Summary： The economic reform and resulting economic growth of China in the past 40 years have been highly praised by economists worldwide. However, the literature does not fully recognize the sources of the Chinese economy's outstanding performance during the reform period. Whether they do not know or are unwilling to admit the dual economy development characterizing Chinese growth in the period, economists who believe in the neoclassical theory of growth have either failed to foresee Chinese success or encountered the scholarly dilemma of understanding the coexistence of unprecedented growth performance and a widening income gap. Insufficient interpretation of the past will lead them to incorrectly predict the future of the Chinese economy.
This paper proposes an important perspective for understanding China's reform and unprecedented growth performance as a key to dispel common misunderstandings. To do so requires investigating processes in which reforms improve incentives, correct pricing signals, and eliminate institutional barriers to enhance resource reallocation efficiency and therefore total factor productivity through the reallocation of increments and stock of production factors, especially of labor.
This paper reviews the economics literature on China's reform and its effects on economic growth, and points out the deficiency resulting from inadequate understanding of the necessary and sufficient conditions, mechanisms, structural perspective, and changed stage of development in Chinese economic growth. The author suggests that to get a real idea of China's reform and growth experiences, one ought to give up the conventional wisdom that is widely used to explain the neoclassical growth of Western economies and to set sights on China's unique stage of development and its change. In light of this, the paper explains how reforms have helped to reallocate labor to facilitate economic growth and structural adjustment.
This paper describes system reforms in related areas that eliminate institutional barriers, focusing on preventing laborers from exiting low productivity sectors, migrating between sectors and regions, and entering into high productivity sectors. Applying the methodology of previous research, the paper re-estimates the amounts and relative shares of labor in the primary, secondary, and tertiary sectors and finds that the labor share of agriculture is 10 percentage points lower than indicated by official data. It calculates the labor productivity growth of the economy as a whole and by sector. To reveal the effect of resource reconfiguration on rapid economic growth, the paper further calculates the contributions of the three sectors, both as a whole and separately, as well as the contributions of sectoral changes to the overall growth of labor productivity. The findings show that in 1978-2015, labor productivity of the Chinese economy as a whole increased by 16.7 times, while it increased by 5.5 times in the primary sector, 13.5 times in the secondary sector, and 5.2 times in the tertiary sector. To the overall labor productivity growth, the three sectors together contribute 56%, with the secondary sector being the largest contributor, and that labor reallocation across sectors—namely, structural change effects—contribute 44%. In dividing the structural change effects into a static shift effect and a dynamic shift effect, the former contributes 5 percentage points and the latter 39 percentage points.
Overall, the success of China's reform is reflected in not only the fast growth of GDP, but also structural change and sharing by rural and urban residents through employment expansion and labor reallocation following labor productivity improvement. In conclusion, this paper proposes policy suggestions. In the new development stage characterized by the rapid disappearance of a demographic dividend, (1) facilitating the hukou system reform will provide incentives necessary for labor transfer, (2) expanding the scale of agricultural operation will enhance labor productivity of agriculture and in turn support labor transfer, (3) increasing total factor productivity will sustain the growth of labor productivity in industry, and (4) industrial structural adjustments should follow productivity enhancement principle.
Keywords： Reform Effects; Resources Reallocation; Labor Productivity

Summary： Setting an economic growth target is a worldwide phenomenon ignored by current studies. Since the end of World War II, the phenomenon has appeared in at least 49 developed or developing economies and presents 3 typical facts. First, an economic growth target is followed by a specific allocation of resources. Second, an economic growth target announcement is positively related to the subsequent economic growth rate. Third, some economies have implemented economic growth target management, while others have stopped. A natural question arises: does an economic growth target matter for real economic growth?
To answer this question, we introduce the central government and ministry into a standard Schumpeterian growth model. The ministry is appointed by the central government and aims to maximize the growth rate, setting an economic growth target by which to measure the minister's success. The minister is responsible for approving investment in intermediate products and seeking approval rent. To encourage the minister to facilitate the approval of investment, the central government selects the growth target as the key performance indicator for the ministry. To meet the target and hold the position, the minister examines and approves more investment to achieve economic growth targets. We prove that there is an endogenous economic growth target in the economy that dominates the real economic growth of the economy. We also show that the balanced growth path driven by the growth target is lower than that of the economy without the investment approval. Thus, our model provides a coherent explanation for the aforementioned three facts.
We collect data on growth rate targets by visiting the websites of each country in the world, excluding those of Africa and South America, and find more than 49 countries or regions had publically announced or have been announcing short-or long-term economic growth targets since 1950. Based on the 49 samples whose other economic variables come from the PWT90, we regress the real growth rate on the growth target. Consistent with the prediction of our model, the estimated elasticity of the growth target on economic growth is about one unit. This means that, all things being equal, a 1% change in the growth target is followed by a 1% change in the real growth rate during the target period. After controlling for possible measurement errors, geographical, cultural, institutional, and genetic factors and the series of indexes on regulation of entry, the estimated elasticity of the growth target remains unchanged.
