Abstract： This paper firstly builds a simple theoretical model to analyze how innovation subsidy may affect firms' R&D investment. Secondly， we use the combined dataset of “Innovation Fund for Technology Based Firms” from China's Science and Technology Ministry and China's Industrial Data to test the propositions predicted by our model. Our findings are： firstly， there is no significant effect of governmental innovation subsidy on the firm's R&D spending. The completeness of the property rights protection has an impact on the effectives of the innovation subsidy. In regions with weaker property rights protection， governmental subsidy has a stronger effect on increasing the firm's private innovation investment; secondly， loan interest subsidy has crowding-in effect on firms' R&D expenditure， but the subsidy of other forms has no such effect. In the areas with lagged financial development， the crowding-out effect of innovation subsidy is larger. These results can serve as important reference for the adjustment and reform of China's innovation subsidy policy.
Key Words： Governmental Innovation Subsidy Policy; Firms' Private R&D Investment; Crowding-in Effect; Crowding-out Effect; Property Rights Protecting
JEL Classification：L52，O12，P14

Abstract： Using the debt/GDP ratio to study the government debt risk， firstly， through a recursive empirical model of real interest rate， GDP growth and the primary government deficit in China to solve for the ergodic distribution of the debt/GDP ratio， so we can measure the risk of the central government debt quantitatively and dynamically. Then we make the gap between central government debt/GDP ratio and 60% as a reference standard to give an indirect analysis of the local government debt critical risk. The results show the central government is stable， and the probability is up to 0.5705 when the debt/GDP is 5.4281%. However， it has a debt-spiral tendency when economic is dim， and future debt/GDP ratio maybe anomalous. One key finding is that the risk of local government debt is controllable currently， and the actual scale is close to the critical point， but the speed be slow after a climax in 2009， furthermore， there is a tendency that the local government debt is growing faster than the actual economic， and the local government risk may outbreak between 2019 and 2022. In addition， the risk of government debt is determined by the economic climates fundamentally， and also influenced by the financial market， macroeconomic situation， and the government expected.
Key Words： Government Debt Risk; Economic Climate; Local Government Debt; Ergodic Distribution
JEL Classification： H63， E32， C61

Abstract： The positive role of expectation management policy by Chinese central bank in decreasing uncertainty and mitigating inflation expectation volatility has been acknowledged by more and more researchers， ever since its broughtup. To this end， the paper estimates volatility of inflation expectation in China according to the “sticky information” model by introducing expectation management information into the model and explores the impact of expectation management on inflation expectation volatility and bank risk-taking. The analysis shows： the impact of expectation management of central bank on reducing inflation expectation volatility is becoming more and more prominent since 2007， especially during the crisis; overall， the relationship between inflation expectation volatility gap caused by expectation management and bank risk-taking presents inverse U-shape characteristics; during non-crisis period， a decrease in inflation expectation volatility and increase in the predictability of monetary policy are more likely to cause the under-estimation of risk and thus more risktaking of banks; the critical values differ among different types of banks， and listed banks are more likely to fall into the left-hand side of inverse U-shape curve. Thus， the implementation of expectation management policies is an issue of tradeoff between mitigating economic volatility and maintaining financial stability while accounting for the heterogeneity of bank risk-taking at the same time.
Key Words： Expectation Management; Inflation Expectation; Volatility; Bank Risk-taking
JEL Classification： G20， G21， G28

Abstract： China's financial reform has entered a fortified stage， with the ability of resources allocation and service to the real economy increasing dramatically. While financial friction is still serious， which restricts the financial reform's ice-breaking. This paper analyzes the export effects of interest segmentation between folk and formal financial market caused by entry barriers of financial market， and of credit allocation imbalance resulting from excessive concentration of credit allocation. Based on the framework of asymmetric information， we construct a model with firm-level heterogeneity on productivity and financing capability， in which financial markets segmentation causes a negative impact on export， while credit allocation imbalance has a positive export effect， by spurring considerable low-productivity firms to engage in foreign market with credit supporting， but only causing few high-productivity firms with credit constrained to quit from foreign market. However， those export effects of financial friction may both reduce national welfare. These distinctive predictions are tested and confirmed by twodimensional data of China's city and manufacturing industry.
Key Words： Financial Friction; Financial Market Segmentation; Credit Allocation Imbalance; Heterogeneous Firms
JEL Classification： F12， F14， G31

