yuying Jin, Dong-An Zhao","doi":"10.3868/s060-007-018-0016-5","DOIUrl":"https://doi.org/10.3868/s060-007-018-0016-5","url":null,"abstract":"We define and quantify for the first time over-credit at the firm level, which refers to the case in which the amount of bank credit that a firm obtains exceeds its expenditure on corporate investment for the year. Then, we explore how over-credit affects corporate investment to determine whether credit expansion in China is consistent with the principle of finance serving the real economy. The results show that over-credit promotes firm investment, and this effect was enhanced by the housing boom. However, the effect of the property market reversed after 2012, owing to Chinai¯s economic transition from a quantitative to a structural mismatch between supply and demand. Finally, we explore how over-credit affects the capacity utilization ratio and whether it has aggravated the overcapacity problem in China. The results show that over-credit reduces firmsi¯ capacity utilization ratio. This finding indicates that excessive credit expansion has exacerbated the overcapacity problem in China.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"281-311"},"PeriodicalIF":0.8,"publicationDate":"2018-05-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42089821","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-02DOI: 10.3868/S060-007-018-0014-1
Yong-Yi Li
Although Chinai¯s asymmetric fiscal decentralization system has been criticized for many years, there have been few studies giving direct evidence of its negative incentives on local government spending policies. By introducing the mechanism of asymmetric decentralization and fiscal transfers to the objective function of local government, this paper studies the incentive effects of asymmetric decentralization and fiscal transfers on spending policies of local governments, and uses the provincial panel data to carry out an empirical test. The conclusion shows that the asymmetric decentralization significantly weakens the incentives of local government to increase social expenditure, and as a solution to asymmetric decentralization, fiscal transfers fail to play a good role. Due to the relatively large income effect, the financing mechanism of fiscal transfers not only significantly reduces the incentives of local government to provide social public goods, but also weakens the constraint effect of fiscal competition on expenditure policies of local governments because of the increase in the relative cost. Although the distribution mechanism of fiscal transfers has a significant positive incentive to local government in regions where the net inflow of fiscal resources is more than zero, because of common pooling effects, the comprehensive effects of fiscal transfers in the distribution of incentives of local governments to provide social public goods are negative in all regions.
{"title":"Asymmetric Decentralization, Intergovernmental Transfers, and Expenditure Policies of Local Governments","authors":"Yong-Yi Li","doi":"10.3868/S060-007-018-0014-1","DOIUrl":"https://doi.org/10.3868/S060-007-018-0014-1","url":null,"abstract":"Although Chinai¯s asymmetric fiscal decentralization system has been criticized for many years, there have been few studies giving direct evidence of its negative incentives on local government spending policies. By introducing the mechanism of asymmetric decentralization and fiscal transfers to the objective function of local government, this paper studies the incentive effects of asymmetric decentralization and fiscal transfers on spending policies of local governments, and uses the provincial panel data to carry out an empirical test. The conclusion shows that the asymmetric decentralization significantly weakens the incentives of local government to increase social expenditure, and as a solution to asymmetric decentralization, fiscal transfers fail to play a good role. Due to the relatively large income effect, the financing mechanism of fiscal transfers not only significantly reduces the incentives of local government to provide social public goods, but also weakens the constraint effect of fiscal competition on expenditure policies of local governments because of the increase in the relative cost. Although the distribution mechanism of fiscal transfers has a significant positive incentive to local government in regions where the net inflow of fiscal resources is more than zero, because of common pooling effects, the comprehensive effects of fiscal transfers in the distribution of incentives of local governments to provide social public goods are negative in all regions.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"223-248"},"PeriodicalIF":0.8,"publicationDate":"2018-05-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49498518","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/S060-007-018-0007-5
H. Wan
This note is an effort to view the research program of Brecher and his co-workers to deploy tax incentives against involuntary unemployment in the broader context; on both the equity-efficiency trade-off in political economy, and the dual economic structure in the theoretic foundations of market equilibrium.
{"title":"Involuntary Unemployment: An Expository Note","authors":"H. Wan","doi":"10.3868/S060-007-018-0007-5","DOIUrl":"https://doi.org/10.3868/S060-007-018-0007-5","url":null,"abstract":"This note is an effort to view the research program of Brecher and his co-workers to deploy tax incentives against involuntary unemployment in the broader context; on both the equity-efficiency trade-off in political economy, and the dual economic structure in the theoretic foundations of market equilibrium.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"83-92"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42644469","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/S060-007-018-0006-8
Sven W. Arndt
This paper examines global value chains at the level of the heterogeneous firm. The context is a world of horizontal intra-industry trade, characterized by imperfect competition and product differentiation at the firm level. Standard microeconomic tools are employed to assess the effects of inter-firm dissimilarities in both demand and supply on firmsi¯ responses to changes in trade policy. In this set-up, dissimilarities in firm characteristics play roles similar to factor endowments and technology differences in traditional trade models. When cross-border production sharing (i°fragmentationi±) is introduced into this framework, those differences in firm characteristics determine the degree to which individual firms will enter into production networks. In this context, horizontal and vertical intra-industry trade elements interact in their effects on firm decisions. Traditional comparative advantage considerations still govern the choice of off-shored activities, while direct competition between imports and exports expands the range of possible outcomes. Finally, it is shown that cross-border production sharing reduces the sensitivity of firms to variations in exchange rates, matching a phenomenon that has been observed in traditional country-level models.
