Abstract：Allowing all households to underreport all kinds of income and making no prior assumptions on underreporting parameters, this article first modifies the classical expenditure-based approach.It then estimates the extent of income underreporting in urban China, using official data from the Urban Household Survey between 2002 and 2009.It finds that the income underreporting exhibits two characteristics.Households with higher income tend to underreport more.The underreported amount varies as the components of income change, even among households with the same level of aggregate income.More specifically, property income is the most underreported item, followed by wages and salaries, and operating income.Transfers are the least underreported source of income.Taking into account the gap between concealed and “true” income, it then calculates the Gini coefficient of inequality in China.The Gini coefficient obtained stands at 0.45—0.51, well above the number released by the Chinese National Bureau of Statistics（0.31—0.34).The size of “black economy” in China as a result of underreporting amounts to 19 to 25 percent of its annual GDP over the period 2002—2009.
Key Words：Engel Law； Gini Coefficient； Size of Black Economy
JEL Classification：D12, D31

Abstract：We use a matched firm-employee data set of year 2009 from six provinces to examine the extent to which minimum wage policy is complied with.We find evidence that there is broad compliance with the monthly minimum wage in China.That is, compared to other developing countries we only find 2.1%—3.4% of workers earn less than the legal monthly minimum wage.On the other hand, we find evidence that there is substantial non-compliance with overtime pay regulations.Over 17% of the employees are paid less than 1.5 times the minimum wage for overtime work.In addition, firms did not comply the regulations very well that minimum wage does not include the employee payments to social security or housing provident funds in Beijing and Jiangsu.We also analyzed how minimum wage affected the wage of workers.There is a positive correlation between the minimum wage with the basic wage and overtime pay.On the other hand, we find that there is a negative correlation between the minimum wage with the bonus and subsidies.For most workers, the higher basic wage and overtime pay with lower bonus and subsidies cancel each other out and the minimum wage is not significantly correlated with the hourly wage.Only for workers in the most labor-intensive firms and HongKong, Taiwan, Macao Funded Firms are higher minimum wages significantly correlated with higher hourly wages.In order to get the expected effect, at first, minimum wage should be suitable, simple, and could be compared between different regions, and secondly law and regulations about overtime pay should be enforced.
Key Words：Minimum Wages； Overtime Pay； Compliance
JEL Classification：J81, J83, J88

Abstract：This paper explores the connections between two agglomeration patterns and wagelabor productivity with a perspective of spatial economics.We build a model to depict the chained links among several variables, the difference and endogenous change of labor skills, labor productivity and wage in two agglomeration patterns, specialization and diversity, based on imperfect competition of labor market. In our empirical works, we create the cross sectional correlation in panel data to measure the agglomeration economies that is believed unobservable so far with a data-driven way. We identify two Chinese provincial economies, Zhejiang and Gangdong, as two sample regions representing the two agglomeration patterns respectively. Using the panel data of manufacture industries of the two provincial regions from 2003 to 2010, we find that the more diversified a region's agglomeration, the higher the wage could be in the long run by PCSE.While in a specialized or less diversified region, wage growth might sacrifice labor productivity improvement.Besides, the effect of labor shortage on wage is insignificant when cross-sectional correlation is considered.There is a negative relation between firm size and wage level in diversity region, on the contrary, wage growth is beneficiary in large firm in a specialization-featured agglomeration region.
Key Words：Agglomeration Patterns； Specialization； Diversity； Wage； Labor Market
JEL Classification：R12, J31, J42, J61

Abstract：This paper introduces the technology transfer loss, the technology isomorphism in final product production, and the monotonicity property of technology isomorphism with respect to the optimal patent protection into a classical Romer model, and discusses the South's optimal patent policy and its impact on both North and South's economic growth.We show that the technology transfer loss, the technology isomorphism, and the monotonicity of technology isomorphism choice with respect to the optimal patent protection interact together and shape the relationship between the optimal patent protection and equilibrium growth rate, and determine the South's optimal patent protection, which is lower than that in the North.When the transfer loss is at the technology level, both the North and the South share the same growth rate while GDP per capita in the South is smaller, which is consistent with the relative convergence theory.When there exists the growth rate loss in the technology transfer, the South has a lower growth rate and has a quite lower GDP per capita, which is consistent with the polarization theory.Our conclusion implies that the traditional wisdom which claims that the South has no incentive to protect patent might be wrong, and associated trade and intellectual protection policies may damage both the South and the North's welfare.
Key Words：Patent Protections； Technology Isomorphism； Technology Transfers； Economic Growth
JEL Classification：F40, O34, O38

