Summary： The relation between government and market is known as the Goldbach conjecture in economics. As this article indicates, Smith's third work expounded on national government behavior and probed into the roles and functions government should play. Keynes explained in his work why a series of measures were proposed for government to intervene in effective demand, rather than why national government could, in the capacity of participant or major entity, propel investment and infrastructure construction.

This article demonstrates a gap in the resource generation literature that waits to be filled by modern mainstream economic theory. Successful practices in China, especially in Shenzhen, have proved that government can play a significant role as a competitive entity in the field of resource generation. Government competition can be classified in the narrow and broad senses, the efficient market can be divided into three tiers, effective government can be represented by three levels of performance, and nine modes for combining an effective government with an efficient market can be identified.

This article breaks free of the limitations of the mainstream Western economic system and the configuration of market theories. First, in market economic theory terms, it proposes that a mature economy is one that integrates an effective government and an efficient market. It holds that many of the issues and practical problems in the economic development of the world are indications of defects in traditional market theory and holes in modern market theory, rather than problems with the market proper. Second, it proposes the concept of “mezzoeconomics” in the economic theoretical system, which is supposed to play an active and innovative role in remedying the defects in the orthodox economic system. It helps to fill in the gaps in the present-day economic system by establishing the mezzoeconomic system, with a regional or urban economy serving as its carrier and a regional government serving as a competition entity and playing a competitive role in the allocation of newly generated resources. Third, it puts forth theories of new economic engines for world economic growth based on analyses of that growth and holds that government should try its best to establish new engines for investment, innovation, and new governance, with a focus on infrastructure development and construction.

This article substantiates the government-market relation through practical analyses, which it bases on explorations of the reform and opening up, economic development, and operative modes in China, particularly in Shenzhen, while also using development experience and research findings on world economic practice. By defining three categories of resources and the attributes of resource allocation in different phases of regional development in Shenzhen, it reveals the duality of the economic attributes of government, the duality of market competition entities, and the necessity of integrating an effective government and an efficient market for a mature market economy. It emphasizes that a successful government requires foresighted leading and that government needs both competition in innovation and innovation in competition. China's reform and opening up and innovative development provide fertile soil for such economic generalization and theoretical sublimation.

This article's theoretical findings and empirical analyses of China's economic growth can be incorporated into world economic theory and made a part of China's contribution to world economics. They are deeply rooted in the author's 10 years of research in institutions of higher learning, both Chinese and overseas; over 10 years of immersion in the financial sector; and over 10 years of work experience in regional government administration. In this article, the author thinks outside of the box by breaking away from Smith's theoretical framework and proposing mechanisms that differ from those of Keynes's government intervention. The findings should eventually serve world economic growth.

Keywords： Effective Government; Efficient Market; Resource Generation; Resource Allocation; Dual Competition of Market

JEL Classification： A11, H11, R11

Summary： Traditional theories of internationalization posit that multinationality enhances firm value because multinational companies can obtain various advantages through monopoly, ownership and control, internalization, and location. However, multinationality may reduce firm value because it can be accompanied by liability of foreignness, formal and informal institution distance, and uncertainty of market demand and investment environment. Applications of real options theory to internationalization have recognized that uncertainty in the external business environment is associated with not only downside risks but also flexibility and opportunity that multinational companies can exploit to hedge against various political and economic risks. In particular, the network of multinational operations across different countries is equivalent to a portfolio of switching options, which enables the multinational company to shift production, investment, and sales activities across its subsidiaries in different countries when the external environmental condition changes, such as a sudden big movement in the exchange rate. In response to new opportunities and challenges, managers of multinational companies can maintain flexibility in deliberating, evaluating, and revising important decisions, thus creating real options value by deferring and switching investment projects across subsidiaries located in home and host countries. This flexibility lowers the downside risk and enhances the upside potential for multinational companies.

Our paper is one of the first to apply real options theory to studies of internationalization for Chinese multinational companies. Using data from all of the manufacturing firms publicly listed on the Shanghai and Shenzhen Securities Exchanges during 2008 and 2016, we seek to determine whether multinationality under excess capacity can enhance the value of real options and whether and to what extent political risks, the correlation of economic growth between host countries and China, the correlation of economic growth between host countries, and market size affect the real options value of multinationality. We also use a list of excess capacity firms compiled by the Ministry of Industry and Information Technology and other government agencies to classify our sample into excess capacity and non-excess capacity industries. We then seek answers as to whether excess capacity is an important mitigating factor in determining the real options value of multinationality, and whether excess capacity affects the sensitivity between the option value of multinationality and external factors such as the political risks and economic links of host countries.