Finally, we exclude the other possible explanations. A major competing explanation is that the growth target is just a forecast indicator of economic growth. When this is the case, the growth target should be correlated with all kinds of production factors. However, our model predicts that the growth target drives the real economic growth through the reallocation of specific resources. As such, we regress the growth target on the several kinds of growth rates of production factors, and find that the growth target is significantly correlated with capital accumulation but not with labor and human capital, which coincides with our model's prediction.
Our paper belongs within the literature of political economy of growth and development. North (1994) argued that the inconsistency of internal goals of the government could lead to the rise and fall of a nation. Though it is not easy to restructure the government to root out this inconsistency, it is not hard to set the inclusive target to eliminate it. As such, setting a growth target is only the second-best solution to breaking down the barrier to economic growth and driving resource reallocation.
Our paper also complements the literature on inflation targeting, which was pioneered in New Zealand in 1990. Since then, 27 countries have adopted inflation targets, and a huge volume of literature has followed. Growth targets and inflation targets are both found in the four goals of macroeconomic management. At least 49 countries have been implementing economic growth target management, making growth targets an exciting area for future research.
Keywords： Economic Growth; Growth Target; Target-driven Allocation

Summary： This paper examines whether a BGP equilibrium on endogenous economic growth (EGT) is stable and sustainable, based on observations of the gradually declining trend of advanced economies in the past 30 years. Traditional EGT and unified growth theory (UGT) usually work to explain development from an agricultural economy to an industrial economy, in addition to development in post-industrial revolution stages. One common feature of these papers is that almost all of them try to prove the existence of a stable BGP equilibrium. Another common point is these models do not consider resource constraints.
Recent research, such as Schfer (2014) and Bretschger (2016), has noted the possibility of unstable BGP in both EGT and UGT. To study the problem of long-term sustainable growth with resource constraints, this paper establishes a three-sector model of industry, agriculture, and knowledge innovation. The major findings are as follows: (1) with resources constraints, there is a potential instability of equilibrium in endogenous growth, with the model showing that the economy may have multiple equilibria; (2) only when the spillover effect of production in the knowledge sector is strong enough to offset the decline in the industrial sector (i.e., the overall innovation is compensatory) does the entire economy exhibit constant returns to scale in the long run, with possible sustainable economic growth; and (3) the model provides a good framework for explaining long-term modern economic development consistently.
In this paper, the history of economic development in modern times is divided into three main stages: the dynamic transfer process of the agricultural economy to the industrial economy, the dynamic transfer process of initial industrialization to post-industrialization, and the endogenous growth stage after post-industrialization.
In the first stage, the most important engine of economic growth is the transfer of labor from agriculture to industry, which increases the utilization rate of labor, increasing labor productivity as a result. In the second stage, the transfer of labor from agriculture to industry has nearly finished, and industrialization has developed to a fairly high level. The demand for skilled labor increases. The labor structure shifts from quantity to quality, and this change becomes a driving force of economic growth in this stage. This mechanism cannot be explained in the traditional endogenous growth model, but it can be explained in the UGT model and this paper. In the third stage, economic growth with depopulation is unsustainable. As the population declines to a certain extent, both population and economic structures tend to reach a stable level, while equilibrium is not unique and no longer exhibits a significant growth trend as in the industrialization transition. There may exist multiple equilibria, and sustainable growth and stagflation are both possible. The former means the realization of balanced growth in the endogenous growth equilibrium, and the latter means the equilibrium is similar to that of the neoclassical model.
The compensation of technological innovation and the rational allocation of resources in different sectors are the key factors for sustainable growth. The multiple equilibria in this stage, as predicted in this paper, are consistent with the actual development of the economy, but discussion of this finding is lacking in the traditional endogenous growth models and UGT models.
Keywords： Innovation Compensation; Consistent Growth Theory; Endogenous Growth Sustainability

Summary： Since the 2008 global recession, the pressure of an economic downturn in China has been high and conventional macroeconomic policies have gradually become ineffective, spurring fierce debate on whether asset price booming can stimulate economic growth. On the one hand, asset price booming can theoretically stimulate consumption and investment through the wealth effect and Tobin's q effect, respectively, and can relax the credit constraint of households and entrepreneurs to stimulate aggregate output, which is why some advanced economies carry out policies of booming up asset prices to mitigate the pressure of economic downturn. On the other hand, however, such policies can lead to resource misallocation and bubblization that crowd out the investment of physical capital, which is harmful to economic growth.