Abstract： Fund family co-holding will reduce disagreement of stocks and thus raise stock return. Even though the idea has been existing in the stock market for a long time， there is no direct evidence supporting this hypothesis. In this paper， we use fund family co-holding data to test its impact on stock return， and analyze the role of disagreement. We construct a new hedge portfolio based on the co-holding stocks，and the average return of the hedge strategy reaches 3.9%per quarter， which means the fund family co-holding increases the portfolio return. To control endogeneity， we compare the difference between the fund family co-holdings and the stocks co-held by different funds. We find that family fund co-holding reduces the opinion divergence of the stocks without information superiority. This evidence suggests that not through short-sale or information sharing， mechanisms that link in vestors' behavior can reduce disagreement， and ultimately affect the stock price.
Key Words： Fund Family; Co-holding; Differences of Opinion;Stock Return
JEL Classification： G11, G14

Abstract： Investors can sell short on designated stocks on China stock market since March 2010 when the CSRC relieved the short sale constraint. It is accepted that short sale can help to incorporate bad news into stock price more quickly so as to reduce the overvaluation (Miller， 1977). This study investigates the impact of short sale on corporate investment and stock valuation. When the investment opportunity declines， if the corporate does not reduce or cut-off the investment， the investors will take advantage of the “bad news” and short sell the stock. The interests of controlling shareholders will be impaired when the stock price declines. Therefore， they will have motivation to monitor the managers to reduce the inefficient investment. Accordingly， the relief of short sale constraint will make the corporate investment respond more efficiently to the declined investment opportunity. According to the valuation theory based on real option (Zhang， 2000)， the value of put option will be incorporated into stock price when the investment is reduced or cut-off. However， short sale has no impact on investment or call option when the investment opportunity improves. The empirical evidence supports the above argument.
Key Words： Short Sale; Investment; Corporate Option Valuation
JEL Classification：G14, G31, G32

Abstract： This paper analyzes the evolutionary mechanisms of the efficiency of inter-provincial resource allocation on the intensive and the extensive margin， and analyzes Chinese manufacturing industry's the actual evolution path of the efficiency of inter-provincial resource allocation based on ‘New’ new economic geography and externalities. This paper also decomposes the efficiency of resource allocation based on China Industry Business Performance Data to recognize the source of the efficiency of inter-provincial resource allocation. The main conclusions are as follows： (1) the change in efficiency of inter-provincial resource allocation on the binary margin can be attributed to the interaction of industrial agglomeration and heterogeneous productivity; (2) the efficiency of resource allocation on the extensive margin has worsened， but the efficiency of resource allocation on the intensive margin has improved gradually. The conclusions in this paper show that the key to study the efficiency of resource allocation is to focus on productivity and quality at the same time.
Key Words： Spatial Agglomeration of Manufacturing Industries; Efficiency of Resource Allocation; Binary Margin; Externalities; Heterogeneous Productivity
JEL Classification： D61, D62, E23

Abstract： Theoretically， this paper shows that urbanization rate， urban density and population megapolization rate have positive roles in promoting local government size. Population megapolization has greater influence on local government size than urbanization on it. Production megapolization rate has an U-shaped impact on the local government size. The effect of production magapolization on local government size is affected by population megapolization. This paper also provides empirical evidence base on China's provincial panel data from 1998 to 2013. The empirical results are highly consistent with the theoretical models， and the results are robust. This paper implies that local government size can be controlled through optimizing the urban layouts and morphology， which matches the context of China's new-type urbanization and streamline administration and delegate power of government.
Key Words： Urbanization； Megapolization； Local Government Size； Advantage of Cities with High Political Hierarchy
JEL Classification： R12， R58， H11

