Abstract:This paper establishes a model in which the population and economic growth are endogenous by introducing parents’ altruism and intergenerational transfer. The evolution of inequality is then determined by the different choices of fertility and education of families with different income. We then study the long-run effect of public education and social security on economic growth and inequality. The analyses suggest that public education could promote economic growth and decrease the population growth, but has little effect on the income distribution. However, social security is a good tool to decrease the degree of inequality, but has a negative effect on economic growth.
Key Words:Public Education; Social Security; Economic Growth; Inequality

Abstract:What factors have led to the China’s regional growth differences and regional disparities? From the perspective of ownership structure,we examine the historical factors’ impact on the regional growth trajectory. We find that, in the process of transition, the regional ownership structure plays a key role in the regional economic growth. Regions with high proportion of initial state-owned economy may lock into “historical lock-in effect”, but that regions with low proportion of initial state-owned economy may grow rapidly. Using China’s provincial data(1985—2008), we find that the higher the proportion of initial state-owned economy, the lower the average growth rate of subsequent years. The decreasing of state-owned economy proportion promote regional economic growth significantly. This paper points out that inter-regional “economic convergence” need “the convergence of the ownership structure”. High proportion of stateowned economy in middle and west regions is of both “disadvantage” and “advantage”,we can change “disadvantage” into “advantage” through changes in ownership structure and achieve economic catch up.
Key Words:Ownership Structure; Polarization Effect; Growth Differences; Regional Economic Disparities

Abstract:Adopting China’s monthly macroeconomic data, we set up seven variables SVAR model, which reveals that there are liquidity effects in the second and third industry, but no effect in the first industry under quantitative expansionary monetary policy shock; investment in the first industry firstly declines then increases, and investment in the second and third industry firstly increases then declines, resulting in the industrial investment structure adjustment in the short-run. Considering China’s interest rate regulation, the paper develops a sticky-price monetary business cycle model with investment gestations lags, investment adjustment cost and habit formation in consumption that assistant generating an empirically plausible industrial liquidity effect and investment effect. The China’s monetary policy mechanism analysis finds that under interest rate regulation, the main mechanism is interest rate channel or credit ration depends on whether lending interest rate is binding or not, firm’s profitability and credit demand; the differences in industrial investment gestation lags, especially in time-to-build and time-to-plan is the critical ingredient for the above industrial liquidity effect; the role played by investment adjustment cost and habit formation is mainly to deepen and make more persistent and existing industrial liquidity effect and investment effect.
Key Words:Industrial Investment Structure; Interest Rate Regulation; Investment Gestation Lags; Liquidity Effect; Quantitative Monetary Policy

Abstract:This paper cast, the Schumpterian growth model into a discrete-time frame work, and analyzes the supply and demand of the capital in the process of innovation. For the later-developing countries, the income of the resident is relative lower, and so is the social total saving. However the catch-up strategy needs intensive capital investment. These two constraints necessitate financial regulation which characterized by low interest rate and credit rationing. On the other hand, low interest rate and inefficiency of enterprise lead to overinvestment, and bring the economy into the trap of poor efficiency and extensive economy. The fundamental way to transform development mode is to take market-oriented financial reform.
Key Words:Technology Progress; Endogenous Growth; Financial Regulation; Innovation Efficiency

Abstract:In recent years, frequent public financing of China’s banks have enriched the capital and reduced business risk, but it also brings excessive credit expansion and has a negative impact on monetary policy transmission mechanism. This paper reviews the relevant research literature, and then builds a bank credit transmission channel theory model. After the modification of Gunjia & Yuan (2010) model, this paper uses econometric analysis based on statistical data. The result shows that the lending behavior of banks are significantly affected by the public financing of banks, and the effectiveness of bank credit channel of monetary policy transmission mechanism is limited.
Key Words:Bank; Public Financing; Credit Expansion; Monetary Policy Transmission Mechanism

Abstract:China’s monetary policy framework is in the transformation from quantitative orientation to price orientation. A fundamental factor for this transformation is indentifying a comprehensive indicator of monetary policy stance other than M2. This paper conducts both theoretical and empirical analysis and proves that the issuing rate of central bank bills can act as a comprehensive indicator for both the quantitative and price-oriented monetary policy tools. It has an ideal measurability, controllability and relativity as a comprehensive indicator for monetary policy stance. It is better than quantitative indicators including incremental RMB loans and M2, and is also better than price-oriented indicators such as SHIBOR and official deposit interest rates. Further test indicates that the influence of monetary policy to production leads its influence on price, which is a good explanation to the current path of output and inflation in China. The test also indicates that monetary policy’s influence on lending is faster than on savings, therefore proves that it is appropriate for monetary policy to target at credit growth. In addition, the time lag of monetary policy is very important, and the central bank shall not adjust monetary stance only based on the path of inflation. In the future, the central bank can improve the term structure of central bank bill rates in the framework of interest rate liberalization combined with the exchange change rate reform.
Key Words:Central Bank Bill Interest Rate; Monetary Policy; Interest Rate System