Abstract：We establish a dynamic stochastic general equilibrium business cycle model including two sectors：workers and entrepreneurs.In this model we distinguish the differences in preferences, consumptions, savings and propensities to investment among different agents.We divide the interest rates into saving interest rate, loan interest rate and marginal rate of return on capital.We study their equilibrium levels both in short run and in long run, and the interest rates which are implemented in reality.We give out the formation mechanisms of their biases and their effects on cyclical fluctuations.We also study the effects of interest rate distortion shocks on real economics.We find that the negative shock of real saving interest rate leads to the economic growth only within a limited level and in a very short term.In the long run, such a shock leads to a deeper depression and lows the average consumption level of the general workers' households, but increases the consumption of the entrepreneurs' households.Financial friction shock affects the growth trend in the long run.We find the crowding-out effect on investment accounts for 81% of one unit demand of financial sector, the crowding-out on the consumption of the general workers' households accounts for 18%, and the crowding-out on the consumption of entrepreneurs' households accounts for 1%.Overall, the lasting interest rate distortion enlarges the income gap, and it also increases the wealth disparity through the distortion of income distribution, then affects the potential power of economic growth in the long run.The interest rate distortion affects the long-run economy by two ways：the direct crowding-out effect on investment and the indirect effect on income distribution.
Key Words：Interest Rate Distortion； Financial Shocks； Financial Friction； Cyclical Fluctuation
JEL Classification：E32, E40, G28

Abstract：Inflation Targeting is a monetary policy pursuing long-term price stability, and more than 20 countries have adopted this monetary policy.This paper applies a novel non-experimental evaluation approach to examine the question of whether inflation targeting is an effective policy tool in emerging economies.We found that the synthetic control method can overcome the endogenous policy and the bias problem of sample selection, and evaluate the effectiveness of inflation targeting in different countries quantitatively；the inflation targeting can effectively reduce the rate of inflation, keeping the price long-term stable and economic development steady, and even with the exogenous shock, the countries applied inflation targeting got smaller increase of inflation rate.Although at present China does not possess the preconditions for implementing of the inflation targeting, the successful experience of some emerging countries can offer references for our monetary policy.
Key Words：Inflation Targeting； Synthetic Control； Monetary Policy； Economic Stability
JEL Classification：E52, E58, C99

Abstract：This paper studies the nonlinear regime switch characteristic of transmission channel of international factors to inflation by extending Gamber and Hung（2001) research frame.Based on this， we build data set of inflation factors and use nonlinear dynamic factor model to reveal the nonlinear transmission effects of international factors to inflation.The results show that international factor effects inflation through trade and capital channels.The transmission effects can be divided into common transmission effects and idiosyncratic transmission effects.Those transmission effects have nonlinear characteristic.With the economic restructuring of stimulating domestic demand slowly， the transmission effect of international factors to Chinese inflation will be weakened.All international factors can be synthesized six common factors.Currently， the international cost factor， international energy factor， international monetary factor and foreign trade factor have negative nonlinear transmission effects to inflation and the international cost factor and international energy factor have larger negative transmission effect than the others.The exiting of quantitative easing monetary policy of U.S.A， the rising of dollar index， the decline of raw material prices and energy prices of international will have negative nonlinear idiosyncratic transmission effect.On the whole， international factors have inhibitory effects to inflation.
Key Words：Inflation； International Factor； Transmission Effect； Economic Structure Transformation
JEL Classification：C32， E31， F23

Abstract：This paper analyses the influence of householders' personality traits on their household stock investment from an empirical perspective.Based on the cross-sectional data from the China Family Panel Studies in 2010 and 2012， this paper adopts the widely-accepted “Big Five” taxonomy（Conscientiousness， Extraversion， Agreeableness， Openness to experience and Neuroticism) and focuses on the fourteen factors subdivided from the five dimensions.Empirical results show that among householders' fourteen personality factors， the factor of “value” belonging to openness to experience exerts significantly and robustly positive effect on household stock investment.If householders have more open value， their families tend to invest more actively in stock market， with higher probability of holding stock， more amount of stock investment and higher proportion of stock in financial assets.Furthermore， the positive effects are not affected by the endogeneity problem caused by reverse influence of stock market investment on personality traits or by the influence of risk attitude which we cannot control for as an important explanatory variable in the regression due to data limitation.Therefore， government should take into consideration the influence of personality traits including “value” on the effect of the policy related to stock market investment.
Key Words：Personality Traits； Stock Market Investment； Endogeneity； Risk Attitude
JEL Classification：D80，G11，Z13

