Decomposition of the increase in earnings inequality in urban China: A distributional approach

This study examines changes in Chinese urban income distribution from 1987 to 1996 and 1996 to 2004 using nationwide household data and investigates the causes of these changes. The Firpo, Fortin, and Lemieux (2007, 2009) method based on unconditional quantile regressions is used to decompose changes in income distribution and income inequality measures, such as variance and a 10:90 ratio. The decomposition results show that wage structure effects, such as a widening gender earnings gap, increases in returns to college education, and increases in earnings differentials between industries, company ownership types, and regions, have been the major contributors to the overall increases in income inequality. It was also found that at different points on the income distribution (e.g., the lower or upper half), the contributing factors that increase income inequality are different.     

A political economy analysis of the Korean economic crisis

This paper analyzes the causes of the Korean economic crisis from a political-economic perspective. The author points out that the economic causes which had been mentioned often such as overvalued won exchange rate and moral hazard of financial sector and corporate sector, have political origins. If the Korean economic crisis was caused by political economic factors, structural reform of the economy alone is not sufficient for economic recovery. Therefore, this paper argues, the behaviors of politicians, bureaucrats, and interest groups had been influential for resource allocation in the Korean economy. It concludes that the self-interest seeking activities of various interest groups should be properly controlled.     

A new anatomy of the retirement process in Japan

In Japan, retirement is a gradual process that transpires over a particularly long period of time. Using large scale micro-level datasets from the Survey of Employment of the Elderly compiled by the Japanese government, we provide some stylized facts on the development of retirement behavior since the 1980s and explore factors affecting the individual retirement decision. First, we observed a general declining trend in the proportion of retired individuals aged 55–59 (especially females) while the proportion of retired individuals aged 65–69 (especially males) increased. Second, the survival analysis on actual retirement age shows that those who are more educated are more likely to retire earlier and those who experienced mandatory retirement are less likely. Third, the survival analysis on the expected retirement age shows that individuals who are satisfied with their job in terms of nonmonetary rewards are less likely to retire earlier.     

Can inflation targeting regimes be effective in developing countries? The Turkish experience

This paper examines the performance of Turkey's inflation targeting (IT) experience. We find the IT regime to be an effective framework. Our judgment is based on three broad conclusions supported by empirical analyses. First, fiscal stability is an effective tool for a successful monetary policy. Second, the overnight policy of the Central Bank of Turkey rate is a significant determinant of the changes in market lending rates, which is the preliminary step in the monetary transmission mechanism. Third, recent developments on the broader issue of the effectiveness of interest rate policy in controlling inflation through aggregate demand management and through other channels are encouraging. Based on our findings, we argue that the impact of policy rate changes on economic activity and inflation have become more predictable and changed in the direction in line with theory, improving the transmission capacity of monetary policy.     

The search for determinants of catching up: Theory, the East Asian experience and the Chinese case

This paper aims to develop a framework to identify the key determinants of a country's growth in late development and apply the framework to analyze the case of China. I analyze the possible necessary and sufficient conditions for catching up. The analyses suggest that an adequate location, initial human capital and institutional arrangements are among the key determinants; for the majority of developing countries, institutional arrangements alone dictate catching up or not. If the institutional arrangements are efficient, then a follower can achieve what I term long-term potential growth rate provided that there exists an adequate location and initial human capital. The experience of Japan and the East Asian newly industrializing economies is evaluated in the framework. Based on the framework of catching up and the experience of East Asia, the Chinese case is analyzed. The analyses suggest with high probability that China will sustain high growth and get close to its long-term potential growth rate in the coming decades: 7–10% annually in the next 15 years and 5–7% annually in the following 15 years.     

A note on the CERU-MoA grain farm household survey in China

During the period 1994–1995 the Chinese Economy Research Unit (CERU), University of Adelaide, Australia and the Department of Policy, Reform and Law, Ministry of Agriculture (MoA),¹ the People's Republic of China, jointly designed and conducted an annual sample survey of about 1000 farm households in five Chinese provinces: Guangdong, Jilin, Jiangxi, Sichuan and Shandong. The CERU-MoA survey is a part of the ACIAR (Australian Centre for International Agricultural Research) project on China's grain production and marketing during 1994–1996.² Based on this survey a large database has been established which contains cross-household data on population and labour, land, grain production and marketing, food consumption, income and related policy issues.³     

Chinese wool auctions: Failed agribusiness reform or future marketing channel?

The spectacular though short-lived operation of China's wool auctions graphically illustrates problems in reforming China's agribusiness sector. A selective coverage of product type and participants, a highly contrived process of price discovery, and an urgent need for parallel reform in related areas all led to the demise of the auctions and are a barrier to their re-emergence as a viable wool marketing channel. Despite the challenges facing wool auctions, this paper argues that they still have much to offer the marketing of wool in China.     

