How Does Transfer Pricing Risk Affect Premiums in Cross‐Border Mergers and Acquisitions?

This study investigates how transfer pricing risk affects the premiums in cross‐border mergers and acquisitions (M&A). Differences in the rigor of transfer pricing enforcement and the severity and clarity of rules across countries create differential risk of material costs for multinationals as they expand globally. We use 448 country‐level transfer pricing risk assessments by global transfer pricing partners and managers from two firms in 33 countries to develop a metric of country‐year transfer pricing risks. The resulting measure of transfer pricing risk is used to analyze the premiums of 3,103 cross‐border M&A from 2000 to 2012. We find that lower bid premiums are associated with higher transfer pricing risk in the target's country. We find the relation is stronger when expected future transfer pricing benefits are larger. Our results, consistent with the views of experts in the field, provide the first archival evidence that acquirers consider synergies created by future tax planning when estimating the value of a target.     

Does Cultural Distance Hinder Trade in Goods? A Comparative Study of Nine OECD Member Nations

We examine the effect of cultural distance, a proxy for the lack of a minimum reservoir of trust necessary to initiate and complete trade deals, on bilateral trade flows. Employing data for 67 countries that span the years 1996–2001, we estimate a series of modified gravity specifications and find that cultural dissimilarity between nations has an economically significant and consistently negative effect on aggregate and disaggregated trade flows; however, estimated effects vary in magnitude and economic significance across measures of trade and our cohort of OECD reference countries. The consistently negative influence of cultural distance indicates that policymakers may wish to consider mechanisms that enhance the build-up of trust and commitment when seeking to facilitate the initiation and completion of international trade deals. Our findings also imply that coefficient estimates from related studies that do not account for the trade-inhibiting effect of cultural distance may be biased.     

Do Islamic and Conventional Banks Really Differ? A Panel Data Statistical Analysis

This study compares two types of banks: conventional banks and Islamic banks. Indeed, since the aftermath of the credit crunch and the global financial crisis (2008–2009), the former have been severely criticized, while the latter are increasingly considered as an alternative form of banking. From a panel sample of twenty major banks (ten conventional banks and ten Islamic banks) located in various developed and emerging countries over the period April 2006- February 2013, the present paper examines whether or not there are significant differences between the two banking systems. Our sample enables us to compare these international banking systems, taking the crisis impact and new regulations and supervisory rules into account. To this effect, we carried out econometric analyses of univariate and multivariate panel data, which pointed to two interesting findings. First, there are only a few significant differences between IBs and CBs in terms of financial risk. Second, PVAR (Panel Vector Autoregressive) estimates and the analysis of Impulse Response Functions (IRFs) indicate weak interactions between IBs and CBs, while panel causality tests reject the causality hypothesis from IBs to CBs.     

Does Country Risk Promote the Informal Economy? A Cross-National Panel Data Estimation

This article investigates whether country risk plays an important role in determining the size of the informal economy. Using annualized panel data for a sample of 131 countries and regions covering 1999–2007, and controlling for a set of control variables, we find that country risk is a robust and significant determinant of the informal economy: a 1% increase in the country risk rating (decrease in the country risk) causes a 0.1% fall in the informal economy, and political risk has the largest effect, followed by economic risk. Moreover, the estimation results provide little evidence in support of an inverted-U relationship between urbanization and the share of the informal sector, which shed new light on the urbanization-the informal economy nexus.     

What are the Determinants of Large‐scale Farming in China?

The Chinese Government has increased its focus on expanding farm scale to promote agricultural development since 2010. A series of favorable polices has been adopted to support large‐scale farming. Using a multivariate probit model and 2015 and 2016 rural household survey data, the present paper examines the factors that influence small farmers' decision to become large‐scale farmers. The empirical regression results suggest that the decision to become a large‐scale farmer is significantly influenced by household human capital, cooperative membership, marketing channels, land‐transfer contracts and government policies. However, the influence of these factors differs with respect to becoming large‐scale grain and non‐grain farmers. These results imply that policy tools should target these factors and the appropriate group of small‐scale farmers. Generally, both central and local governments should promote large‐scale farming by enhancing rural households' human capital, improving marketing channels and providing agricultural social services, as well as encouraging returning migrant workers to engage in large‐scale farming.     