Abstract:Fiscal-decentralized and multiple-ethnic countries usually use the intergovernmental transfers for ethnic regions to relief ethnic conflicts and reduce regional differences. This paper sets up a simple theoretical model to interpret the equalizing effect of fiscal transfers for ethnic regions, based on which we then use both the county-level and province-level data in China over the period 1993—2003 to test the theoretical findings by using the method of DID with propensity score matching. The empirical results are robust and our main findings are as follows. (1) Fiscal transfers for ethnic regions significantly improve both level and composition of ethnic regions’ spending. However, we find evidence that the improving effects above do not increase along time. (2) Fiscal transfers for ethnic regions do not significantly reduce the gap of economic development between ethnic regions and others. The findings aforementioned imply that intergovernmental transfers like transfers for ethnic regions display the equalization effect in the development countries like China, while the extent is limited. 
Key Words:Intergovernmental Transfers; Equalization Effect; Ethnic Regions; Propensity Score Matching; Difference-in-Differences

Abstract:This paper studies the relationship between changes of credit ratings and earnings management, by using all listed firms with credit rating during the period of 2006 and 2010 in China. We find that compared to firms without credit rating changes, firms with an upgrade of credit rating exhibit lower degree of upward earnings management in the year prior to the change of credit rating. State ownership, however, weakens the negative relation between upgrade of credit rating and upward earnings management. Furthermore, the results show that external financing needs enhance the monitoring role of rating agencies on earnings management. Ex ante, firms will adjust their earnings management behavior. When they have ratings with a plus or minus specification that are near a broad credit rating change, non-state-owned firms and firms with external financing needs tend to have lower level of upward earnings management. Overall, upgrades of credit ratings motivate firms to reduce earnings management.
Key Words:Credit Ratings Changes; Earnings Management; State Ownership; External Financing Needs

Abstract:Wage is almost the most important way to motivate employees, and also could be one way to hurt shareholders’ value. By studying the change of employee wage during CEO turnover, we analyze that how corporate politics based on implicit contract are formed and their consequences. It is found that the higher the level of employee wage in previous period, the less likelihood that CEO change in following period. In the first year of new CEO, employee wage has a significant growth, and this effect is more pronounced for firms if their new CEOs are from outside. When we separate wage growth into two parts, the formal part and the informal part. The formal part is more likely determined by firm’s efficiency factors, and the informal part is more likely determined by firm’s political factors. We find that the formal part of wage growth has a positive effect on future performance, while the informal part has a negative effect on future performance. This indicates that new CEOs may increase wages to please the employee to protect their position at the cost of shareholders.
Key Words:CEO Turnover; Employee Wage; Implicit Contract; Corporate Politics

Abstract:Through a four-sector endogenous growth model based on product-adding innovations, this paper puts systematically forward a theoretical interpretation on how natural resource exploitation affects regional technological progress and economic growth, and discusses the appearance condition and mechanism of resource curse. Further, we also verify empirically theoretical propositions by using static and dynamic panel data at the China’s cross-province level. 
Key Words:Natural Resource Exploitation; Technological Progress; Endogenous Growth; Resource Curse; Allocation Efficiency of Production Factors

Abstract:This paper follows the controversy regarding the effects of stronger intellectual property rights (IPR) on technological innovation under the North-South analytical framework. Using panel data from 27 developed countries and 57 developing countries, this study systemically examines the relationship between IPR and technological innovation after controlling for a potential endogenous problem. Our empirical results support the optimal IPR hypothesis. We find that the threshold effects of stronger IPR on innovation depended on the initial IPR level. Neither very strong IPR nor very weak IPR are conducive to innovation. Furthermore, the optimal level of IPR in developed countries is higher than that of developing countries; this difference implies that adoption of IPR standard of developed countries may be inefficient for developing countries. 
Key Words:Intellectual Property Rights; Technology Innovation; Optimal IPR; Endogenous Problem

Abstract:We have developed a theoretical model that incorporates trade, firm heterogeneity and quality upgrade into general equilibrium. This theoretical work has developed trade equilibrium models to formalize the role of quality as a determinant of trade patterns. The main objective of the present study is to explore the effect of trade liberalization on the level of quality-ladder as well as the firm heterogeneity. Firstly the level of product quality and the growth of intermediate goods trade are driven by reduction of trade cost from trade liberalization. Secondly this paper generates new insights on the effect of technology spillover and scale economy on the level of quality-ladder as well as the firm heterogeneity. In addition, we also confirm that quality upgrade is capital goods or machine intensive bias in developing country, and which is innovation or technology intensive bias in developed country.
Key Words:International Trade; Firm Heterogeneity; Quality Upgrade

Abstract:Classic stochastic orders were developed to consider decision making problems under risk and uncertainty, and had been used extensively in manny fields of economics and finance. However, in some specific fields, even a strong odering of two random variables ‘first stochastic dominance’ can be insufficient to ensure unambiguous conclusion. As a consequence, some strengthenings of classic stochastic orders have been introduced. This paper summarize refinements of classic first order stochastic dominance and second order stochastic dominance which have been used in games of incomplete information in recent literatures, and review the relations among all the orders introduced in this paper. Some applications of stochastic orders in auctions are given to show how stochastic orders can be used in games of incomplete information.
Key Words:Stochastic Order; First Price Auction; Equilibrium Strategies; Comparative Statics