Abstract： This paper identifies the causal relationship between dependent ratio and current account surplus with a national level panel data about 165 countries in the period of 2005 to 2012. The main contribution of our research is utilizing WWII as an instrumental variable to tackle the endogeneity problem of demographic structure in previous studies. We find that dependent ratio has a positive effect on current account surplus， which is even magnified after using IV. We further find that increased dependent ratio enhances the motivation of precautionary saving， which offsets the “life-cycle” motive to save less and renders insignificant the effect of dependent ratio on saving rates. Besides， by decreasing the marginal rate of return of investment and by hampering social entrepreneurship， a heightened dependent ratio significantly reduces investment ratio of a society. Our result indicates that， with a persistent augmentation of dependent ratio in the future， China may experience prolonged current account surplus
Key Words： Current Account Imbalance；Demographic Structure；WWII
JEL Classification： F32， F41， J11， H56

Abstract： In china， labor migration almost happens within the same dialectal region. This paper therefore tries to explore the impacts of dialectal distance on labors’ migration. Theoretically we put forward a simple model and show that， dialectal distance， with both identification effect and complementary effect， will first promote then prevent labors migration under certain conditions. Empirically， based on Chinese Dialect Family Tree from Dictionary of Chinese Dialect and Language Atlas of China， we calculate the pairwise dialectal distances for 278 prefectures， and then match the dialectal distances with China Labor-Force Dynamic Survey (2012). With this seminal dataset， we validate the prediction of the model. Specifically， within the same dialectal region， if dialectal distance rises by one level， the probability of cross-prefecture migration will rise by 30%; however， this probability will fall by 3% when dialectal distance is large enough to belong to different dialectal regions; the optimal dialectal distance is crossing different dialectal areas but lying within the same dialectal region. When we control for other factors， such as economic factors， marriage and family， social network， hukou system， geographic factors， and Mandarin， the inversed“U”shaped pattern still robustly exist.
Key Words： Labor Migration; Chinese Dialectal Distance; Identification Effect; Complementary Effect.
JEL Classification： J61， Z10

Abstract： CHARLS data shows that the separation of living arrangements and residential preferences is increasingly severe. We construct utility equilibrium model which contains old-age insurance， living arrangements and family ethics of filial piety. Theoretical model has proved that if elderly parents get pension， it will expand the utility possibility frontier of two generations， but whether they obtain the opportunity to achieve a Pareto improvement or not depends on the family ethics of the society. If the utility weight of parents that their children acquiesce is greater than that of parents， it means that parents‘ preferences are respected. If parents are willing to live with their children， the acquisition of pensions will provide an opportunity to achieve a Pareto improvement for them. However if parents are willing to live with their children， but children insist on living alone namely the ethics of filial piety collapse， the income effect of elderly parents’ pension will be weakened. CHARLS data show that oldage insurance in rural areas promotes the ethics of filial piety and creates an opportunity to achieve a Pareto improvement; however oldage insurance of employees in government agencies， institutions and enterprises fail to create an opportunity to achieve a Pareto improvement and accelerate the collapse of the ethics of filial piety. We propose that old-age insurance tilts to the elderly in rural areas and pension payment is linked to elderly living arrangements， such as old-age insurance tilts to an extended family of three or more generations living together， prompting old-age insurance to maintain the filial piety of the Chinese family.
Key Words： Old-age Insurance; Ethics of Filial Piety; Family Welfare; Pareto Improvement
JEL Classification： C35， H55， I31

Abstract： Based on the perspective of farmers’ behavior， this paper constructs a microstructure model of land transfer incentive explanation， and uses Propensity Score Matching(PSM) method and rural households data from China Family Panel Studies(CFPS) to analyze farmers‘ decision behavior for land transition and measure welfare effect. The result implies that rented into or out of land is beneficial to raise farmers’ income and reduce poverty rate， however， welfare effect is significant difference in different family groups. Land values， agricultural subsidy and agriculture-related loans have a significant positive effect on farmers‘ decision of rented into land， urban wages and job opportunities are major cause that households rent out of land and take up non-agricultural activities. In addition， the decomposition result of welfare effect shows that net income effect for rented in land successively originates in the scale expansion of land， technology efficiency improvement and intermediate imput increase， net income effect for the rented out of land mainly originates in non-farm income increase and partly is from land rent.
Key Words： Land Transfer; Farmers' Behavior; Welfare Effect; Propensity Score Matching
JEL Classification： J31， Q15， Q18