This paper develops a dynamic stochastic general equilibrium (DSGE) model of rational asset bubbles with endogenous market sentiments to quantify the effect of asset price booming on aggregate dynamics. The key feature of the model is the characterization of market sentiment dynamics with the changing probability of bubble bursting. Given the information of state variables and sentiment shocks in each period, individual agents calculate the probability of bubble bursting through forward-looking expectations. Comparing the indirect utilities of trading or not trading bubble assets, individual agents pin down the threshold probability under which agents are indifferent. We define market optimism as when the probability of a bubble bursting is less than the threshold probability and more than the probability of market pessimism. Hence, market sentiment and bubble dynamics are endogenously jointly determined by fundamentals and sentiment shocks. According to Martin & Ventura (2016) and related studies, whether asset price booming has a stimulating effect highly depends on the bubble size and the probability of bursting. Therefore, to better quantify the effect of asset price booming, characterizing market sentiment and bubble dynamics endogenously is needed. Our model also includes high participation rate of individual investors, the severe financing constraint of entrepreneurs, and other crucial economic features in China.
This paper provides two main results. First, asset price booming is not able to stimulate economic growth. Simulation results show that a 1% increase in asset price will lead to an aggregate output decline of 0.8%. In the case that takes into account endogenous market sentiment, as the asset price goes up, individual agents buy more asset bubble, which crowds out the investment of physical capital. Moreover, to obtain more benefit from asset price booming, entrepreneurs have even less incentive to provide physical investment as long as they are bound by financing constraints, which eventually leads to bubblization. Second, as the output level does not rise as asset prices go up, market sentiment deviates from optimism to pessimism. As long as the asset bubble bursts, the asset price returns to its fundamental level, strengthening the financing constraints of entrepreneurs and significantly reducing the wealth of households. We quantify that aggregate output drops by 7.5% as long as the bubble bursts.
We make two contributions. Theoretically, this paper develops a new method to model the interactive switching between optimism and pessimism in the market. Without relying on ad hoc assumptions of bubble dynamics, the model features the entire process from bubble booming to bursting endogenously, providing a micro-foundation of market sentiment dynamics. Empirically, the model enables the quantification of the asset price booming effect on stimulating economic growth and its possible risks. We argue that without considering endogenous market sentiment, the model would overstate the effect of stimulating growth but underestimate the risk exposure of bubble bursting. Moreover, the results of this paper not only apply to China but also have implications for other countries in similar debates over the stimulating effect of asset price booming.
Keywords： Asset Prices; Asset Bubble; Economic Growth; Market Sentiment; DSGE Model

Summary： During the last several decades, rapid and extensive urbanization around China has been combined with population migration at a large scale, leading to substantial changes in urban systems and city spatial structures. According to the sixth nationwide population census, the migrating population in China is as much as 221 million people. As this figure makes up 16.58% of the total national population, the migrating population should not be neglected when studying China's urbanization and urban system. However, the reality in China is different compared with that in Western developed countries. As such, we must consider both the special institutional barrier in China, known as the hukou restriction, and the rocketing estate prices in big cities. Under the current rapid urbanization process in China, discrepancies in hukou restriction policies between different cities have a big effect on migration policy. Moreover, discrimination against the migrating population gives rise to an inequality of public welfare, making it difficult for the large numbers of migrants to integrate into their destination cities. This not only results in “imperfect urbanization” in China, but also hampers the formation of ideal urban systems as the inhabiting decisions of rural migrants are distorted and their migration costs increase. Thus, accurately measuring the effects of housing prices and hukou restrictions on city-size distribution is essential.
This paper elaborates on the theoretical framework of Desmet & Rossi-Hansberg (2013) and constructs a spatial general equilibrium model to analyze migration decisions with endogenous housing prices. In our paper, city-size distribution can be attributable to productivity, migration friction, housing price, and living amenities. We combine the theoretical model with factual data and measure the features in the four aforementioned dimensions. Thus, we see the effects of these dimensions on migration population and city size by means of counterfactual analogy and structural estimation, which are widely adopted by quantitative trade models and neo-economic geography models in the literature. We find that productivity, migration friction, and amenities are all key factors affecting population migration and city-size distribution, especially migration friction. If the friction difference between cities were eliminated, the urban population, both total and migrating, would have substantial reallocation. Contrary to migration friction, housing price, which is also an effect of urban congestion, has little influence on city population size distribution. Furthermore, considerable welfare improvement could be achieved if migration friction were eliminated and housing prices were equal across all of the cities. Further analyses prove that the preceding findings remain robust and significant when the values of parameters are changed, and when endogenous productivities, migration friction, and estate price are considered. Our findings demonstrate that China's hukou system and the consequent migration friction indubitably have significant influence on city-size distribution, and contribute to the current flat urban system.
Academic debates persist regarding the choice of urbanization patterns in China. Some scholars believe that city sizes in China are generally not large enough, and that mega-cities such as Beijing and Shanghai need further expansion. However, other scholars insist on more spatially balanced, polycentric city systems composed of more medium and small cities, as China has a huge population and vast territories. These two opinions are fair, but the effects remain to be seen in comprehensive analyses of costs and benefits of city agglomeration. Our paper is the first to provide theoretical and empirical evidence for the determinants of cross-country migration city-size distribution, which has implications for urbanization in the near future. Based on our conclusions, hukou reform is necessary to make China's city-size distribution more reasonable. We suggest eliminating the urban hukou restriction, reducing the migration friction derived from the hukou system, and promoting the endogenous and market-oriented development of cities of different sizes, so that China's urban system can be made more efficient and the welfare of millions of migrants can be improved.