We find that multinationality leads to lower downside risk and upside potential, but only for multinational companies with excess capacity. In addition, multinational companies in industries characterized by excess capacity on average have a significantly higher real options value of multinationality than multinational companies in other industries. Moreover, the real options value of multinationality increases with the market size of host countries, but decreases with the host countries' political risks and the correlation of economic growth between the host countries and China. Our results are robust to (1) measures of multinational companies using the number of host countries, the number of host regions, the number of overseas subsidiaries, the diversification of host countries and host regions, and a comprehensive multinationality indicator; (2) measures of real options value using downside risk and upside potential; (3) the specification of a Heckman two-step procedure to account for the potential “self-selection” problem between multinationality and the value of real options.

Overall, our results indicate that the benefits of multinationality are subject to whether multinational companies have excess capacity and operate in host countries with low political risks, low economic correlations with China, and low market sizes. Therefore, China's current Go Global Strategy, which it uses to encourage its firms to invest overseas, should not primarily focus on small countries or economies where political risks are high. The time is ripe for more manufacturing companies with excess capacity, high growth opportunities, and good risk management capability to become major participants in overseas investment in larger economics with advanced technologies and knowhow and in economies whose GDP growth shows a low correlation with that of China.

Keywords： Multinationality; Real Options; Excess Capacity; Political Risks; Correlation of Economic Growth

JEL Classification： F21, F23, G32

Summary： The trading halt system was originally designed to protect the interests of investors, but it can be highly controversial when exercised in practice. The trading halt system was established in China in 1998 and has been in place for about 20 years. However, in recent years, voluntary trading halts of listed companies have occurred frequently in the Chinese market, attracting close attention from Chinese regulatory institutions and international investors. The new phenomenon of voluntary trading halts differs from that in developed markets in that listed companies apply for trading halts arbitrarily, have overlong halting periods, do not follow relevant standard procedures, and fail to disclose information adequately. Within the range of literature reviewed, studies have not provided a systematic classification or conducted an empirical test of this phenomenon. Therefore, do voluntary trading halts in the Chinese market indeed harm the interests of investors? If so, how serious is the harm, and what is the mechanism behind such behavior?

We answer these questions in three ways. First, we analyze the present situation of trading halts in China and theoretically analyze how voluntary trading halts may undermine the interests of investors by facilitating the private benefit behavior of insiders. Second, we define voluntary trading halts in detail from the perspectives of overlong halting periods and inadequate information disclosure in accordance with the regulations enacted by the Shanghai and Shenzhen Stock Exchanges of China in May 2016. Third, we use the event study method to test the impacts of voluntary trading halts on the interests of investors based on data for companies listed in China from June 2014 to May 2016.

The empirical results show that voluntary trading halts cause significantly negative excess returns to investors regardless of whether the total sample or a propensity score matched sample is used. During the voluntary halting period, the private benefit behavior of insiders in the company is more likely to emerge. If the private benefit behavior occurs during the halting period, the negative abnormal returns caused by voluntary trading halts are greater. Furthermore, we find that the institutional investors are more likely to sell their shares after the voluntary trading halts. These results mean that the voluntary trading halts in the Chinese market do not achieve the original intention of protecting the interests of investors, but end up causing them harm by facilitating the private benefit behavior for some insiders. Therefore, to promote the effectiveness of the trading halt system, relevant Chinese authorities must strengthen new regulations that emphasize the requirements on trading halt periods and information disclosure, It is also necessary to pay attention to the design of the global market, which may help to regulate both the halting and private benefit behavior.

We make three main contributions to the literature. First, based on the experience from the Chinese market, this paper provides empirical evidence of the damage of voluntary halts on investors and provides a new explanation for how trading halts can undermine the interests of investors by facilitating the private benefit behavior of insiders. The current theoretical explanations for trading halts on investors' interests mainly come from the cooling-off hypothesis and learn-by-trading model, which ignore imperfections in the institutional environment. Therefore, the findings of this paper extend the knowledge of the literature on trading halts. Second, studies of trading halts in the Chinese market have mainly focused on the types of halts in the early stages, such as routine halts and halts for abnormal fluctuations, and few studies have considered the problem of voluntary trading halts, which have concerned international investors in recent years. To the best of our knowledge, this paper is the first to provide a systematic classification and an empirical test of voluntary trading halts. Third, although the question of whether trading halts can protect the interests of investors is widely recognized as controversial, relevant evidence has mainly been concentrated in developed capital markets. This paper provides new evidence on trading halts in China from an emerging market perspective.