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.     

Actuality Analysis of the Development of Industry Association in China and its Countermeasures

With China＇s entry into WTO and the globalization of the market economy, changing the old management mode of administration of Chinese employer＇s organization as soon as possible and building the function mode of modem market mechanism have already, become the urgent task of China＇s economic reform and development. Based on the current situation of the development of industry association in China, this paper lists the problems and difficulties faced in the development of employer＇s organization at present and puts forward corresponding countermeasures and suggestions by analyzing the problems.     

On the Impact of Foreign Aid in Education on Growth: How Relevant Is the Heterogeneity of Aid Flows and the Heterogeneity of Aid Recipients?

This paper examines whether foreign aid in education has a significant effect on growth. We take into consideration the heterogeneous nature of aid as well as the heterogeneity of aid recipients—we disaggregate the aid data into primary, secondary, and higher education, and run separate regressions for low income and middle income countries. We find that the effect of aid varies by income as well as by the type of aid. Thus our results underscore the importance of the heterogeneity of aid flows as well as the heterogeneity of recipient countries when analyzing the effect of aid on growth. JEL no. F34, F35, I20, O19     

Home Market Effects of Foreign Trade in China＇s Manufacturing Sector： Analysis Using International Standard Industry Classification Panel Data

In this paper,we use 2002-2008 International Standard Industry Classification two-digit bilateral trade panel data for manufacturing industries in China and the OECD countries to test for the existence of home market effects.We find that significant home market effects exist in 8 out of 12 industries.These industries include the food,beverage and tobacco industry, wood products,the paper products and printing industry,chemical products,other nonmetallic mineral products,machinery and equipment,transport equipment,and miscellaneous products and waste resources recycling industry.Textile,clothing and leather manufacturing,oil refining and nuclear fuel manufacturing,rubber and plastics,and basic metals and fabricated metal products industries do not exhibit home market effects.Indeed, strong reverse home market effects occur for oil refining and nuclear fuel manufacturing and for the rubber and plastics industry.The empirical results reveal that certain industries benefit from new export opportunities due to the expansion of domestic demand in China.     

Does Education Still Pay Off in Rural China： Revisit the Impact of Education on Off-farm Employment and Wages

The present study considers how education affects off-farm job participation and wages. We use a nationally representative dataset from a survey conducted in 5 provinces, 101 villages and 808 households by the authors in early 2005. The empirical results show that educational attainment, skill training and years of experience of rural residents have positive, statistically significant effects on off-farm employment. The average return to a year of education is 7percent, which is higher than those observed in previous studies. We also find the return to an additional year of schooling to be higher for post-junior high schooling than for junior high and below schooling： 11.8 versus 3.2 percent. We conclude that not only does education still pays off in rural China, but also the rate of return to education is increasing over time.     

Analysis of the Changes in the Growth of Japan’s Direct Investment in and Trade with China

I. Relative Drop in the Proportion of Japan’s Direct Investment in ChinaCompared with the United States and the EU, Japan’s direct investment in China hasslowed down since 1999, with the relative real size of investment dropping. Table 1 shows that Japan’s direct investment in China was slightly more than that of the USA and much more than that of the EU before 1998. But in the ensuing five years from 1999 onward, the situation was reversed. The US direct investment in China rose …     

Does Human Capital Protect Workers against Exogenous Shocks? Evidence from Panel Data on South Africa during the 2008‐2009 Crisis

The financial and economic crisis of 2008 and 2009 took a heavy toll on the South African economy. The economy contracted for the first time since 1998 and entered recession during the fourth quarter of 2008. The gross domestic product contraction was soon transmitted to the labour market. Between the second quarters of 2008 and 2009, employment fell by 3.8%. However, not all individuals were hit with the same intensity. Using panel data from a quarterly labour force survey unique in the African context, we find that human capital (i.e. education as years of schooling and workforce experience) provided a buffer against the shock. After controlling for observable characteristics, education and experience showed the potential to entirely offset the effect of the recession on the likelihood of employment. This has important policy implications, as it strengthens the case for strategic investments in human capital and helps identify the unskilled as having the greatest need for social safety net interventions during a recession.     

