Opening up,Market Reform,and Convergence Clubs in China*

This paper evaluates the relationship between initial government policies and the emergence of convergence clubs in post‐reform China. We test the structural stability of a global convergence equation using China's provincial data over the period 1985–2000. We find that the provinces cluster around two basins of attraction defined by initial opening‐up. Domestic market reform exerts a positive and significant influence on provincial economic growth but has no threshold effect. The two convergence clubs exhibit strikingly different growth behaviors, suggesting that the roles of some growth‐promoting factors, such as human capital and infrastructure, depend on whether an openness threshold is passed.     

Human capital estimates in China: New panel data 1985–2010

We introduce new provincial level panel data on human capital in China from 1985 to 2010. Our estimation of human capital is based on the Jorgenson–Fraumeni lifetime income approach modified to fit the Chinese data, thereby allowing a more comprehensive measurement of human capital than traditional partial measurements, such as education. Our provincial data are adjusted for purchasing power parity via a living-cost index as well as for real values so that all values are comparable across the provinces and time. We discuss various characteristics of the data, including total human capital, per capita human capital, and labor force human capital, which in turn are disaggregated based on gender and urban or rural location. Our human capital estimates are compared with the provincial physical capital estimates and provincial GDP. As an illustration, we also use the data to estimate a production function and to decompose China's economic growth from physical capital, human capital, and TFP. Our results, compared with those that use traditional specifications, reassure us as to the reliability of our new China human capital data.     

On Persistent Poverty in a Rich Country

We examine differences in income within the United States, and the regions of persistent poverty that have arisen, using a newly assembled county‐level data set linking 19th century Census data with contemporary data. We identify the roles of current differences in aggregate production technologies and factor endowments, together with contributions of historical institutions, culture, geography, and human capital. We allow for possible cross‐county factor mobility via a correlated random effects GMM estimator and find evidence of significant regional differences in production technologies. Our decompositions of the poor/nonpoor income gap suggest that at least three‐fourths of the gap is explained by differences in productive factors. Persistently poor counties are different (and poorer) primarily because they have lower levels of factors of production, not because they use the factors they have less efficiently. Together, historical and contemporary human capital explain over half of the overall income gap between persistently poor and nonpoor counties.     

Classification of Growth Clubs and Convergence： Evidence from Panel Data in China, 1981-2004

This paper uses provincial panel data to examine club convergence in China during 1981–2004. We estimate the province‐specific initial technology level, A(0), and classify the Chinese economy into “developed club” and “underdeveloped club” based on the economic characteristics of A(0), instead of on geographical location. We find significant evidence of conditional convergence across provinces, and that the convergence speed in the developed club is faster than that in the underdeveloped club. We also find that: (i) human capital accumulation contributes more than physical capital does to club convergence; (ii) there is a positive correlation between infrastructure and growth convergence at the national level and within the developed club, while the spillover effect of infrastructure has not been developed in the developing club; and (iii) the effect of economic openness on convergence is tiny, and insignificant across and within clubs.     

Does Life Expectancy Affect Private Educational Investment in China？

In this paper, we emphasize the interactive effect between life expectancy and human capital accumulation, and test the positive feedback of longevity to educational investment in China. This is very important for understanding the pressure from the aging population and the increase in private educational investment in China. We first show in an extended human capital investment model that life expectancy growth acts as a driving force for educational investment. We then build a difference‐in‐difference‐in‐differences empirical framework and use cross‐province data to examine the effect in China. We use the maternal mortality rate (MMR) to identify the difference in life expectancy between genders, and the illiteracy rate or average years of education by gender for educational investment. The empirical results comply with the theory, in that increases in life expectancy significantly lower illiteracy rates and improve the average schooling years in China. This content of the present paper is closely related to crucial issues like population aging, human capital accumulation and gender discrimination. Policy implications are discussed based on the empirical results.     