How are China''s state-owned enterprises doing in the 1990s? Evidence from three interior provinces

Since its inception in the early 1980s, the success of China's enterprise reforms remains hotly debated. This paper introduces a new element into the analysis of state-owned enterprise performance by drawing on the recent increase in inter-regional income disparities. It is argued that as a result of less favourable structural conditions and stronger fiscal dependence on the central government, reform implementation in the interior provinces has lagged behind the progress made along the coast. This hypothesis is investigated using enterprise survey data from three interior provinces which is compared to a similar survey carried out earlier in four coastal cities. The evidence generally supports the view of larger administrative restrictions in the interior and relatively poor economic performance.     

Production sharing and trade flows: A comparative analysis of Japan and the US

This paper examines the determinants of trade flows in parts and components related to global production sharing in machinery industries, using a newly compiled panel dataset for Japan and the US over the period 1988–2005. The findings show the importance of labour costs, and the quality of the legal system and physical infrastructure in attracting production sharing, as suggested by theory. It is also found that US production networks in the electronics industry have a regional focus on Asia, while those in the automobile industry are concentrated in North America. On the other hand, Japanese production networks in both industries are concentrated in Asia.     

Cost heterogeneity and the destination of Japanese foreign direct investment: A theoretical and empirical analysis

This paper first of all develops a Cournot oligopolistic model with heterogeneous firms to examine each firm's choice between export-oriented foreign direct investments (FDI) and FDI to serve the host-country market. It is shown that there exist a critical level of efficiency such that all firms below that level choose the former and those above it the latter. The hypothesis is tested using firm-level data on 118,300 Japanese firms covering the entire manufacturing sector. Multinomial logit estimates strongly support our theoretical findings.     

Global outsourcing or foreign direct investment: Why apple chose outsourcing for the iPod

A simple model is presented, where a firm's productivity is endogenized by its R&D investment. It shows that the most productive firms may prefer international outsourcing to foreign direct investment (FDI) in industries with a high innovation share. The high innovation share motivates the firms to economize on organizational cost in order to save resources for R&D investment, making outsourcing preferable to FDI because the former incurs a smaller organizational cost. This model helps explain why Apple Inc., belonging to the electronics industry, which has a particularly high innovation share, launched its innovative iPod through international outsourcing instead of FDI.     

The usefulness of earnings versus book value for predicting stock returns and cross corporate ownership in Japan

Using a sample of Japanese firms, this paper evaluates the usefulness of the two fundamental products of an accrual accounting system, namely accrual earnings and book value of equity for predicting stock returns. Our analysis shows that both earnings and book value for Japanese firms have the ability to provide for profitable trading strategies or improved portfolio decisions, and that relative to the trading strategy based on earnings or book value alone, the trading strategy based on a combination of both earnings and book value generates substantially higher returns for all cases. This suggests that book value (or earnings) captures certain aspects of equity values that are not captured by earnings (book value). Our multivariate regression results further indicate that the predictive ability of earnings is dominated by that of book value. Finally, it is found that the predictive ability of book value is sensitive to the degree of cross corporate ownership, while it is insensitive to the degree of real estate holding.     

Relationship regarding the demand for labor between domestic temporary and foreign workers: Korean case

With the progress of globalization, South Korea, one of the emerging industrial countries, has recently witnessed a sharp increase in the number of enterprises that employ foreigners. However, there are only a limited number of studies on the influence that such an increase has had on the labor market in the Republic of Korea. Thus, using ‘Workplace Panel Survey’ data surveyed by the Korea Labor Institute (KLI), this paper examines the relationship concerning the labor demand of an establishment between domestic temporary and foreign workers. Analysis using a bivariate Tobit model shows that a typical Korean firm attempts to employ domestic temporary and foreign workers simultaneously. Further, the empirical analysis found that any establishment that is relatively newly established and has difficulty in recruiting domestic workers hires foreign workers, but there is no evidence that establishments hire foreign workers rather than domestic temporary workers to save on the production cost.     

China's grain marketing system reform in 1993–1994: empirical evidence from a rural household survey

By utilizing a rural household survey, this paper domonstrates the progress in China's grain marketing reform in 1993 and evaluates to what extent the reform was reversed in 1994. Specifically, we investigate the degree of commercialization, changes in state's contract procurement quota and changes in the marketing channels. Overall, the grain market has been liberalized to a very large extent. Participation of the private traders have already grown to a significant level, occupying more than one-third of the market share for wheat and rice and more than half for maize. For minor crops, the share of private traders were even bigger. Despite the reversal in 1994, the grain market was still very “open.” Counting all grain types, the state was controlling only about one-third of the marketed surplus. However, if the central leadership perceived any serious instability in the market for a certain grain, examples provided illustrate how the state's control could certainly be strengthened significantly.     