Does contracting institution affect the patterns of industrial specialization in China?

This study evaluates the importance of contracting institutions as a source of comparative advantage across Chinese provinces. We find that industries differ in their reliance on relationship-specific investments. Provinces with better contracting institutions specialize in industries with more intensive relationship-specific investments. We implement two proxies to measure contracting institutions, including efficiency of the legal system and service of contract enforcement. The empirical results of this study indicate that contracting institutions play a role in shaping the patterns of industrial specialization. Specifically, the service of contract enforcement has the first-order effect on the patterns of industrial specialization in China; by contrast, legal jurisdiction plays a modest role.     

Does cultural identity facilitate cooperation?—Impact of business culture on boards and bank cooperation in Republican China

This paper studies the impact of cultural integration on business cooperation in the Republican Era. We collect the composition of bank boards and directors' biographical details of 28 principal banks in China, compiling a panel dataset from 1921 to 1936. The data allows us to classify directors' merchant groups, a typical cultural reflection, thereby calculating the cultural difference at the bank-pair level. Using the boards' cultural traits, we find cultural difference among bank boards is negatively related to their director-sharing decisions, an indicator of inter-bank cooperation. Also, cultural identity on boards facilitates banks to participate in loan syndicates with the yield and risk shared. Further composition tests show that cultural attitude towards clan orientation, trust and open spirit embedded in the business culture is the root of inter-banking cooperation. The finding reveals the importance of informal institutions in financial development and contributes to the debate on cultural and institutional bifurcation between China and Europe.     

A Brief Analysis on the Application of the Grammar Translation——Form the Perspective of Its Popularity and Adaptation in China

Proceeding from the historical retrospect of the Grammar-Translation Method, this essay clarifies its present application in China’s foreign language teaching and analyzes the reasons for its popularity and adaptation in China. Finally, some constructive suggestions are given on how to apply the Grammar’Translation Method more effectively and improve China’s foreign language teaching.     

A Panel Unit Root and Panel Cointegration Test of the Complementarity Hypothesis in the Mexican Case: 1960–2001

Using panel data, this paper tests whether public and private capital have a positive and significant effect on aggregate output and labor productivity for Mexico during the 1960–2001 period. The richer information set made possible by the sectorial data enables this study to utilize the methodologically sound “group-mean” fully modified ordinary least squares (FMOLS) procedure developed by Pedroni to generate consistent estimates of the relevant panel variables in the cointegrated production (labor productivity) function. The results suggest that, in the long run, changes in the stocks of public and private capital and the economically active population (EAP) have a positive and economically significant effect on output ( and labor productivity). The period is also broken down into two sub-periods: 1960–1981 (state-led industrialization) and 1982–2001 (neoliberal model). The estimate for the public capital variables clearly shows that it had a relatively more important economic effect during the earlier state-led period.

Does Manufacturer Advertising Crowd‐in or Crowd‐out Retailer Advertising? An Application of an Endogenous Prize Contest with Asymmetric Players

When a manufacturer advertises, what is the impact on retailer advertising? I analyze a contest model of advertising where total advertising by the manufacturer and by retailers determines market size, and the relative level of advertising by each retailer determines market share. If retailers are symmetric I show that there is a crowding‐in effect so increased manufacturer advertising increases retail advertising. But if one retailer is stronger, then marginal increases in manufacturer advertising have a crowding‐out effect on retailer advertising, while sufficiently large increases have a crowding‐in effect by “jump‐starting” competition between retailers for the larger market. Furthermore, asymmetric abilities in such contests can lead the weaker player to effectively drop out of the contest, thereby undermining the ability of increased prizes to increase effort by intensifying competition.