Keywords： Migration Friction; Structural Estimation; City-size Distribution

Summary： The demand-export hypothesis indicates that domestic demand is one source of export advantage and the standpoint of export development (e.g., Basevi, 1970; Krugman, 1980; Weder, 1996, 2003; Crozet and Trionfetti, 2008). However, China's exports have substantially deviated from domestic demand. While this export model has created China's export miracle with the support of an endowment advantage, it is now trapped in a transformation dilemma due to the breakpoint of a new export advantage. For a long time, the export model, which demonstrates a substantial deviation from domestic demand in China, has been considered normal in leveraging endowment advantage and participating in global intra-product specialization, disregarding the imperfect domestic institution that might also have caused the deviation of export and domestic demand and hinder export upgrading.
Drawing on the framework of institutional environment, structure deviation, and export upgrading, this paper reexamines China's export model through an empirical study of cross-country panel data. Using data from the United Nations Industrial Development Organization, classified by four-digit ISIC, we compute an index for structure deviation of export and demand (SDED) for 51 economies. Three stylized facts related to SDED are found. First, SDED is higher for countries with worse institutions than for countries with better institutions. Second, the correlation between SDED and the export structure differs among counties with different institutions. Third, the correlation between SDED and the export structure is more significant in large countries with imperfect institutions. Three serial hypotheses are accordingly proposed: imperfect institutions cause SDED, SDED caused by imperfect institutions will suppress export upgrading, and the suppressing effect is more significant in large countries. These hypotheses are tested using instrumental variable techniques.
Following the paradigm of typical facts, theoretical hypothesis, and empirical evidence, this paper confirms the following findings: (1) while leveraging endowment advantage and participating in global intra-product specialization normalize SDED, imperfect institutions can also lead to SDED by blocking the demand-inducing-export mechanism; (2) SDED caused by imperfect institutions will suppress export upgrading, as domestic demand cannot become an export advantage; and (3) as domestic demand is an important country-specific advantage for large countries, SDED caused by imperfect institutions will exert a more significant suppressing effect on export upgrading in large countries than in small ones.
These results provide insightful policy references for how to recreate the fundamental driving force of export upgrading and to adjust the export model in large developing countries with expanding domestic markets. First, various sources of export-demand deviation should be treated differently. Although export-demand deviation can be reasonable, deviation caused by imperfect institutions should be rectified. Second, it is more important for large developing countries to develop demand-inducing-export institutions to leverage a country-specific advantage than for small countries to do so. Third, the focus of developing demand-inducing-export institutions should be to enable local enterprises to enhance their competitiveness by exploiting large, expanding domestic markets.
Our paper contributes to the export literature in multiple ways. First, it proposes a new concept and measurement of export-demand deviation, which can be used to study the source of export advantage and the corresponding export model. Second, the new mechanism of institutions affecting export upgrading by acting on export-demand deviation identified in this paper not only enriches the literature on institutions and export, but also deepens our understanding of export-demand deviation. Third, this study verifies that the sources of export advantages and the corresponding export model for large countries different from those for small countries, suggesting that the demand-driven trade model proposed by Weder (2003) is more necessary for large developing economies.
Keywords： Export-Demand Deviation; Export Upgrading; Institutions Environment; Domestic Demand

Summary： Chinese economy has stepped into a “new normal” status, focusing more on balanced growth than before. How China can continue innovating in its industrial transformation and upgrading is the most important topic for Chinese economists. It seems that cooperation between firms is meaningful for industrial transformation and upgrading, especially as firms face more complicated technology. Besanko & Wu (2013) show that many developed countries already encourage firms in the same product markets to engage in collaborative innovation such as joint research ventures. Some evidence from industries in China indicates that such cooperation can reduce costs based on economy of scale, enhance firms' R&D efficiency, and improve innovation. However, little research has focused on collaborative innovation in China, and little is known about the factors that play an important role in determining a firm's participation in collaborative innovation.
In this paper, we build a simple theoretical model for profit maximization. Based on the model, we hypothesize that financial constraints and innovative capability impede collaborative R&D. This model proposes that whether a firm participates in collaborative innovation is determined by its financial constraints and how effectively it can appropriate its rents from innovative activities. On the one hand, it is well recognized that financial constraints restrict firms' R&D investment because they lack collateral value for proprietary knowledge-based assets and due to the nature of information asymmetry (Brown et al., 2009; Hsu et al., 2014). On the other hand, the more interesting but not so intuitive finding is that innovative capability plays a negative role in collaborative R&D activities. As a result, we adopt the concept of appropriability following Cassiman & Veugelers (2002) to explain why that is the case. Due to underdeveloped intellectual property protection, Chinese firms may have fewer effective strategies to prevent their proprietary knowledge-based assets from flowing to their competitors, which is why firms with higher innovative capability are more reluctant to engage in collaborative innovation.