Keywords： Listed Company; Voluntary Trading Halt; Interests of Investors; Private Benefit Behavior

JEL Classification： G10, G14, G18

Summary： Since the reform and opening up, Chinese processing trade has developed rapidly. However, most of it remains in the stage of OEM production, lacking self-owned brands and core technologies, and its export expansion is mainly driven by a large number of low-value-added primary processed goods. Problems persist, such as an insufficient ability to conduct independent research and development and a low ability to acquire added value; hence, Chinese processing trade is located in the middle and low end of the global value chain. In the context of the new type of international division of labor, it is urgent for Chinese processing trade to transform and upgrade. This paper treats the sharp increase in human capital resulting from the higher education reform as a quasi-natural experiment and adopts a difference-in-differences method to empirically investigate the impact of human capital expansion on the upgrading of Chinese processing trade.

Based on Chinese firm-level data from 2000 to 2013, the results show that human capital expansion significantly raises processing firms' export technological sophistication and thus promotes the upgrading of Chinese processing firms. The mechanism tests show that human capital expansion not only spurs processing firms to increase R&D and on-the-job training expenditures but also inspires processing firms to import and use more varieties and higher quality intermediate inputs. It also encourages processing firms to increase fixed investments. All of these factors jointly promote the upgrading of processing firms. Further heterogeneity analysis shows that the positive effect of human capital expansion is larger for processing firms with lower financing constraints, higher management efficiency, higher capital intensity, and foreign-owned processing firms. We also document heterogeneity in the impact of human capital expansion on the upgrading of processing firms across fields. Finally, this paper explores the relationship between human capital and the upgrading of processing firms from additional perspectives and finds that human capital expansion tends to promote the transformation of the organization mode from pure assembly processing trade to import-and-assembly processing trade, increase processing firms' domestic value added ratio, and increase processing firms' production efficiency and independent innovation ability.

This paper has important policy implications. The government should continue to attach great importance to and actively promote the development of higher education and realize the transformation from “scale expansion” to “quality improvement”,thereby continuously improving the quality of human capital in China. Processing trade firms should hire and absorb high quality human capital at all costs, increase funding for on-the-job training, and raise the human capital of current employees.

This paper makes the following contributions. First, it is one of the first to explore the impact of human capital expansion on the upgrading of Chinese processing trade at the micro level, which enriches the literature on the determinants of Chinese processing trade transformation and upgrading. Second, it uses the higher education reform implemented by the Chinese government in 1999 as a quasi-natural experiment and investigates the causal effects of human capital expansion on the upgrading of Chinese processing trade by adopting the difference-in-differences technique. Third, it constructs a comprehensive system for evaluating the upgrading of processing trade in the context of the open economy and global value chain. Last but not least, it explores the mechanisms through which human capital expansion affects the upgrading of processing trade and deepens our understanding of the internal relationship between the two. In addition, this paper examines the heterogeneous effects of human capital expansion on the upgrading of processing trade from multiple perspectives.

Keywords： Human Capital; Processing Trade Upgrading; Higher Education Reform

JEL Classification： F13, F14, J24, O30

Summary： The succession process, during which a business is transferred from one generation to the next, represents the most critical issue confronting family firms (Morris et al., 1997; Burkart et al., 2003). The process includes the dynamics that lead up to the actual transition and its aftermath, with the cultivation of successors being the key factor in determining the success of the succession (Goldberg & Wooldridge, 1993). China is experiencing a transition of family firm leadership from the first founding generation to the second generation, and there are two main modes of cultivating successors in Chinese family firms (Forbes, 2014). Overseas training endows the second generation with an international vision and familiarizes them with foreign management practices (Giannetti et al., 2015), while domestic training facilitates the transferring of specialized assets and the development of commitment to family firms. Determining which cultivating mode is beneficial to family firms during the succession process is an empirical question. Our study investigates this question and provides empirical evidence.

Two theories are related to this study. The first is specialized assets theory. Operation activities in family firms depend heavily on the families' specialized assets (Nooteboom, 1993), which mainly include key operating knowledge and skills, long-established reputations, the founder's political connections, and social capital (Fan et al., 2012). Domestically trained successors are more likely than overseas-trained successors to be involved in the family firm earlier, to acquire key knowledge and skills, and to establish social connections with various stakeholders. The second is commitment and identification theory. Successors' commitment to family firms is considered a more crucial factor than other technical factors in determining the success of succession (Cabrera-Suárez, 2005). Early involvement in a firm makes domestic trained successors more likely to develop commitment and acquire credibility and legitimacy through the position promoting process (Barach et al., 1988).

Based on a succession sample of Chinese listed family firms, this study investigates the effect of successors' cultivation mode on post-succession performance. We find a significant decline in post-succession performance, and that successors with overseas training experience exhibit worse accounting and market performance than domestically trained successors. Cross-sectional evidence indicates that the difference in post-succession performance between the two groups is smaller when the successor has a longer period of internal development before the succession, a longer period spent managing the firm after the succession, and a shorter period of overseas training. The difference is smaller for successors who share similar academic backgrounds with founders and for firms from religions and industries that are less dependent on social capital. Further analysis shows that successors with overseas training experience find it more difficult to inherit founders' specialized assets and to develop affective commitment to and identification with family firms. The difference in post-succession performance exists only in firms that lack a founder's decision balance mechanism.

