Abstract：A notable hysteretic downward movement of the interest rates was observed when the money market rates underwent big fluctuations in 2013, which was hard to be explained by the traditional framework of liquidity supply and demand analysis.This paper, based on the assumption of the diversification of banks, the uncertainty of shocks and the inadequate availablity of central bank liquidity support, formulates an analysis framework from a micro perspective incorporating money market interest rates, the liquidity supply and demand, and the central bank liquidity management, and also conducts empirical studies based on Chinese date to reach the conclusion: once the money market rates breach the reasonable upper limit, the central bank should immediately supply massive liquidity up to the threshold to bring down the interest rates instantly.And the central bank can use the Standing Lending Facility(SLF) as an appropriate interest rate policy instrument to directly regulate money market rates, thus requiring enhanced transparency and applicability of the SLF.
Key Words：Money Market Rates；Supply and Demand of Liquidity；Central Bank, Liquidity Management
JEL Classification：E43,E52,G10

Abstract：We analyze the distribution of de facto political power for each region at the beginning of the state as the heritage of China‘s Revolutionary War, and show that this initial distribution of local de facto political power has long-run impacts on subsequent economic growth.We measure the local and central de facto political power in terms of informal relationships, and test our hypothesis by using a sample of China’s 29 provinces from 1952—2008-We find that the interaction between local de facto political power and efficacy of formal institutions explains the dynamics of regional disparity among regions.Regions where initial de facto political power was biased towards grass-roots cadres and other elites, performed with no difference before the early 1970s, but since then started growing at higher rates after a sudden drop in efficacy of de jure institution.
Key Words：De Facto Political Power; De Jure Institution; Informal Relationships/Connections; Economic Growth
JEL Classification：N15, O10, P16, R11

Abstract：“Controlling leverage” has become one of the key goals of China‘s central bank in recent years, along with “maintaining a stable growth”.This paper builds a DSGE model incorporating financial sector and central bank, which optimizes broad money growth under the dual goals of “controlling leverage” and “maintaining a stable growth”.This paper finds that the optimal money growth under the dual goals is affected by various factors, and the effects of controlling leverage by relying solely on central bank may not be satisfactory and often unstable with high sensitivity to changes in other parameters.As a result, relying monetary authority alone to pursue these two goals at the same time would increase the risk of policy error.Other measures, including structural reforms, are necessary to effectively resolve the elevated leverage ratio.
Key Words：Leverage; Optimal Money Growth; DSGE
JEL Classification：  E51, E52, E58, E61

Abstract：Available literature mainly uses statistical methods to determine the capital depreciation rate in China, and few scholars use econometric method to estimate capital depreciation rate.We use maximum likelihood method based on the production function to estimate China’s constant and variable capital depreciation rate, and measure 1978—2012 China‘s capital stock.First, using the method of growth rate and econometric method, we estimate initial fixed capital stock in 1978, then four models estimating capital depreciation rates in China are built by the production function.By 1978—2012 GDP etc data in China, maximum likelihood method is used to estimate them.The results are: labor elasticity coefficient is 0.4; constant capital depreciation rate is about 5.65%; variable capital depreciation rate is related with the growth rate of GDP, and emerges structural changes in 1993-Mean value of variable depreciation rate is 5.63%.In order to test a small sample reliability of maximum likelihood estimation, we use Monte Carlo method to estimate the parameters.Parameter estimation of four models is unbiased and credible.Using estimated capital depreciation rate, we estimate 1978—2012 capital stock in China.Our estimated capital stock is between the available literature estimates of capital stock.Finally, we make the summary of this estimated depreciation rate of fixed capital model and make recommendations.
Key Words：The Initial Phase of Capital Stock;Maximum Likelihood Method;Variable Capital Depreciation Rate;Capital Stock
JEL Classification： C14, E22

Abstract：Development of service industry, especially the modern service industry, has been a key of economic transformation and industrial upgrading.However, Baumol-Fuchs Hypothesis still dominates in academia, i.e.low productivity in service sector, and vigorously developing service sector will pull down the overall economic growth.Therefore, with the aid of the innovation of methodology we use the interprovincial panel data from 1998 to 2012 to measure productivity and its change in service and industrial sector.Conclusions show: service sector productivity(efficiency) is higher than the industrial sector’s on average, but TFP growth in service sector is less.However, in recent years, the service sector TFP growth has a tendency to catch up with industrial sector, which suggests the Baumol-Fuchs Hypothesis does not hold in current China.In addition, industrialization has a positive impact on productivity, but little effect on TFP growth.
Key Words：Service Sector Efficiency; Productivity; Directional Distance Function; Environmental Constraint; Industrialization
JEL Classification：C67, Q01, L80