Abstract：Based on 2070 observations of a balanced panel data set from 2007 to 2011， we investigate whether China's H+A cross-listed companies get lower efficiency of capital allocation and then achieve lower market value because of greater government intervention.Adopting the method of parametric function of production， we apply the total factors productivity（TFP) and technical efficiency（TE) to measure the static efficiency of capital allocation.The dynamic efficiency of capital allocation is measured by total factors productivity growth（TFPG) and its sub-index——technological progress， scale economy change， and technical efficiency change.With the treatment effect model， we find that H+A companies have lower TFP， TE， and TFPG.Meanwhile， the lower TFPGs of H+A companies come from lower technological progress.The treatment effect model with interaction shows that the lower efficiency of capital allocation decreases the value of H+A companies.These results can be viewed as a cost of China's imposed institutional changes.
Key Words： Cross-listings； Government Intervention； Efficiency of Capital Allocation； Corporate Value
JEL Classification： G32， G31， G18

Abstract：This paper investigates the effect of turnover of local officials on issuance of local government debt in China.Using the data of the municipal investment bonds issued during the period from 2004 to 2012 in China， this paper finds that policy uncertainty caused by turnover of local official will adversely affect the frequency and scale of municipal investment bond issuance.In addition， such policy uncertainty will significantly increase the risk of the municipal investment bonds and thus significantly increase the debt issuance costs； and such effect will be enhanced if the risk of policy uncertainty increases.Furthermore， when cities are under higher pressure of repaying debts， the impact of policy uncertainty on the cost of issuing bonds becomes more significant.This study enriches our understanding of issuance of local government debt.
Key Words：Official Turnovers； Policy Uncertainty； Local Government Debt
JEL Classification：H60, H63, H69

Abstract：Government intervention has played an important role in almost every stage of China's economic development.China is now experiencing the transitional development， which is called “new normal” economy.Government still plays a leading role in guiding this new development. New energy industry， as the main driving engine for world economy in last decade， is also at the center of the strategic development in China.A series of government policies are carried out to stimulate the development of this new energy industry.In this paper， we want to discuss the policy effect on the development of new energy industry.As is well known， the government policies in encouraging the development of traditional industries usually focus on the supply side.The emerging industries like new energy industry is essentially different from the traditional counterparts， what of interest is whether such interventions still works well in this new industry.However， relevant existing literature mainly focuses on traditional industries as research objects， rather than emerging industries， which bears different characteristics such as high technology products and immature consumption market.These limitations motivate us to study the government policy effect on the emerging industries， in this paper， we propose an enterprise behavior model concerning firms' reaction to production subsidies and demand subsidies provided by the government under the consideration of characteristics of emerging industries.We further use econometric analysis to evaluate the impact of industrial support on corporate profit and R&D investment of enterprises in emerging industries by using Chinese listed companies' data to prove theoretical conclusions.Results show that：（1) during the start-up periods， government encouraging policy can help to build emerging industries' advantage in profit；（2) after industry expansion， due to weak market foundations， subsidies can hardly create incentives for R&D investment in enterprise level， which will lead homogeneous competition.Overproduction is the direct consequence.Therefore， the realization of original innovation and market cultivation will be the key point of future policy adjustment.
Key Words：Innovation-driven； Market Cultivation； New Energy； Propensity Score Matching
JEL Classification：L25， L52， O31

Abstract：High-tech enterprises always have trouble on bank lending， due to asymmetric information， which is more severe in transition economic conditions like China.There is some market failure though the market mechanism plays a decisive role on rationing credit resource.Meanwhile， supporting behaviors to high-tech enterprises， act by the government who is an independent third party in the market， may have a certification effect.The supporting behaviors could be a signal to relieve information asymmetry and make high-tech enterprises more credible.We identify and verify whether the government's supporting behaviors could play as a signal in hightech enterprises' bank lending process by combining methods of theoretical deduction and mathematical analysis， based on a dynamic games of incomplete information model.We find that all of the hightech enterprises have motivations to signal to banks and some of them even transmit mendacious signals to pretend a higher quality of enterprises.Our findings could provide a new way to relieve the information asymmetry in credit market， help banks to manage credit risk effectively and provide a theoretical reference for the government to highlight the influence of policies.
Key Words：High-tech Enterprises； Information Asymmetry； Certification Effect； Signaling； Bank Lending
JEL Classification：G10， G12

Abstract：We document the substitution effect between the accrual-based earnings management（AEM) and real transaction-based earnings management（REM).We propose an equilibrium model that if the cost of one type of earnings management（EM) increases， the magnitude of this type of EM will decrease and that of the other type will increase， while the total EM will decrease.However， if the cost of one type of EM decreases， the magnitude of this type of EM will increase and that of the other type will decrease， while the total EM will increase.Empirical analysis provides evidence of the partial substitution effect of AEM to REM.We find that after the termination of long-lived assets impairment reversals in 2007， firms with an upward earnings management motivation decreased the probability and the amount of long-lived assets impairment reversal， whereas increased the probability and the amount of the gain of long-lived assets sales， but the total EM decreased.
Key Words：Earnings Management； Accounting Standards； Long-lived Assets Impairment
JEL Classification：H32, M41