Our study makes several contributions. First, it provides a new explanation for performance declines in the post-succession period from the perspective of successor training. Second, the current literature asserts that managers with foreign experience bring benefits to their firms, improve firm-level corporate governance, and identify beneficial foreign merger and acquisition opportunities (Giannetti et al., 2015). However, our findings indicate that this rule is not applicable for the cultivation of second generations, as overseas-trained successors may have a disadvantage in inheriting specialized assets and developing affective commitment to and identification with family firms, which are both crucial factors in promoting the firms' competitive advantages. Third, our study provides practical advice for private entrepreneurs on cultivating successors effectively. Although it draws its conclusions from a sample of family firms, our study sheds light on how to cultivate managers in other private enterprises. Internally developed managers may be more productive than external managers.

Keywords： Family Firm; Succession; Overseas Training; Domestic Training

JEL Classification： G32, M12, M41

Summary： In recent years, developing countries' convenience in using international technology spillovers has gradually disappeared, and independent technological innovation has become the main approach. To solve the problem of technological innovation, developed countries have generally adopted measures such as government subsidies and tax cuts, but there have been many disputes over the measures. The most important dispute has centered on whether a developing country's economic system, depending on the push of a construction investment, can be rapidly transformed into an economic system dominated by science and technology innovation by significantly improving the government's technological innovation expenditure while maintaining the economic growth rate. This has important theoretical and policy-related implications for the effects of China's government technology innovation expenditures on its economy.

To study the role of government technology innovation expenditures on technological progress and other economic effects, based on analysis of the difference in China's industry technology input rate, we confirm the significant differences in technological innovation investment behaviors across different industries, test the effect of government funding support on different firms' technology innovation investments through the generalized method of moments, construct a simple dynamic stochastic general equilibrium model that includes the innovative heterogeneous firms, and simulate the impact of government technology innovation expenditures on technological progress and output.

We obtain four results. First, according to the difference in China's industry technology input rates, firms can be divided into two categories: technologically innovative firms and technologically stable firms. A firm's profit is the most important internal source of the increase in firm innovation investment, and the sales profit rate plays an important role in guaranteeing and promoting investment in firms' technological innovation. Residents carry out investment structure allocation based on the capital profit rate, which further affects the proportion of capital of the two types of firms. Second, the increase in R&D investment proportion in technology innovation firms cannot rapidly drive the rise of output, but can promote the transformation of the domestic economy from the traditional extensive investment type to the technological innovation type. Third, government technology innovation expenditures are the main external driving force behind the increase in firms' technological innovation investment, which significantly boosts their technological progress and has an important positive effect on macroeconomics development. When a firm's own technology innovation investment rate is higher than a certain level, the government's technological innovation expenditure is more effective. Fourth, although the government's increase of technological innovation expenditure has less of an incentive effect on the total social output than its economic construction expenditure, it is necessary to sacrifice the economic growth rate to some extent to build an innovative country.

Our paper makes three contributions to the literature. First, we design the production functions of technologically innovative and stable firms, develop a dynamic stochastic general equilibrium model that includes innovation heterogeneity, solve the output equilibrium, and examine the economic effects of the government's technological innovation policy under this framework, which should provide a reference for improving the accuracy of policy evaluation and reducing deviation in future policy. Second, we study the impact of dynamic decisions about residents' capital investment structure on the change in capital structure and firms' technology innovation. Finally, we divide government expenditures into technological innovation expenditure and investment construction expenditure and analyze not only the impact of government technology innovation expenditure and economic construction expenditure on firms' technology innovation investment and output function, but also the other macroeconomic effects. Through these effects, the government can rationally adjust the ratio of economic construction expenditure to technological innovation expenditure according to the economic development needs.

Keywords： Innovation Heterogeneity; Technology Steady Firm; Technology Innovation Firm; Government Technological Innovation Expenditure

JEL Classification：  E03, E27, O30

Summary： The level of farmers' human capital guarantees and reflects the quality of rural development, which is a major economic problem of sustainable rural development in China. To solve the problem of the lack of farmers' human capital accumulation, the central “No. 1 Document” for 2004—2018 has put forward a specific arrangement for accelerating the accumulation of farmers' human capital from the vocational skills training of rural labor to rural practical personnel training, agricultural production technology and job skills training, and new vocational farmers training. At the central government level, the specific deployment of farmers' human capital accumulation has varied over time, which shows that it is difficult to solve the problem of a shortage of human capital accumulation through a single policy tool. As such, what dynamic mechanism is used to promote the accumulation of farmers' human capital? In the transformation of land urbanization to population urbanization, what changes occur in the dynamic mechanism?