Fiscal policy switching in Japan, the US, and the UK

This paper estimates fiscal policy feedback rules in Japan, the United States, and the United Kingdom for more than a century, allowing for stochastic regime changes. Estimating a Markov-switching model by the Bayesian method, we find the following: First, the Japanese data clearly reject the view that the fiscal policy regime is fixed, i.e., that the Japanese government adopted a Ricardian or a non-Ricardian regime throughout the entire period. Instead, our results indicate a stochastic switch of the debt-GDP ratio between stationary and nonstationary processes, and thus a stochastic switch between Ricardian and non-Ricardian regimes. Second, our simulation exercises using the estimated parameters and transition probabilities do not necessarily reject the possibility that the debt-GDP ratio may be nonstationary even in the long run (i.e., globally nonstationary). Third, the Japanese result is in sharp contrast with the results for the US and the UK which indicate that in these countries the government’s fiscal behavior is consistently characterized by Ricardian policy.     

Restructuring of financial institutions and the corporate sector in Korea

This paper explores causes of the Korean currency crisis which started in November 1997. This paper also presents restructuring proposals and introduces the progress made so far. The urgency for quick restructuring and the necessity of the injection of money from both the government and foreign investors are emphasized. Restructuring of financial and corporate sectors should be pursued simultaneously. In the financial sector, the restructuring of banks should take precedence over other financial institutions. The key task in terms of bank restructuring involves the resolution of bad loans, recapitalization and the expedited reorganization of nonviable banks. Corporate reform is also important. Banks should play a central role in corporate workouts, especially in lowering excessive corporate debt and triggering corporate restructuring based on core competence. Transparency of corporate management, internationally accepted accounting practices, fuller disclosure requirements and stronger monitoring by minority shareholders are prerequisites for effective market discipline. Reform of ownership and governance structure are also important in enhancing managerial accountability of corporates as well as financial institutions.     

Productivity growth, technological progress, and efficiency change in chinese agriculture after rural economic reforms: A DEA approach

This study applies a data envelopment analysis (DEA) approach to analyze total factor productivity, technology, and efficiency changes in Chinese agricultural production from 1984 to 1993. Twenty-nine provinces in China were classified into advanced-technology and low-technology categories. The Malmquist (1953) productivity measures were decomposed into two components: technical change index and efficiency change index. The results show that total factor productivity has risen in most provinces for both technology categories during the 1984–1993 period. Technical progress was mostly attributed to Chinese agricultural productivity growth after the rural economic reforms. The deterioration in technical efficiency in many provinces indicates China has great potential to increase productivity through improved technical efficiency. Enhancing rural education and research and development (R&D) in agriculture may also help farmers to improve technical efficiency and productivity in agricultural production.     

Understanding openness and productivity growth in China: An empirical study of the Chinese provinces

This paper investigates the effects of openness on China's regional productivity growth. We build a model of technology diffusion in which follower economies achieve productivity growth by taking advantage of technology spillovers from the world technology frontier. We hypothesize that China's regional productivity growth is a positive function of regional openness and a negative function of the current level of regional productivity. Empirical analysis in this paper focuses on how openness affects productivity growth in the Chinese provinces. We examine two effects of openness on regional productivity growth in China: the direct growth effect and the convergence effect. By using a variety of panel data regression techniques, we show that the direct growth effect of openness is the main effect while the convergence effect is insignificant. The findings of this paper lend strong support to the claim that the opening-up of China promotes the country's economic growth.     

Entrepreneurship and business culture in Japan and the U.S.

It seems to me likely that entrepreneurship will take a different path in Japan than it has in the U.S. Given the prominence of large organizations in key areas of Japan's economy and the emphasis its society places on lifetime employment relationships, many of the “startups” of the sort that transformed the American business are more likely to happen within existing firms rather than as new enterprises. Such development, called “intrapreneurship” in the U.S. requires new institutional structures and rewards. Such changes will not come easily, because they run against the grain of Japanese society and business culture, yet I believe that success will come to those who can execute such strategies.     

A decomposition analysis of income inequality of Chinese rural households

This paper reports an application of household survey data collected from grain producing areas in five provinces of China to issues of the determinants of rural inequality. Previous studies suggest that non-agricultural activities have been the major cause of rural income inequality, which has important implications for policy formulation. However, our results show that inequality within the grain producing areas was also very high, with differences in crop income as the major source of inequality. The policy implications are also different from those of previous studies. While some suggest that an increase in agricultural income can reduce inequality, our results indicate that this is not universally true. In some cases, whether the increase in crop income has come from state procurement also matters. These results call for a more cautious and area-specific approach to policy formulation as far as inequality is concerned.