China's interregional capital mobility: A spatial econometric estimation

Free interregional mobility of capital refers to the efficiency of resource allocation. Using a general spatial autocorrelation model that extends the traditional Feldstein–Horioka (FH) test, we analyze Chinese provincial data for the periods before and after 1993, and show that the FH coefficients differ to those in the existing literature. During China's period of reform and opening up between 1979 and 1992, the FH coefficient is significantly negative or not statistically significant. However, for the period after 1994, the FH coefficient is significantly higher than that shown in prior studies. This study explains this phenomenon from the perspective of Chinese-style decentralization. The FH test is an indirect method of showing regional capital mobility. Therefore, we need some form of direct measurement. Thus, we use the rate of the proportional change in physical capital stock as a proxy variable to demonstrate capital mobility directly, and use it to analyze various factors affecting Chinese provincial capital mobility. When investigating these factors, and to establish a realistic foundation on which the spatial effects take place, we devise four spatial weight matrices from the perspectives of geographical features and economic characteristics. Lastly, in order to promote regional capital mobility in China, the Chinese central government needs to take urgent measures to change local governments' strong preferences for GDP under the pressure of political promotion.     

Capitalization of Flood Insurance and Risk Perceptions in Housing Prices: An Empirical Agent‐Based Model Approach

Federally regulated or insured lenders in the United States are mandated to require flood insurance on properties that are located in areas at high risk of flooding. Despite the existence of this mandatory flood insurance requirement, take‐up rates for flood insurance have been low, and the federal government's exposure to uninsured property losses from flooding remains substantial. Meanwhile, the value of capital at risk varies significantly with flood events and changing risk perceptions, which necessitates mechanisms that stabilize these dynamics. In this article we discuss how a scenario of complete insurance uptake, under various risk attitudes, affects the value of properties in the 100‐year and 500‐year flood zones. Our results indicate that an increase in flood insurance uptake may provide such a mechanism by lowering the value of capital at risk in the flood zone consistently, independent of homeowners' risk attitudes. We apply an empirical adaptive agent‐based model to examine the capitalization of insurance costs, risk premiums, and their interaction in housing prices. Our approach combines widely‐used empirical hedonic analysis with the computational economic framework. We highlight the usefulness of our method in capturing the marginal implicit price of homeowners' preferences that may change over time and separately assess the effect of various factors and policies on property values, illustrating the agent‐based modeling as a valuable complement to traditional hedonic analysis.     

Non‐Residential Capital Stock in Latin America, 1875–2008: New Estimates and International Comparisons

We use a homogeneous method to estimate non‐residential capital stock for Argentina, Brazil, Chile, and Mexico. Our estimates extend back to the late‐nineteenth century, 50 years earlier than the present available estimates. Our estimates use the gross fixed capital formation data base (1850–1950). These data are linked with existing standardised national accounts for the region, such as those of Economic Commission for Latin America and the Caribbean. Finally, we compare investment in Latin American countries to that of advanced economies, particularly focussing on the performance of two settler countries, Argentina and Australia.     

Chinese Regions in the Great Divergence: Provincial Gross Domestic Product per Capita, 1873–1918

We construct 1912/18 Chinese provincial gross domestic product per capita from primary sources and project cross‐sections for 1873 and 1893. The results fit the historical record. We hypothesise that regionally specific conflicts have a role to play in explaining differential growth rates, and that geography, governance, and sectoral structures explain relative income‐level rankings. China's richest provinces matched Europe's poorest. A divergence did indeed occur, but our estimates show that at a broader economic level, it was perhaps not as dramatic as some of the literature implies.     

Key Factors of Recent Chinese Provincial Economic Growth

The aim of this paper is to analyse the factors that affected Chinese provincial economic growth after the reforms of the early 1980s, through a panel analysis (period 1986–2001). The production function approach focuses on human capital, ‘space-serving’ infrastructure, sectoral allocation of labour and institutional changes. Indices relevant for the analysis are elaborated and provincial capital stocks are estimated. The empirical results indicate the positive role of capital stock, human capital and physical infrastructure and underline that sectoral allocation of labour and institutional changes affected the level of aggregate output. A redistribution policy in favour of the inland provinces needs to be implemented so that human capital and infrastructure can be enhanced, bottlenecks can be overcome and investment can be attracted.     