Although the literature has considered the problem of farmers' human capital accumulation in many ways, it has rarely examined the impact of agricultural productivity on rural household human capital accumulation based on a unified framework. This paper constructs a dynamic general equilibrium model of agricultural productivity and theoretically analyzes the influence of agricultural productivity on the accumulation of rural household human capital. Based on theoretical research, we empirically study the impact of agricultural productivity on farmers' human capital accumulation using data from the China Household Income Survey and analyze its mechanism in depth.

Empirical results show that the increase in agricultural productivity is an important way to promote the accumulation of farmers' human capital after controlling for the agricultural land endowment and family characteristics variables, thus verifying the theoretical proposition of this paper. We arrive at several main findings. As agricultural productivity increases, rural households tend to invest in education, thereby increasing the level of household human capital accumulation. The increase in agricultural productivity over time has had a significant effect on the increase in household laborers' years of education. The earlier agricultural productivity changes, the greater the impact on family members' years of education. The income growth effect of agricultural productivity and the investment effect of education are important mechanisms for improving the level of human capital accumulation in the family. The improvement of agricultural productivity increases the level of human capital accumulation in the households engaged in agriculture. Although it is significantly promoted, for households with non-agricultural production, the human capital accumulation effect of agricultural productivity is not significant. Finally, when the family farmland resource endowment increases, rural families pay more attention to education, which leads to an increase in family human capital investment.

This paper makes the following contributions. First, it builds a dynamic general equilibrium model of urban and rural areas that accounts for the special center-periphery spatial structure between rural homestead and agricultural production and reveals the special relationship between rural and urban. It discusses the dynamic impact of agricultural productivity on farmers' human capital accumulation based on the dynamic general equilibrium framework. Theoretical analysis shows that the increase in agricultural productivity promotes the accumulation of human capital in rural households and that the income growth mechanism of agricultural productivity plays an important role. Second, using the China Household Income Survey data, this paper empirically examines the impact of agricultural productivity on rural human capital accumulation. It finds that with the increase in agricultural productivity, rural households are more inclined to invest in education. This increases the level of family human capital accumulation, and the mediating effect of income and education investment plays an important role.

Keywords： Dynamic General Equilibrium; Agriculture Productivity; Human Capital Accumulation

JEL Classification： R12, R23, J24

Summary： The increasingly unbalanced population structure is becoming a global issue, and its impact on economic growth has been a highly concerning issue around the world. In particular, some scholars in China have expressed concern that they are “not getting rich first”. Studies have focused on either the overall demographic structure or one dimension of the demographic structure, with less research considering both fertility and life expectancy. This paper analyzes the transmission mechanism and effect of fertility and life expectancy on economic growth. To the best of our knowledge, the differences between this paper and previous studies are reflected in three main ways. First, this paper considers the impact of population structure on economic growth in terms of both fertility and life expectancy. Second, it develops a theoretical model to consider the problem of endogenous economic growth. Third, it incorporates the spatial effect of economic growth into its empirical research and considers the two-way causality of population structure and economic growth.

To clarify the impact mechanism of population structure on economic growth, both fertility rate and life expectancy are simultaneously introduced into the overlapping generations model, which shows that fertility rate and life expectancy have two paths of action for economic growth. First, they change the ratio of education expenditure on income, which directly changes the level of education expenditure, creating a substitution effect on economic growth. Second, they influence income levels through the change in savings, creating an income effect on economic growth. Economies with higher levels of economic development tend to show that the income effect of fertility is greater than the substitution effect and that the substitution effect of life expectancy is greater than the income effect. The decline in fertility and the extension of life expectancy can slow down its economic growth, while the characteristics are just the opposite for those economies with lower economic development levels.

This paper selects the balance panel data composed of 67 countries and regions from 1971 to 2015 and uses the spatial econometric model and the moment-to-moment method to measure and decompose the economic growth effect of population structure changes. The empirical results support the theoretical model, and the economic growth effects of population structure exhibit certain differences in different countries that can be roughly divided into three categories. The first category is represented by low-developing countries such as Burundi and Congo, where the substitution effect dominates both fertility and life expectancy. The decline in fertility and the extension of life expectancy have promoted and hampered their economic growth, respectively. However, the positive effect of the reduction in the number of births is greater than the negative effect of the extension of life expectancy, and thus demographic changes have driven the countries' economic growth. The second category is represented by high-developing countries such as China and Argentina, where the substitution and income effects dominate fertility rate and life expectancy, respectively. The decrease in the number of births and the extension of life expectancy have contributed to the economic growth of both countries. The third category is represented by developed countries such as the United States and Japan, where the income and substitution effects dominate both fertility and life expectancy. The decline in fertility and the extension of life expectancy have hampered these countries' economic growth.