Motivated by this prediction, we try to verify our theoretical model by using data on small and medium-sized enterprises in China taken from the World Bank's 2012 Enterprise Surveys. Following the settings in Cassiman & Veugelers (2006), we apply a probit model to investigate factors that influence the individual R&D decision and the collaborative R&D decision, and a tobit model to explore factors that influence the expenditure of individual R&D and collaborative R&D. The empirical results are consistent with the theoretical implications after controlling for known factors, the industry effect, and the area effect. Moreover, we find that the negative effect of financial constraints is more prominent when the product market competition is more intense. We also conduct various robustness checks and further discuss absorbing ability and appropriability. All in all, the risk of leaking core information about R&D impedes the benefit from collaborative innovation. Accordingly, we argue that the government should establish funds to finance collaborative innovation and strengthen intellectual property protection to encourage firms to engage in collaborative innovation activities, which should thereby accelerate the Chinese economy's transformation and upgrading.
Our paper is distinct from other studies related to collaborative innovation in China, providing theoretical implications as well as empirical evidence that financial constraints impede not only a firm's own R&D but also collaborative R&D. This finding complements the work of Brown et al. (2009) and many other subsequent studies. Furthermore, to the best of our knowledge, we are the first to follow Cassiman & Veugelers (2002, 2006) in formally distinguishing absorbing ability from appropriability with a dataset for China. Thus, we can explore the channel through which innovative capability affects collaborative innovation. Moreover, we consider the roles of product market competition and financial constraints.
Keywords： Financial Constraints; Innovative Capability; Collaborative Innovation; Transformation and Upgrading

Summary： R&D elements are important strategic resources used to insure successful implementation of China's innovation-driven strategy and to promote sustainable economic growth. China is stepping into the era of open innovation characterized by free R&D element flow, reform of the household registration system, and accelerated integration of science and technology. Investigating the cross-regional flow of R&D elements and its effect on economic growth is of great significance from both theoretical and empirical perspectives.
Most of the research explores the effect of R&D input or its externality on economic growth from a static perspective but ignores the dynamic flow of R&D elements. On the contrary, we investigate the intrinsic mechanism of how the dynamic flow of inter-regional R&D elements influences economic growth through spatial knowledge spillovers from a dynamic viewpoint. Thus, we provide policy insights for coordinating the development of regional innovation and implementing the strategy of innovation-driven development. On the basis of new economic geography theory, we introduce R&D element flow into Fujita & Thisse's (2003) knowledge innovation and diffusion models and construct a theoretical model that includes R&D element flow, spatial knowledge spillovers, and economic growth. Our key distinctions from Fujita & Thisse (2003) are listed as follows: (1) Fujita & Thisse (2003) simply equated factor mobility with spatial knowledge spillovers, ignoring their inherent relation mechanism. Instead, we introduce the flow factor of R&D elements and put it into a unified analytical framework with spatial knowledge spillovers. (2) Based on the analysis of internal mechanisms in theory, we study 30 provincial-level administrative areas of the Chinese mainland (except Tibet because of incomplete data) to investigate the knowledge spillover effect on economic growth as induced by R&D element flow.
Considering the model, misspecification might have occurred had we not noticed the spatial correlation associated with R&D element flows, as cross-provincial R&D element flows are not mutually independent and the R&D element flow of a province may be influenced by the economic activities of other provinces. We first test the spatial relevance of economic behavior statistically using spatial index Moran I, and the results show a significant correlation. As such, we use a spatial econometric analysis method that takes the spatial correlation of economic activity into account to establish the econometric model and to measure the knowledge spillover effect practically. To obtain the optimal fitted model and investigate whether different types of models can transform into each other, we construct a measurement model and test the influence machine empirically along the path of OLS-［SAR and SEM］-SAC-SDM, as different models assume different spatial conduction mechanisms and represent different economic implications.
Several results were found. First, there exist significant spatial correlations between Chinese provincial economic activities. Furthermore, both the direct growth effect and the spatial spillover growth effect of cross-provincial R&D element flow are positive and statistically significant. Second, the growth effect of spatial knowledge spillovers accounts for more than half of the gross growth effect, and the growth effect of R&D capital flow accounts for more than 10%. Based on these results, we suggest that local governments pay attention to not only local economic conditions but also the development strategy of surrounding areas at the policy level, actively set up a platform of regional coordination and strengthen exchange and cooperation. Additionally, to further break down regional barriers, we suggest that the local government improve the mechanism of cross-regional R&D element flow and encourage the free flow of R&D elements to bring the knowledge spillover effect into full play by deepening the census register system reform and strengthening science technology and finance systems.