Abstract：Whether Institutional investors play a positive role in stabilizing the market has always been a hot problem within the academic and business.Taking into account of the endogenous problem between the stock selection preferences of institutional investors and stock volatility, this paper uses propensity score matching methods to pick out stocks with lower institutional ownership but very “similar” to the stocks which with higher institutional ownership and examines the impact of China’s institutional investors on the market volatility from the micro perspective.The analysis finds that:(1) institutional investors prefer investing companies with good financial conditions and effective corporate governance, and such company stocks tend to exhibit lower volatility.(2) During the rising phase of the market, institutional investors increased the volatility of the stock, while during the decline stage, although institutional investors reduced stock volatility, failed to stop the stocks price going downward.(3) Furthermore, there is a strong positive relationship between institutional investors buying behavior and stock gains in the corresponding period.But stocks with higher institutional ownership showed no higher rate of return in the lag period, which seems to imply that the individual investors who want to follow the institutions trading may have missed the best buying time.
Key Words：Institutional Investors; Volatility; Propensity Score Matching
JEL Classification：G11，G23

Abstract：The minimum wage has evolved over the history and became a widely applied institutional arrangement in the real world.Taking into consideration the possibility of market shutdown caused by workers‘ social actions，this article builds an infinite horizon dynamic game model between workers and capitalists, and offers an political economic explanation for the minimum wage.The basic model shows that, comparing to the case where there is workers’ social actions but not minimum wages, the minimum wage enforced by the government may not only raise the welfare of workers, but also that of capitalists under certain conditions, which means the realization of Pareto improvement.We then introduce influencing factors including the possibility of split inside the workers‘ group, economic fluctuation and the partition between skilled and unskilled workers, and analysis their effects on our main conclusions.
Key Words: Minimum Wage; Employee-Employer Relations; Social Action
JEL Classification：I38, J58

Abstract：China has become the third largest source of outward direct investment(ODI).This paper studies how institutions in the host countries affect the location choices of China‘s ODI.Based on a deallevel sample from 2002—2011, this paper empirically tests how political institutions, political stability, government effectiveness, regulatory quality, rule of law and corruption control in the host countries affect the location choices of China’s ODI. On top of these institutional factors, we study the effects of tax evasion and natural resources in host countries, and their interactions with the institutional factors.We find that political institutions in the host countries are not major concerns of the ODI, while government effectiveness, regulatory quality, and corruption control have significant effects on the locations of ODI.And China‘s ODI tend to avoid countries with strict legal system.Tax evasion and resources are also major motives of China’s ODI.General institutional quality and tax evasion are substitutes in China‘s ODI location decisions.
Key Words：China; ODI; Institutions; Tax; Resources
JEL Classification：F21, F23, O53

Abstract：Industrial policy has always been an important tool for the Chinese government to control and stimulate the economic activities.Based on a unique trading dataset provided by the Shanghai Stock Exchange, this article explores the linkage between national emerging and strategic industrial policy and the financial market, in particular how the policy announcement may affect asset prices and investors’ investment behavior.We find that abnormal returns can be achieved within two weeks after the announcement but gradually decrease until they totally disappear after eighteen months.The reason for this temporal price effect is because the information about industrial policy is released over time.Institutional investors can benefit from their comparative advantage in analyzing public information and exploit of other investors‘ overreaction to stale news.Retail investors may lose money because of the resulting return reversal.As a result of all these, those firms that are supposed to benefit from the industrial policy cannot obtain long-term and stable financing from the domestic stock market.
Key Words：Industrial Policy; Stale Information; Overreaction
JEL Classification：G12, G14

Abstract：This paper, using the data of CHNS 2000—2009, explores the multidimensional poverty of laborers, which is income, health, education, medical care in 9 Chinese provinces.Furthermore, we comparatively analyze the situation of multi-dimensional poverty for rural migrant workers and urban local laborers.The authors highlight marketization and use the process of marketization to explain the decline of workers’ multi-dimensional poverty.The authors evaluate the trends of returns to education for both rural migrant workers and urban local laborers using the Heckman two-step econometric method, and then compare the total returns to education for the above two cohorts during the latest one decade.This research indicates that the situation of rural migrant workers‘ multidimensional poverty is more serious than that of both the average laborers and urban local ones.The poverty of income and education contributes to migrant workers’ multidimensional poverty; in particular, education contributes increasingly more to the poverty.Rural migrant workers’ returns to education are lower than that of urban local laborers.In recent years, the gap of returns to education between the two cohorts is increasing.In terms of lower returns of education, rural migrant workers‘ rational choice is to reduce education inputs for themselves, and the lack of incentive to education inputs is disadvantaged to accumulation of their human capital.Facing transformation and upgrade of Chinese economy, rural migrant workers multidimensional poverty are worsened, which are likely to impede migrants‘ agglomeration into cities.
Key Words：Rural Migrant Workers; A-F Multidimensional Poverty Measurement; Multidimensional Poverty; Marketization; Returns to Education
JEL Classification：O15, I24, R23