In the past 40 years, China's comprehensive decline in fertility and life expectancy has contributed nearly three percentage points to economic growth. However, as the economic level develops, the positive marginal effect of the decline in fertility rate and the extension of life expectancy is fading and shifting to a negative marginal effect. In view of this, this paper argues that it is a good time for China to introduce a policy to increase fertility and optimize the age structure of the population. This should not only have a minor impact on current economic growth but also increase the potential economic growth rate and maintain sustainable economic growth.

Keywords： Fertility Policy; Population Age Structure Optimization; Economic Growth; Overlapping Generations Model

JEL Classification： C21, J11, J13

Summary： In the modern economy, human capital has become an important force for promoting urban development. The accumulation and agglomeration of human capital in cities comprise the basis of urban economic development and are an important source of modern economic growth (Glaeser et al., 2014). As the core of urban development, the spatial distribution of human capital basically determines the spatial distribution of the urban population and economy in a country. In recent years, human capital and population trends have become more concentrated in big cities and metropolitan areas around the world, and China is no exception (Berry & Glaeser, 2005; Moretti, 2010; Diamond, 2016; Giannetti, 2003; Xia & Lu, 2018), which is necessary under the conditions of a market economy and free labor flow. However, in reality, some policies promote the even distribution of human capital. These policies may affect the spatial distribution of the population to a certain extent in the short term. However, once the administrative means weaken, does the flow of human capital and population return to the earlier path, or does the policy effect sustain? The answer to this question reveals the long-term accumulation and development of urban human capital. However, sufficient research in this area is lacking. Based on the perspective of spatial agglomeration and path dependence, this paper examines the long-term development of urban human capital.

In this paper, we use a unique dataset spanning several centuries in China to study the three forces that influence the formation of city-level human capital in the long run: the historical heritage of human capital, policy shock, and contemporary migration. We find that the historical human capital (measured by the number of jinshi in imperial examinations during the Ming and Qing Dynasties) has been inherited by contemporary Chinese cities and that the policy shock of relocating university departments in the 1950s has impacted the geographic distribution of human capital. However, during the decades of ongoing marketization reform, the impact of the policy shock in the planning era has gradually weakened, and large-scale migration, especially high-skilled migration, is making the distribution of human capital across cities gradually converge to its historical status. We further find that the accumulation of city-level human capital depends on location. Cities in coastal areas, which have inherited more of the historical human capital and have higher returns on human capital under the conditions of economic openness, are attracting a highly skilled population. The footprint of human capital in China over centuries tells us that although administrative powers can change the distribution of human capital to a certain extent, their impact may not last in the long term. In a market economy, the long-term accumulation of human capital over the course of history remains an important force in the formation of the contemporary city system and plays an important role in the path dependence of city development. When the human capital accumulated throughout history obtains higher returns in the contemporary era, it can result in further human capital agglomeration by attracting migrants.

Our study contributes to the literature by examining the impact of high-skilled human capital on city systems over several hundred years and testing the path dependence of city development. In the literature on the path dependence of city development (Davis & Weinstein, 2002; Bosker et al., 2013), few studies have examined the role of human capital. Meanwhile, no study of human capital agglomeration across cities (Berry & Glaeser, 2005; Moretti, 2004a; Eeckhout et al., 2014; Diamond, 2016) has examined such a long historical period or included a shock in its analysis of human capital formation. Our unique dataset, which includes human capital of high education across cities over several centuries, extends almost several hundred years earlier than the measures of city-level human capital of other countries (Simon & Nardinelli, 2002; Tabellini, 2010; Akcomak et al., 2016). We determine the impact of high-skilled human capital at the city level via a natural experiment involving university relocation in the 1950s to study whether the spatial distribution of human capital changed by administrative forces can be sustained. In addition, we examine the role of location advantage and its impact on the return of human capital in the path dependence of city-level human capital.

Keywords： Human Capital; Historical Inheritance; Policy Shock; Migration

JEL Classification： R12, O18, J24, R23

Summary： As one of the most representative traits of Chinese culture, Chinese cuisines are world famous and a reflection of soft power. However, the literature on the Chinese cuisine industry is significantly insufficient, and few papers have considered variety welfare across the whole country.

We attempt to determine the distribution rule of non-tradable goods in China. Modern economics, especially new trade theory, pays more attention to the distribution rule, as preference for variety is a basic assumption of modern economic theory (Armington, 1969). Studies from Krugman until now have gradually determined that the scale economy, which comes from the agglomeration effect of supply, can increase the number of varieties in production and promote variety welfare (Krugman, 1979, 1980, 199la; Broda & Weinstein, 2006). In contrast, the rule of consumption and non-tradable goods remain misunderstood.