Keywords： R&D Element Flow; Spatial Knowledge Spillover; Economic Growth; Spatial Panel

Summary： As haze and fog become more prevalent and the demand for a green ecology begins to grow rapidly, ecological construction emerges in the overall landscape of China's modernization. The Third Plenary Session of the 18th CPC Central Committee proposed to improve the property rights system and the use control system of natural resources; to confirm and register the right of water, forests, mountains, grasslands, wastelands, beaches, and other natural ecological spaces; and to gradually expand the resource tax to occupancy on all kinds of natural resource spaces. This proposal shows that an important aspect of tax reform in China is to extend the resource tax to all kinds of natural ecological spaces with land as its carrier.
Based on ecological footprint theory and the economic value accounting method of ecosystem services, this paper quantifies the occupancy of ecological space by matching consumption items, land types, and service functions and accounting for the ecological value of the ecological space occupied. Thus, it proposes an environmental tax scheme based on the compensation of ecological deficit value, also called ecological deficit tax. As ecological footprint accounting includes natural resource consumption and carbon emissions, the extension of the resource tax to the occupancy of natural ecological space will include environmental resources. This paper uses the generalized concept of environmental tax. According to the environmental tax reform, the tax burden will be transferred from cleaning inputs such as labor and capital to the use of natural resources and pollution emissions. This should help to achieve green development, with the CGE model used to analyze the policy effect of levying the environmental tax and reducing corporate and individual income tax in three regions.
The results show that in the short term, the ecological footprint of each region decreased while the capital demand and employment in the eastern and central regions increases. The tax plan can guide economic growth from ecological occupation to capital and labor input. Total output and intermediate inputs generally decline, but the intermediate inputs decrease relatively more. Therefore, in terms of the economic growth in various regions, green GDP growth is the largest, real GDP growth is the smallest, and the growth rate in the western region is low. In the long run, the nominal GDP growth rate of eastern and central regions falls sharply in the short term and then increases year by year. Decline in the growth rate of the eastern region is mainly due to the total output of the secondary industry slowdown. The fluctuation of total output and intermediate inputs in the central region corresponds to the fluctuation of GDP growth in time. The growth rate of the GDP and the total output and intermediate inputs in the western region increase steadily. The economic growth in each region benefits from the improvement of the input-output efficiency of the secondary industry.
Therefore, this paper suggests that the environmental tax should restrain ecological excess occupation. The tax rate should be less than 5%, and the corresponding tax revenue can be used to reduce corporate and individual income tax in the same proportion, thus facilitating the transfer of economic growth momentum to labor and capital elements. The eastern region should focus on reducing corporate income tax, while the central and western regions should focus on reducing personal income tax.
Furthermore, based on the framework of this study, on the one hand, ecological footprint accounting should be improved by expanding the ecological footprint quantification range from the types of resource consumption and pollution emissions and the types of land use to a larger store of ecological data that includes every region and ecological space. On the other hand, ecological occupancy accounting should be expanded based on the ecological service function, the conditions should be made to apply ecological value accounting to indirectly occupied natural ecological space, and the foundation should be laid for the quantitative management of environmental resources and regional ecological compensation.
Keywords： Natural Ecological Space; Ecological Compensation; Environmental Tax Reform; Structural Tax Reduction

Summary： The rapid development of e-commerce has changed China's economy dramatically, especially the domestic consumer price of various kinds of goods. This study theoretically and empirically tests the impact of e-commerce on China's domestic micro retailing goods. By applying the micro retailing price of various kinds of consumer goods, the paper reveals the direct effect of e-commerce on a micro level rather than on a macroeconomic level.
The literature shows that e-commerce has had a significant impact on specific industries (Lee and Clark, 1996; Lee, 1998; Brynjolfsson and Smith, 1999; Haynes and Thompson, 2008). Moreover, consumer demand is influenced by income distribution, the household registration system, and external shock (Chen, 2012; Dai and Mao, 2015). However, this research lacks more theoretical support and empirical evidence on the micro level. From the theoretical perspective, searching theory provides one possible explanation for the impact of e-commerce on consumer price in the micro retailing market. The theory argues that the clustering of homogeneous goods on e-commerce platforms is effective in enhancing market competition and decreasing the retailing price of goods (Heil and Prieger, 2009; Tang et al., 2010; Waldeck, 2002). We introduce searching time and cost into the e-commerce searching model, and use micro-level data on retailing price and the difference-in-differences method to test the aforementioned impact empirically.
In terms of the representative consumer's searching time, this paper formulates the theoretical hypothesis that the number of searches (or efficiency) has different effects on the retail price of different commodities. We also reveal the impact of the representative consumer's marginal e-commerce searching cost on the retailing price of different categories. Based on the theoretical model, we apply the micro-level retailing prices from January 1999 to December 2012 collected from the Consumer Price Institution of China to test the preceding hypothesis. To avoid the endogeneity problem between retailing price and e-commerce, we apply the empirical methods of difference-in-differences to test the impact of the founding of Taobao, the largest e-commerce platform in China, on the retailing price of necessities, middle-and high-level daily-use goods, and electronic equipment. To control the macroeconomic differences between different cities, such as transport costs, fiscal expenditure, and economic developments, we apply various control variables collected from China's urban statistical yearbook.