{"title":"Global Value Chains, Horizontal Intra-Industry Trade and the Heterogeneous Firm","authors":"Sven W. Arndt","doi":"10.3868/S060-007-018-0006-8","DOIUrl":"https://doi.org/10.3868/S060-007-018-0006-8","url":null,"abstract":"This paper examines global value chains at the level of the heterogeneous firm. The context is a world of horizontal intra-industry trade, characterized by imperfect competition and product differentiation at the firm level. Standard microeconomic tools are employed to assess the effects of inter-firm dissimilarities in both demand and supply on firmsi¯ responses to changes in trade policy. In this set-up, dissimilarities in firm characteristics play roles similar to factor endowments and technology differences in traditional trade models. When cross-border production sharing (i°fragmentationi±) is introduced into this framework, those differences in firm characteristics determine the degree to which individual firms will enter into production networks. In this context, horizontal and vertical intra-industry trade elements interact in their effects on firm decisions. Traditional comparative advantage considerations still govern the choice of off-shored activities, while direct competition between imports and exports expands the range of possible outcomes. Finally, it is shown that cross-border production sharing reduces the sensitivity of firms to variations in exchange rates, matching a phenomenon that has been observed in traditional country-level models.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"68-82"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44361513","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/s060-007-018-0003-7
John D. Wilson, Ilkay Yılmaz
This paper uses a probabilistic voting model to investigate voting for a free-trade agreement between a labor-abundant country and a capital-abundant country. Migration from the labor-abundant country to the capital-abundant country increases the probability of a free-trade agreement, with lower migration costs leading to more migration and a higher free-trade probability. On the other hand, if a lower probability of free trade is caused by an increased voter bias against free-trade candidates, then there is less migration. A dynamic extension of the model is also investigated.
{"title":"Free-Trade Agreements in a Model of Trade, Migration and Politics","authors":"John D. Wilson, Ilkay Yılmaz","doi":"10.3868/s060-007-018-0003-7","DOIUrl":"https://doi.org/10.3868/s060-007-018-0003-7","url":null,"abstract":"This paper uses a probabilistic voting model to investigate voting for a free-trade agreement between a labor-abundant country and a capital-abundant country. Migration from the labor-abundant country to the capital-abundant country increases the probability of a free-trade agreement, with lower migration costs leading to more migration and a higher free-trade probability. On the other hand, if a lower probability of free trade is caused by an increased voter bias against free-trade candidates, then there is less migration. A dynamic extension of the model is also investigated.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"15-31"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45082588","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/S060-007-018-0008-2
Zhiqi Chen, Marcel-Cristian Voia
We investigate the impact of the Canada-Chile Free Trade Agreement (CCFTA) on Canadian exports to Chile, particularly the dynamic effects of the agreement on extensive and intensive margins of trade. Consistent with the literature, we find that the extensive margin effects occurred later than the intensive margin effects and became more prominent in the long-term. Surprisingly, the intensive margin effects died off in the long-term. A theoretical model is constructed to show that our results can arise in a standard setting of intra-industry trade.
{"title":"Short-Term and Long-Term Margins of International Trade: Evidence from the Canada-Chile Free Trade Agreement","authors":"Zhiqi Chen, Marcel-Cristian Voia","doi":"10.3868/S060-007-018-0008-2","DOIUrl":"https://doi.org/10.3868/S060-007-018-0008-2","url":null,"abstract":"We investigate the impact of the Canada-Chile Free Trade Agreement (CCFTA) on Canadian exports to Chile, particularly the dynamic effects of the agreement on extensive and intensive margins of trade. Consistent with the literature, we find that the extensive margin effects occurred later than the intensive margin effects and became more prominent in the long-term. Surprisingly, the intensive margin effects died off in the long-term. A theoretical model is constructed to show that our results can arise in a standard setting of intra-industry trade.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"93-115"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42268937","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/S060-007-018-0009-9
Churen Sun, Zhihao Yu, Zhang Tao
Using Chinese manufacturing data between 1998 and 2007, this paper investigates the impact of agglomeration on firmi¯s export behavior. It is found that the agglomeration of manufacturing industries in China over this period increases firmi¯s export probability as well as its export volume, and the impact is larger for more efficient firms. However, the impact on firmi¯s export volume depends on the degree of agglomeration. When the degree of agglomeration is low, an increase in agglomeration would expand firmi¯s export volume but the impact will be diminishing and even turns negative if the degree of agglomeration is already very high.