Determinants of Economic Growth and Spread–backwash Effects in Western and Eastern China

This paper comparatively assesses the major contributors to economic growth and spread–backwash effects in Western and Eastern China over the period 2000–2007. The empirical findings indicate that economies in both regions increasingly agglomerated in large cities; the marginal products of domestic capital and labor in the western region were, respectively, two‐thirds and half of those in the eastern region; FDI was more productive than domestic capital. Spatial econometric analysis reveals that the central cities in Western China had mild spread effects on each other and backwash effects on the nearby rural counties and, in contrast, the central cities in the eastern region competed with each other and had backwash effects on nearby rural counties but spread effects on neighboring county‐level cities. The paper draws several policy implications in relation to the improvement of factor inputs and construction of growth centers in the western region.     

Note on global dynamics and imbalance effects in the Lucas–Uzawa model

In the traditional literature on the Lucas–Uzawa model, it is proved that in the so‐called normal parametric case, human capital stock grows at a rate greater than its long‐run counterpart in the neighbourhood of the long‐run balanced growth path. We first prove that the claim is true outside the neighborhood of balanced growth paths. More importantly, we identify a crucial asymmetry: whatever the parametric case considered, physical capital stock always grows at a rate lower than its long‐run counterpart when the ratio of physical to human capital is above its long‐run value.     

Can Time–Space Compression Promote Urban Economic Growth? Evidence from China's High‐speed Rail Projects

This paper studies the effect of high‐speed rail (HSR) on urban economic growth using a panel data comprising 285 Chinese cities in 2007–2017. Combining the endogenous growth model with a difference‐in‐difference analysis, we extend the horse‐mass theory to explain how China may use HSR to avoid the so‐called middle‐income trap. The paper also examines the efficient boundaries of HSR and simultaneously studies HSR time–space compression as well as the city neighboring effects on economic growth. It is found that HSR's efficient boundaries are within the range of 200–1,200 km for provincial capitals and 50–300 km for prefecture‐level cities. HSR stimulates economic growth by approximately 0.6 percent, and the neighboring effect accounts for one‐quarter of economic growth. Three policy implications are drawn: (i) China needs to further reduce the travel times between the inland provincial cities and Beijing, Shanghai or Guangzhou; (ii) China should build a denser HSR network to maximize its economic impact on the vast majority of cities; (iii) China needs to develop some powerful economic growth centers in the inland areas to lead the development of their neighboring cities.     

The impact of economic geography on wages: Disentangling the channels of influence

This paper evaluates the role of economic geography in explaining regional wages in China. It investigates the extent to which market proximity can explain the evolution of wages, and through which channels. We construct a complete indicator of market access at the provincial level from data on domestic and international trade flows; this is introduced in a simultaneous-equations system to identify the direct and indirect effect of market access on wages. The estimation results for 29 Chinese provinces over 1995–2002 suggest that access to sources of demand is indeed an important factor shaping regional wage dynamics in China. We investigate three channels through which market access might influence wages beside direct transport-cost savings: export performance, and human and physical capital accumulation. A fair share of benefits seems to come from enhanced export performance and greater accumulation of physical capital. The main source of influence of market access remains direct transport costs.     

Provincial Output Spillovers in China： Global Vector Autoregressive Approach

The paper uses a global vector autoregressive model to examine provincial output spillover effects in China. We find that there are effective output spillovers from Guangdong, Liaoning and Zhejiang to other provinces in China, but trivial effects from Shanghai, Shandong, Sichuan and Xinjiang, and negative effects from Beijing. Foreign direct investment (FDI) in Guangdong and Liaoning is the main channel for creating provincial output spillovers, compared with domestic investment and exports. However, FDI spillovers tend to decrease, with spillovers from exports and domestic investment rising over time, so that the spillover effects in Guangdong and Liaoning are non‐persistent and highly volatile. Other channels of output spillover, such as domestic investment, should be enhanced. Impacts of shock from government expenditure on GDP vary significantly across time and provinces; inland and western provinces are most negatively affected. The heterogeneous spillover structure shows that regional policies might achieve better results than nationwide policies in reducing regional disparity.     

