nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒10‒29
seven papers chosen by
J. David Brown
United States Census Bureau

  1. The Price of Growth: Consumption Insurance in China 1989-2009 By Raül Santaeulàlia-Llopis; Yu Zheng
  2. Technological catching-up, sales dynamics and employment growth: evidence from China's manufacturing firms By Giovanni Dosi; Xiaodan Yu
  3. Educational Choice, Rural-urban Migration and Economic Development By Pei-Ju Liao; Ping Wang; Yin-Chi Wang; Chong Kee Yip
  4. Vertical Fiscal Imbalance and Local Fiscal Discipline: Empirical Evidence from China By Junxue Jia; Yongzheng Liu; Jorge Martinez-Vazquez; Kewei Zhang
  5. Is Poland a welfare state? By Jakub Sawulski
  6. Profitability of simple stationary technical trading rules with high-frequency data of Chinese Index Futures By Jing-Chao Chen; Yu Zhou; Xi Wang
  7. The Future of Money: Liquidity co-movement between financial institutions and real estate firms: evidence from China By Sheng Huang; Jonathan Williams; Ru Xie

  1. By: Raül Santaeulàlia-Llopis; Yu Zheng
    Abstract: We exploit a novel and unique opportunity to document the transmission of income risks to consumption in a growing economy. Our laboratory is China, an economy that has witnessed enormous and sustained growth and for which we build a long panel of household-level consumption and income. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that at least triples from 1989 to 2009. Although preliminary, our calculations suggest that the loss of consumption insurance has implications for the welfare assessment of economic growth.
    Keywords: economic growth, income risk, consumption insurance, China
    JEL: O11 O12 E21
    Date: 2017–10
  2. By: Giovanni Dosi; Xiaodan Yu
    Abstract: This paper investigates the microeconomics of employment dynamics, using a Chinese manufacturing firm-level dataset over the period 1998-2007. It does so in the light of a scheme of "circular and cumulative causation", whereby firms' heterogeneous productivity gains and sales dynamics, and innovation activities ultimately shape the patterns of employment dynamics. Using firm's productivity growth as a proxy for process innovation, our results show that the latter correlates negatively with firm-level employment growth. Conversely, relative productivity levels, as such a general proxy for the broad technological advantages/disadvantages of each firm, do show positive effect on employment growth in the long-run through replicator-type dynamics. Moreover, firm-level demand dynamics play a significant role in driving employment growth, which more than compensate the labour-saving effect due to technological progress. Finally, and somewhat puzzlingly, the direct effects of product innovation and patenting activities on employment growth appear to be negligible.
    Keywords: Employment Growth, Demand, Product Innovation, Process Innovation, Export, China catching-up
    Date: 2017–10–24
  3. By: Pei-Ju Liao; Ping Wang; Yin-Chi Wang; Chong Kee Yip
    Abstract: Observing rapid structural transformation accompanied by a continual process of rural to urban migration in many developing countries, we construct a micro founded dynamic framework to explore how important education-based migration is, as opposed to work-based migration, for economic development, urbanization and city workforce composition. We then calibrate our model to fit the data from China over the period from 1980 to 2007, a developing economy featuring not only large migration flows but major institutional reforms that may affect work and education based migration differently. We find that, although education-based migration only amounts to one-fifth of that of work-based migration, its contribution to the enhancement of per capita output is larger than that of work-based migration. Moreover, the abolishment of the government job assignment for college graduates and the relaxation of the work-based migration have limited effects on economic development and urbanization. Furthermore, the increase in college admission selectivity for rural students plays a crucial but negative role in China's development, lowering per capita output and worsening the high-skilled employment share in urban areas.
    JEL: O15 O53 R23 R28
    Date: 2017–10
  4. By: Junxue Jia (Renmin University of China); Yongzheng Liu (School of Finance, Renmin University of China); Jorge Martinez-Vazquez (Department of Economics, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University); Kewei Zhang (Boston University)
    Abstract: Using a nationwide city-level panel dataset for China for the years 1999-2009, this paper examines the effects of vertical fiscal imbalances (VFI) on local fiscal discipline, and explicitly explores the institutional conditions under which these effects may take place. We find that higher VFI levels induce fiscal indiscipline by reducing tax effort of local governments. We exploit the unique Chinese fiscal institution of assigning taxing power for local taxes and shared taxes to two separate authorities (i.e., the local tax bureau and the central tax bureau, respectively) in several ways. We show that local governments respond to the presence of the VFI by lowering their tax effort on local taxes, but do not do so for shared taxes. In addition, we show that the (in)disciplining effect of the VFI is not present for extra-budgetary revenues, which reflects the institutional fact that extra-budgetary revenues are not considered for the determination of central fiscal transfers to local governments, thus creating no incentive for local governments to respond in this area.
    Date: 2017–10
  5. By: Jakub Sawulski
    Abstract: We determine whether Poland is a welfare state by looking at social expenditures as a share of GDP, taking into account that the share tends to increase with the level of income. By this criterion Poland is a welfare state. The share of social expenditure in GDP is high in Poland compared to countries with similar income levels, although still lower than in the majority of wealthier EU Member States. The structure of social expenditure in Poland is marked by high pension expenditure. Education spending is close to the EU average. Low public health expenditure, on the other hand, diverges from EU standards. Following the introduction of the Family 500+ Programme, Poland has become one of the top EU spenders on family policy. The main challenge for social policy is to improve the quality of health care and limit the negative impact of certain types of social expenditure on labour force participation.
    Keywords: welfare state, public expenditure, social expenditure
    JEL: H50 H53 H55
    Date: 2017–10
  6. By: Jing-Chao Chen; Yu Zhou; Xi Wang
    Abstract: Technical trading rules have been widely used by practitioners in financial markets for a long time. The profitability remains controversial and few consider the stationarity of technical indicators used in trading rules. We convert MA, KDJ and Bollinger bands into stationary processes and investigate the profitability of these trading rules by using 3 high-frequency data(15s,30s and 60s) of CSI300 Stock Index Futures from January 4th 2012 to December 31st 2016. Several performance and risk measures are adopted to assess the practical value of all trading rules directly while ADF-test is used to verify the stationarity and SPA test to check whether trading rules perform well due to intrinsic superiority or pure luck. The results show that there are several significant combinations of parameters for each indicator when transaction costs are not taken into consideration. Once transaction costs are included, trading profits will be eliminated completely. We also propose a method to reduce the risk of technical trading rules.
    Date: 2017–10
  7. By: Sheng Huang (Bangor University); Jonathan Williams (Bangor University); Ru Xie (Bangor University)
    Abstract: The possibility of liquidity risk interdependence between financial institutions and real estate firms raises concern over financial stability. Changes in real estate liquidity conditions reflecting credit risks could increase bank liquidity risk due to untimely loan repayment. Liquidity risks can be amplified if liquidity shortfalls are not resolved. Using data from China from 2000 to 2014, and using three liquidity indicators to measure the impact of market capacity (liquidity depth), transaction costs (liquidity tightness) and market efficiency (liquidity resilience), a first result shows commonality or a two-way loop in liquidity risks between financial institutions and real estate firms. A second result indicates a positive and long run effect of the liquidity resilience of real estate firms on financial institutions. Liquidity risk transmission becomes prominent during episodes of market distress.
    Date: 2017–09

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