According to the urban economy, all location-based services or goods that are differentiated and patronized by consumers with a specific set of preferences can be regarded as non-tradable goods. Due to the two main characteristics of non-tradable good, including transport cost heterogeneity and low substitution, more scholars have recognized that varieties of non-tradable goods can better proxy for a city's non-tradable goods welfare than other indexes. In addition, scholars have determined that non-tradable goods are among the major sources of a city's amenities (Glaeser et al., 2001) and one of the most important factors attracting people to live in a city (Chen & Rosenthal, 2008; Lee, 2010). Therefore, it is important to study the distribution rule of non-tradable goods for urban development.

China's huge population and unique population mobility pattern also motivate our research. The 12th and 13th Five-Year Plans insist that big cities should limit population inflow, which has made China's population uniquely fluid. Recent empirical work has shown that industrial composition varies systematically with population size (Mori et al., 2008; Mori & Smith, 2011; Hsu, 2012; Schiff, 2015). However, there is an extreme spatial mismatch between the economy and population that weakens the urban population agglomeration effect and scale economy effect (Lu, 2013). Thus, we research the potential loss of non-tradable goods variety welfare against the background of limiting population mobility policy.

We acquire the cuisines data from Meituan-Dianping（dianpingcom）There are two classification standards for cuisines, including categories and dishes, which can proxy for the varieties of a local city. Compared with other studies, ours makes three main contributions. First, we first use big data to proxy for the varieties of non-tradable goods in a Chinese city; second, we discuss the relationships between China's population size, population structure, and varieties of non-tradable goods; third, we estimate the loss of non-tradable goods variety welfare in a Chinese city under the population mobility restriction policy. We combine the cuisines data from dianping.com in 2015 and consider the sixth census and land data at the city level to empirically test the causal relationship between population size and structure and the variety welfare of non-tradable goods. We find that the elasticity of variety in terms of population is between 0528 and 0696, while that in terms of fluid population is between 219 and 356. That is, the “fluid population” not only serves as a special category for the city, but also encourages the city to create new categories.

This paper supports the positive promoting effect of population scale and structure diversity on the variety welfare of non-tradable goods. Based on our estimation of the instrumental variables, we use varieties of non-tradable goods as welfare indicators through numerical simulations to estimate the potential losses of Chinese cities under different parameters of logarithmic normal distribution. The results show that the current limits on population mobility result in a huge variety welfare loss especially for big cities, but have a protective effect on small and medium-sized cities.

Keywords： Non-tradable Goods; Variety; City Size; Internal Migration

JEL Classification： L10, R12

Summary： China has consumed huge amounts of energy, which has resulted in a variety of environmental challenges. As a result, to achieve sustainable development, policymakers have taken administrative and market-based policy measures to reverse the process of rising energy consumption. During the 13th Five-Year Plan period (2016—2020), strict “double control goals” (i.e., capping total energy consumption and energy intensity) have been issued. In response to the “double control goals”, the energy quota trading policy was proposed. However, the economic and environmental effects of this new market-based policy are unclear. Furthermore, concerns have arisen over which policy mechanism (the command and control mechanism or market-based mechanism) is more effective. The purpose of this study is to compare the effects of these two policy mechanisms.

The question of which policy mechanism can achieve “double control goals” has been important and controversial. Some environmentalists and scholars have argued that a mandatory policy can provide incentives for polluters to use cleaner and cheaper production technologies, promoting economic and environmental performance in turn. The “Porter Hypothesis” presented by Porter et al. (1995) holds that stringent government regulations can induce polluters to increase investment in clean innovations and improve technologies to achieve pollution reduction and production enhancement. Some research supports this hypothesis. For example, Boyd et al. (2000) examine glassworks and find that stringent regulations reduce emissions by 2—8% without productivity degradation. Simon (1976), Nelson et al. (1982), Greenstone & Hanna (2014), and Shapiro & Walker (2015) offer similar viewpoints. In contrast, neoclassical theories demonstrate that strict government regulations increase production costs and reduce the competitiveness and innovation incentives of polluters. They argue that market-based instruments are more effective. Crocker (1966) and Dales (1968) were the first to propose the tradable permit mechanism based on transaction cost theory (Cose, 1960). The system allocates the emissions quota to participants based on the market price principle, which can lower costs and help enterprises innovate to create economic benefits (Montgomery, 1972; Tietenberg, 1995; Farrell et al., 1999; Carlson et al., 2000; Stavins, 2003). As such, comparative analysis of mandatory and market-based instruments is still essential. Moreover, although studies have considered the emissions permit transactions of different pollutants such as CO2, SO2, and NOX, no work has focused on inputs permit trading such as energy. Thus, this paper examines the energy quota trading policy and compares the economic and environmental effects of this new mechanism and the traditional command and control mechanism.

