nep-cna New Economics Papers
on China
Issue of 2008‒10‒13
five papers chosen by
Zheng Fang
Ohio State University

  1. Tournaments and Managerial Incentives in China's Listed Firms: New Evidence By Kato, Takao; Long, Cheryl
  2. Paradoxes of Traffic Flow and Economics of Congestion Pricing By Chengri Ding; Shunfeng Song; Yiling Zhang
  3. China-Opportunities of and Constraints on the New Global Player By Horst Siebert
  4. Enhancing technological progress in a market-socialist context:China's national innovation system at the crossroads By Gabriele, Alberto; Khan, Ali Haider
  5. Population Ageing, Labour Market Reform and Economic Growth in China - A Dynamic General Equilibrium Analysis By Xiujian Peng; Yinhua Mai

  1. By: Kato, Takao (Colgate University); Long, Cheryl (Colgate University)
    Abstract: The promotion tournament as a potentially important incentive mechanism for top management in transition economies has not been examined by the emerging literature on managerial incentives in transition economies. This paper is the first attempt to fill this important gap in the literature. The paper begins with modifying the previously-derived empirical predictions from the tournament theory to the context of transition economies in which state ownership still plays a significant role in publicly-traded firms. Specifically, we test the following two hypotheses. First, the winner's prize will need to increase in order to prevent each contestant from lowering his/her effort level in the face of expanding contestant pool. Such an optimal response of the winner's prize to the size of the contestant pool is more evident for China's listed firms that are less controlled by the state. Second, the winner's prize will also need to rise in order to prevent each contestant from reducing his/her effort level in the face of greater market volatility (or more noise in performance measure used to decide on the tournament winner). Using comprehensive financial and accounting data on China's listed firms from 1998 to 2002, augmented by unique data on executive compensation and ownership structure, we find evidence in support of both hypotheses. Finally, we also find evidence suggesting that an increase in the winner's prize will result in enhanced managerial effort and hence improved firm performance, and that the performance effect of the winner's prize is greater for China's listed firms that are less controlled by the state. As such this paper provides yet another piece of evidence that ownership restructuring may be needed for China to successfully transform its SOEs to efficient modernized corporations and reform its overall economy.
    Keywords: tournaments, managerial incentives, ownership structure, China, transition economies
    JEL: M51 P3
    Date: 2008–09
  2. By: Chengri Ding (Urban Studies and Planning Program, University of Maryland); Shunfeng Song (Department of Economics, University of Nevada, Reno); Yiling Zhang (Department of Economics, University of Nevada, Reno)
    Abstract: This paper utilizes a unique county-level dataset to examine technical efficiency and technology gap in China’s agriculture. We classify the counties into four regions with distinctive levels of economic development, and hence production technologies. A meta-frontier analysis is applied to the counties. We find that although the eastern counties have the highest efficiency scores with respect to the regional frontier but the northeastern region leads in terms of agricultural production technology nationwide. Meanwhile, the mean efficiency of the northeastern counties is particularly low, suggesting technology and knowledge diffusion within region might help to improve production efficiency and thus output.
    Keywords: China’s grain production; County-level; Metafrontier; Stochastic production frontier; Technical efficiency
    JEL: D24 N55 O13
    Date: 2008–09
  3. By: Horst Siebert (Kiel Institute for World Economics, Germany and SAIS Bologna Center, Johns Hopkins University, Italy.)
    Date: 2008
  4. By: Gabriele, Alberto; Khan, Ali Haider
    Abstract: This paper analyzes the available evidence of China's S&T, R&D, and innovative capabilities, to provide an assessment of the effectiveness and potentialities of its national system of innovation (NSI) ), and to formulate some preliminary policy suggestions aimed at improving China's overall innovation strategy. Our approach focuses particularly on the evolving relationship between China's NSI and the country's overall market socialist social and economic system - both of which are developing fast and undergoing deep qualitative changes - and on related policy challenges. China's innovation strategy aims at embodying world-class best practices from technological world leaders and successful late industrializers, but is also peculiarly Chinese in at least two crucial aspects. The first is China's sheer size, which has allowed her to leapfrog to rank 2 worldwide in terms of the absolute quantitative magnitude of its NSI, at a stage when it still far lags behind all technological leaders in terms of per capita educational, technological, and research achievements. The second is China's specific form of market socialism, which has the potential of conferring her leaders an outstanding advantage in the crucial area of strategic planning, i.e. the capability to master national resources and to earmark them towards key goals accordingly to a clear set of priorities. China's goal is to engineer in a relative short period a decisive qualitative leap in her NSI, developing a systemic ability to generate world-class indigenous innovations. In addition to fostering technical progress, China's development strategy shall also take into account the challenge of establishing a model of innovation compatible with an equitable pattern of income distribution and environmental sustainability, thereby paving the way to the eventual evolution towards a higher and more developed form of socialism. This is the expressed aim of the Chinese leadership. However, the simple NSI approach is not necessarily sensitive to these strategic requirements, and therefore there is a need for more advanced analytical and planning tools. In this context, we propose to consider the utility of nonlinear models of the POLIS (positive feed back loop innovation system) class, which are suitable to chart strategically the market socialist course, as their internal logic is consistent with China's unique catch up strategy.
    JEL: P36 P27 O33
    Date: 2008–09–22
  5. By: Xiujian Peng; Yinhua Mai
    Abstract: The dramatic fertility decline since the beginning of 1970s has decelerated the growth of China's working age population. From 2015, this growth will turn sharply negative, resulting declining labour force in China. This has caused concerns about the sustainability of China's economic growth. This paper sheds lights on the view that a more efficient allocation of labour between sectors is likely counter balance the negative effect of populating ageing. Using a dynamic CGE model of China, we analyse the effects of removing labour market distortions that hinder the movement of labour from agricultural to manufacturing and services sectors over the period 2008 to 2020 in the context of declining growth of labour supply in China. Simulation results shows that removing the discriminations against rural workers in urban area will increase the labour shift from agricultural to non-agricultural sectors. The resulting increase in the movement of rural labour will mitigate the adverse effects of population ageing by raising not only the growth rate of total output but also household living standard. China can enjoy continued growth in its manufactured exports even with a slower growth in its labour force.
    Keywords: population ageing, labour market reform, rural migration, CGE model, China
    JEL: J21 J61 E17
    Date: 2008–05

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