{"title":"Agglomeration and Firm Export","authors":"Churen Sun, Zhihao Yu, Zhang Tao","doi":"10.3868/S060-007-018-0009-9","DOIUrl":"https://doi.org/10.3868/S060-007-018-0009-9","url":null,"abstract":"Using Chinese manufacturing data between 1998 and 2007, this paper investigates the impact of agglomeration on firmi¯s export behavior. It is found that the agglomeration of manufacturing industries in China over this period increases firmi¯s export probability as well as its export volume, and the impact is larger for more efficient firms. However, the impact on firmi¯s export volume depends on the degree of agglomeration. When the degree of agglomeration is low, an increase in agglomeration would expand firmi¯s export volume but the impact will be diminishing and even turns negative if the degree of agglomeration is already very high.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"116-132"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46891426","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/S060-007-018-0002-0
Alan V. Deardorff
This paper examines the effects of a fall in the price of an imported good in a region of a country that is specialized in producing that good. The context is a Olumpy countryO model in which factors are unable to move between locations, although in this case I assume that only labor is immobile, and that the other factor, capital, is perfectly mobile between regions. With mobile capital, the lumpy-country equilibrium can be anywhere in the factor-price equalization set, but my focus is on a region that initially produces only one good, on the border of that set. When the price of that good falls due to import competition, it would be possible for both factors to reallocate partially into production of the other good, but I assume instead that some capital simply leaves the region, so that it continues to produce only the same good that it did before. The result of this is a fall in the real wage of labor, just as under Stolper-Samuelson assumptions. I then look at production also of a non-traded good, and find that the same import competition that cheapened the traded good also cheapens the nontraded good. The result is that the region shrinks, losing capital and producing less of both goods unless the substitution in favor of the nontraded good expands its consumption out of a smaller income.
{"title":"Local Import Competition in a Lumpy Country","authors":"Alan V. Deardorff","doi":"10.3868/S060-007-018-0002-0","DOIUrl":"https://doi.org/10.3868/S060-007-018-0002-0","url":null,"abstract":"This paper examines the effects of a fall in the price of an imported good in a region of a country that is specialized in producing that good. The context is a Olumpy countryO model in which factors are unable to move between locations, although in this case I assume that only labor is immobile, and that the other factor, capital, is perfectly mobile between regions. With mobile capital, the lumpy-country equilibrium can be anywhere in the factor-price equalization set, but my focus is on a region that initially produces only one good, on the border of that set. When the price of that good falls due to import competition, it would be possible for both factors to reallocate partially into production of the other good, but I assume instead that some capital simply leaves the region, so that it continues to produce only the same good that it did before. The result of this is a fall in the real wage of labor, just as under Stolper-Samuelson assumptions. I then look at production also of a non-traded good, and find that the same import competition that cheapened the traded good also cheapens the nontraded good. The result is that the region shrinks, losing capital and producing less of both goods unless the substitution in favor of the nontraded good expands its consumption out of a smaller income.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"5-14"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47976259","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/S060-007-018-0004-4
N. Long, Maxwell Tuuli
This paper demonstrates that an increase in bargaining power of Northern firms relative to that of their Southern contractors can trigger reshoring if the North- South wage differential is moderate, such that only industries with a high share of unskilled labor find outsourcing profitable. However, such an increase in Northern bargaining power can increase offshoring if the wage differential is so high that even industries with a low share of unskilled labor also offshore.
{"title":"Offshoring and Reshoring: The Roles of Incomplete Contracts and Relative Bargaining Power","authors":"N. Long, Maxwell Tuuli","doi":"10.3868/S060-007-018-0004-4","DOIUrl":"https://doi.org/10.3868/S060-007-018-0004-4","url":null,"abstract":"This paper demonstrates that an increase in bargaining power of Northern firms relative to that of their Southern contractors can trigger reshoring if the North- South wage differential is moderate, such that only industries with a high share of unskilled labor find outsourcing profitable. However, such an increase in Northern bargaining power can increase offshoring if the wage differential is so high that even industries with a low share of unskilled labor also offshore.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"32-51"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49238071","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-15DOI: 10.3868/S060-007-018-0001-3
Zhiqi Chen
{"title":"Introduction to the Special Issue in Honor of Richard A. Brecher","authors":"Zhiqi Chen","doi":"10.3868/S060-007-018-0001-3","DOIUrl":"https://doi.org/10.3868/S060-007-018-0001-3","url":null,"abstract":"","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"13 1","pages":"1-4"},"PeriodicalIF":0.8,"publicationDate":"2018-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47830290","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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