To build the theoretical model and conduct our empirical research, we collect the input and output panel data of China's 38 sub-industries from China Statistical Yearbook, China Industrial Statistical Yearbook, China Energy Statistical Yearbook, and China Statistical Yearbook on Science and Technology. Based on the data, we construct a command-and-control non-parametric optimization model and a market-based non-parametric optimization model to estimate and forecast the potential economic gains and energy savings of Chinese sub-industries. We also use the parametric method to estimate the potential energy savings from the command-and-control mechanism due to statistical considerations.

The results show that the average industrial economic and energy-saving potential from the market-based non-parametric optimization model are higher than those from the command-and-control non-parametric optimization model, and that the average potential energy savings from market-based non-parametric optimization model are significant over the long term. However, a part of the potential energy savings is squeezed out due to the negative externality of the market trading. As a result, only government regulation supplemented by market trading should be considered. Meanwhile, the government should continue to adjust the economic and industrial structures, increase R&D investment, and eliminate backward capacity. Only by creating a perfect trading environment can Chinese industry achieve a win-win development of economic growth and energy savings.

Keywords： Chinese Industry; Command and Control; Energy Quota Trading (EQT); Potential Economic Gains; Potential Energy Savings

JEL Classification： C14, C60, O13, Q56

Summary： The existent literature suggests that the endowment effect is essential for the formation of natural property rights. However, where the endowment effect comes from and how it coevolves with natural property rights is not fully understood. This paper develops an agent-based model featuring “preference evolution + individual choice” to examine how the endowment effect could be shaped and how natural property rights could emerge in an evolutionary artificial society. In our agent-based model, each agent has a pair of preference genes that respectively determine its subjective valuations of the resources it owns or does not own. The agent's subjective evaluation of resources may be biased or deviate from the true value of the resource, which is defined as the survival value, i.e., how much benefit the resources objectively bring to the agent for her survival. Each agent can only survive for a single period, during which some agents will randomly become the owner of a resource (i.e., the incumbent), and other unlucky agents become wanderers without any resources. The wanderer needs to decide whether to launch a fight to seize resources from the incumbent. Whether or not a fight breaks out, the agents' interaction will determine how many resources each party can obtain, and thus the number of descendants the agent can produce. At the end of a period, all agents will die, and their descendants will repeat their stories. Each descendant inherits the gene from its parent; that is, an agent's subjective valuation of the resource in both owned and unowned states will be the same as that of its parent.

When the model is run, the results show that the emergence of the endowment effect is typically evolutionarily stable, i.e., a higher valuation of an owned resource and a lower valuation of an unowned resource is an evolutionarily stable result. With massive simulation experiments, we determined that the endowment effect coefficient (measured by the ratio of subjective valuations of resources when owned and not owned) is around 1.6, and in 90% of the experiments it is in the interval ［1, 2.5］, which is quite close to the endowment effect coefficients found in 169 behavioral experiments in the 39 projects surveyed by Sayman & ncüler (2005). The experimental results of our agent-based model are thus consistent with the WTA/WTP deviation observed in a large number of experimental studies. We also found that the relative value of resources affects the evolution rate and the level of the endowment effect, but has no effect on whether the endowment effect occurs.

Furthermore, we found that agents' subjective valuation of unowned resources tends to approach the true value (i.e., survival value) of the resources when the evolution process is long enough, while the agents' subjective valuation of owned resources is always higher than the true value of the resources, even over a very long process of evolution. These results show that the agents' valuation is closer to the objective value for unowned resources while higher than the objective value for owned resources. The reason is that the excessive valuation of a possession makes an agent more able to defend it from being snatched away, so this seemingly “wrong” preference improves the agent's situation and thus makes the endowment effect more likely to evolve successfully as a psychological tendency. Once the endowment effect emerges in the evolutionary process, an agent with this psychological tendency has a solid commitment mechanism, which makes the agent credibly “more willing to pay for the defense of possessions”,and thus others are discouraged from stealing them from the agent. When the robbing intentions of other agents are completely inhibited, natural property rights, or spontaneous respect for property rights, will be pervasive in a given society.

This paper not only provides an evolutionary explanation for the origin of the endowment effect, but also provides a theoretical logic and computer simulation evidence for the co-evolution of the endowment effect and natural property rights. Our model disposes of the troubles and confusions resulting from the fact that the property rights phenomenon and the anti-property phenomenon always have the same conditions and the same possibilities; this difficulty has long vexed the classic literature such as Smith (1982) and Gintis (2007, 2009). Thus our approach provides a more solid theoretical foundation for the institutional economic analysis of spontaneous order.

Keywords： Endowment Effect; Artificial Economy; Behavioral Evolution; Institutional Economic Analysis

JEL Classification： B52; C63; D03