The results of our paper are as follows. First, searching times by consumers through e-commerce websites have different effects on goods of different categories. For necessities with prices lower than the threshold level, the greater the e-commerce searching time, the higher the retailing prices. Meanwhile, for goods with prices higher than the threshold level, such as middle-and high-level daily-use goods and electronic equipment, the greater the e-commerce searching time, the lower the retailing prices. Second, the marginal cost of searching through e-commerce is negatively related to the retailing price of necessities, middle-and high-level daily-use goods, and electronic equipment.
The results of our paper indicate that searching through e-commerce can smooth the retailing price in China through two channels: greater searching time and lower marginal searching cost. Therefore, one possible strategy for stabilizing the price is to develop e-commerce in China. However, considering that the marginal cost of searching is closely related to the internet infrastructure of different cities, we strongly suggest that city governments pay more attention to developing and upgrading a given region's internet infrastructure. Furthermore, we suggest that the Chinese government make more efforts to narrow the gap of internet infrastructure between different cities and lead the balanced development of e-commerce.
Keywords： E-Commerce Trading Platform; Number of Consumer Search; Market Searching Cost; Consumer Price

Summary： Environmental pollution is not only an environmental problem but also a political issue, especially in countries like China where economic decentralization and political centralization coexist. In China, local government is responsible for the implementation of environmental policies formulated by the central government. However, as environmental pollution is a public good with strong negative externalities, there is strong incentive for local government to ignore environment standards and allow excessive pollution emissions from local enterprises, especially when contamination brings economic growth. In China, the promotion of government officials is highly dependent on the local economic growth rate during their tenure. Therefore, with collusion between government and enterprise, a “win-win” situation has been formed: on the one hand, local officials achieve political promotion and fiscal revenue, or even gains from corruption; on the other hand, enterprises continue to maintain extensive operations while saving on the compliance cost of environmental regulations.
In China, principal officials in local government possess great power. Therefore, the principal officials' long-term service forms a relation network that facilitates the collusion and conniving of local enterprises in illegal pollutant discharge and emissions. Thus, when the Secretary of the Communist Party of China (CPC) changes, a politically sensitive period creates a deterrent effect on collusion. During this period, officials of all levels become cautious and meticulous, the environmental protection administration strengthens law enforcement, and polluting enterprises reduce illegal pollutant discharge and emissions. Therefore, the concentration of air pollutants, especially that created via collusion, decreases in the short term.
In this paper, we match turnover data from the Secretary of the Municipal Committee of the CPC of 160 major cities in China with their daily air quality index (AQI) data, as well as the concentration data of the main air pollution components (PM2.5, PM10, SO2, CO, NO2, and O3), from December 2013 to June 2016 to study the short-term effect of municipal party secretary turnover on air pollution through an event-study analysis method. The results show that the concentrations of SO2 and CO, which are more susceptible to collusion, decreased significantly one month before and one month after municipal party secretary turnover. While AQI and the concentration of other air pollutants were less susceptible to collusion, indicators like PM2.5 and PM10 saw no obvious changes during the turnover period. As a pollutant such as SO2 is mainly an emission of industrial enterprises, it is more likely to be influenced by collusion compared with other pollutants. Meanwhile, the main sources of pollutants including PM2.5 and PM10 are household, transportation, and the like, which are less involved in collusion.
Further analysis shows that for those cities with long tenures of municipal party secretaries or cities with secretaries in anti-corruption campaigns, the concentration of SO2 decreased even more. However, when the new municipal party secretaries came from the same place and were promoted, in most cases, by the local mayor, there were no obvious changes in SO2 concentration during the turnover period. Furthermore, there was only a short-term effect in the improvement of air quality caused by secretary turnover, with air pollution returning to normal conditions as soon as the politically sensitive period passed.
To conclude, personnel control of local officials is inadequate to strengthen air pollution control. In the long run, to eliminate collusion, establish a clean government-enterprise relationship, and achieve the eternal blue sky, we must improve the official governance mechanism, strengthen the legal system, and encourage public engagement.
Keywords： Air Pollution; Official Turnover; Collusion

Summary： In the great wave of China's economic reform and opening up, especially since the 1990s, thousands of cadres and professors have moved from non-commercial occupations to companies and entrepreneurship, a phenomenon popularly termed xiahai (Dickson, 2007). Specifically, a majority of xiahai entrepreneurs known as wenren xiahai are former teachers and professors from colleges and universities (Du, 1998). This is unique in the development of China's enterprises, and such a phenomenon rarely appears in Western countries like the United States and United Kingdom. According to the statistics in our sample, about 40.65% of listed companies have executives with academic experience. Therefore, exploring the effect of managerial academic experience is helpful to understand China's enterprise management and economic development.
