| By: |
Julan Du (The Chinese University of Hong Kong);
Qing He (Renmin University of China and Hong Kong Institute for Monetary Research);
Oliver M. Rui (The Chinese University of Hong Kong and Hong Kong Institute for Monetary Research) |
| Abstract: |
This paper decomposes consumption risk sharing among provinces in China over
the 1980-2007 period. We find that 9.4 percent of the shocks to gross
provincial product are smoothed by the interprovincial fiscal transfer system.
This system also cushions a relatively large fraction of the province-specific
shocks in the coastal provinces of China. Using a variety of indicators, we
explore non-fiscal channels of consumption risk sharing. We find that the
migration of rural labor to urban areas and the remittance of migrant wages
play important roles in promoting interprovincial consumption risk sharing in
the inland provinces of China. In contrast, the extent of risk sharing through
financial intermediaries and the capital markets is very limited. These
factors have resulted in a low degree of risk sharing among Chinese provinces,
especially over the last decade. |
| Keywords: |
Consumption Risk Sharing, Chinese Economy, Fiscal System, Credit Markets, Remittance |
| JEL: |
O16 O53 R11 |
| Date: |
2011–04 |
| URL: |
http://d.repec.org/n?u=RePEc:hkm:wpaper:122011&r=cna |