Health,education, and economic growth in China: Empirical findings and implications

This empirical analysis examines the augmented Mankiw, Romer and Weil's model which considers both health and education in human capital in the framework of Chinese economy. We consider the relationship between per capita real GDP growth and the physical capital, human capital, and health investment in the production function. Panel data models are used in the estimation based on the provincial data from 1978–2005. The empirical evidence shows that both health and education have positive significant effects on economic growth. The results also show that the interaction of health and education stock will not reduce their impact on growth and there is perhaps a trade-off between two forms of human capital investment.     

ECONOMIC ANALYSIS ON THE URBAN–RURAL DISPARITY IN HUMAN CAPITAL IN CHINA

With China's economic development and capital accumulation in the industrial sectors, the human capital level of the labours moving from the rural areas could no longer meet the demand of the industrial sectors. Therefore, “structural shortage of technical labour” emerged in the labour market as a result of excess of demand for high‐skilled workers. Previous literature mostly focused on the relationship between rural human‐capital level and labour movement, income change and economic growth, but in this article, the authors focus on the study of the relative disparity of urban and rural human capital and labour movement, as well as the effect of the change of urban–rural human capital gap on industrial output, profit and social welfare. This article shows that bridging the urban–rural gap in respect of human capital level could not only improve the situation of the “structural shortage of technical labour,” but also have a positive effect on the general social welfare.     

省会迁移的新经济地理学思考——以江苏为例

政治、经济、军事都是历史上都城迁移决定的重要因素。在社会政治、经济、军事平稳的今天,省会的位置相对稳定。从新经济地理学视角提出省会迁移是基于两方面的考虑:一是省会城市越来越拥挤,产生离心力,经济发展缺乏后劲;二是省会迁移到其他城市,会为移入地注入新鲜血液,带动移入地及周边地区发展。文章以江苏为例,先对自辛亥革命后江苏省会迁移的历史作了阐述,继而分析当前有可能导致江苏省会迁移的现实之处,最后对省会迁移的作用机制、移入城市、迁移成本作了相应的探讨。     

Do Inland Provinces Benefit from Coastal Foreign Direct Investment in China?

Foreign direct investment (FDI) in China is heavily concentrated in the coastal regions. Do inland provinces benefit from coastal FDI? We use a provincial‐level panel dataset and employ the fixed‐effects instrumental variables regression technique to investigate the interregional spillovers from coastal FDI to inland provinces. The study finds that, on average, coastal FDI has a negative impact on the economic growth of inland provinces. In addition, depending on the different trade activities engaged in (i.e. whether processing trade or ordinary trade), coastal FDI has different impacts on the economic growth of inland provinces.     

Value,Structure and Spatial Distribution of Interprovincial Trade in China

This study uses two different datasets to explore the stylized facts of interprovincial trade in China during the recent two decades. One dataset provides the magnitude of bilateral interprovincial goods trade calculated using firms' value‐added tax invoices. The other supplies estimates of interprovincial trade using provincial input–output tables. We find that China has both a large value and a high growth rate of interprovincial trade, but there still exists a home bias in internal trade for most provinces. In addition, disaggregation by product shows that the manufacturing sector has the largest share of interprovincial trade and this share continues to grow. Finally, the spatial distribution of trade suggests that all provinces can be clustered into a smaller number of trade areas with large intra‐cluster trade. Therefore, China's central government should make more effort to reduce local protection, stimulate domestic demand and coordinate interregional trade among local jurisdictions.