Theoretically, due to the lengthy time of academic training, executives with academic experience are more rigorous and risk-averse in their decision making, with relatively more dedication to independent thinking (Francis et al., 2015). Meanwhile, academic experience also makes executives more self-disciplined and self-supervised, which makes top executives with academic backgrounds typically have higher social responsibility and ethical standards (Cho et al., 2015). Taken together, executives with academic experience are more risk-averse, leading to lower levels of firm information risk. Managerial academic experience as a mechanism of self-restraint and supervision can also reduce the agency risk between managers and debt-holders. Both lower levels of information risk and agency risk reduce a firm's financing costs. Therefore, we expect a negative relationship between managerial academic experience and corporate cost of debt.
Based on Shanghai and Shenzhen A-share listed firms in China between 2008 and 2014, this paper examines the effect of managerial academic experience on corporate cost of debt. The results show that managerial academic experience can reduce a firm's debt financing costs by about 6.4%. The results hold when we use instrumental variable two-stage regressions, propensity score matching (PSM) approach, and firm fixed-effect regressions to address endogeneity concerns. We further investigate possible underlying mechanisms and find that managerial academic experience reduces earnings management and increases accounting conservatism, with the effect being more pronounced in firms that are audited by small audit firms and have less analyst coverage. The results suggest that managerial academic experience affects a firm's cost of debt by reducing information risk and agency risk. Further analysis shows that the effect is stronger in firms that face severer financial constraints, and that managerial academic experience also makes firms more likely to obtain bank loans.
Our study contributes to the literature in several ways. First, this paper is the first to examine the effect of managerial academic experience on firm behaviors and the signal to capital market participants. The large number of executives with academic experience is an important unique phenomenon brought by the wave of xiahai in China's economic reform and opening up. This paper thus has great significance to understanding China's enterprise management and economic development. Second, this paper extends the literature on the influence of managerial attributes on corporate cost of debt. Studies have found that corporate cost of debt is affected by managerial attributes such as education background. Education is more about an executive's individual knowledge and capability, while academic career experience is more related to professional discipline (Kaplan et al., 2012; Cho et al., 2015). This paper is thus different from the research on managerial education background. Third, this paper finds that executive academic experience can play a role in corporate governance, thus enriching the corporate governance literature. The results in this paper suggest that when external monitoring is weak, managerial academic experience as an internal self-restraint mechanism can be a substitute mechanism. This conclusion has important implications for enterprise executives in emerging markets where external governance is relatively weak.
Keywords： Academic Experience; Cost of Debt; Information Risk; Agency Risk

Summary： This paper investigates the literature on the family farm, theoretically reviews the main issues and debates in this academic subject, and clarifies some critical confusion and ambiguity from the perspective of agricultural transition and economic development.
First, agriculture is an industry that is relevant to individuals working, as it is highly biological in nature. The core family is the most appropriate organizational mode of agricultural production. Depending mainly on family members as the source of labor, family farms can easily assign residual control and residual claim to one agent, which is necessary to ensure an efficient economic operation. While hired labor has occurred since ancient times, it nevertheless has its inherent difficulties in monitoring and supervision. Some biological characteristics of agriculture can be weakened by technological innovations such that factory-style operation becomes more feasible.
Second, the family farm is not equivalent to small-scale farming. Modern family farms may be huge businesses in terms of cultivated area and output, while still being smallholdings in terms of labor use. However, all of the advantages of the family farm are specific to the production stage of agriculture, and family farms are quite powerless in facing their up-and downstream trading partners and need assistance with organizational measures and public policies outside the production stage.
Third, the debate regarding the relationship between farm size and efficiency is still inconclusive. The arguments for there being an inverse relationship between farm size and efficiency (i.e., a decreasing return to scale) are largely based on observations of developing economies. Instead, observations of developed economies tend to justify the hypothesis that there is no relationship between farm size and efficiency (i.e., a constant return to scale). In analyzing agriculture across economies, common sense points to countries with higher per capita GDP having larger average farm sizes and fewer small farms, with the agricultural production in rich countries characterized by large farms and that in poor countries by small farms.
Fourth, many observers suggest that policies favor smallholdings based on the inverse relationship of farm size and efficiency, while others object to such reasoning. One of the main arguments for the objection is that the alleged inverse relationship of farm size and efficiency actually reflects agricultural involution, and traditional smallholdings are efficient but unable to overcome poverty. Preservation and popularization of such modes of farming are not only unconducive to poverty alleviation and agricultural development, but also impede agricultural transition and the development of the economy as a whole.
Fifth, the essentials of agricultural modernization are reducing the number of farms, expanding the mean size of farms, increasing farm productivity, and promoting migration from rural to urban areas, with agronomic and technological changes taking place. This transition makes the agricultural sector able to provide plentiful labor and inexpensive agricultural products for the development of the economy as a whole. Moreover, this transition is what enables the agricultural sector to keep talented farmers with the recompense from farming jobs. This amount is not inferior to the income that farmers can obtain in off-farm jobs, and thus helps to achieve the sustainable development of agriculture.
Keywords： Family Farm; Scale Farming; Modernization of Agriculture