Summary： The gap of initial income distribution has been widening since the marketoriented reform in China. Meanwhile, in the process of fiscal redistribution, the longterm implementation of the tax system based on goods and service tax has resulted in inequality in the incidence of tax burden; the longterm implementation of the public service provision and sharing system based on the identity characteristics has led to inequality in benefit incidence of public expenditures. The “double inequality in incidence” of the initial distribution of the market and the fiscal redistribution add up to each other, and the income distribution gap of Chinese residents is now characterized by solidification, institutionalization and intergenerational transmission. As China is committed to practicing the new concept of shared development, measuring whether and how current fiscal redistribution system alleviates the income distribution gap and poverty is pivotal to improving it.
This paper extends the traditional method of analyzing financial redistribution system by integrating the income and expenditure of finance into a unified research framework. We use household survey data from 2012 China Family Panel Studies (CFPS2012) and China Input and Output Tables in 2012 to construct residents' income accounting account. Using standard financial analysis, we calculated the net fiscal income of Chinese residents and comprehensively measured the redistribution effect and povertyreducing effect of China's public finance with both “anonymous” and “nonanonymous” measures. The results show that China's overall fiscal redistribution has a weak positive adjustment effect on the primary distribution of the residents' income, and the fiscal redistribution reduces the Gini coefficient by 406%. Specifically, the marginal contributions of basic social insurance payment, public service, transfer payments and the direct taxes are 248%, 234%, 175%, 119%, respectively, while the marginal contribution of indirect taxes is-157%, indicating that it plays a reverse regulatory role. China's fiscal system has a significant povertyreducing effect, fiscal redistribution has reduced the poverty span, poverty depth and poverty intensity of the whole country by more than 20%. Specifically, transfer payments, public service and basic social insurance are poorrelieving, but the indirect taxes are poordepriving. On average, net fiscal beneficiary account for a larger proportion among the poor, while net fiscal payers are more among the rich, suggesting that the fiscal redistribution of China is conducive to the formation of an oliveshaped social structure. Although China's fiscal redistribution brings some wealth reduction, its fiscal gain is more significant. Overall, the weakprogressive fiscal redistribution system of China and its adverse adjusting tools are contrary to the principles of fair redistribution and shareable development. Based on the above results, we believe that the key to realizing shareable development is to speed up the establishment of a modern fiscal system with a core of “two fair incidences”. Therefore, based on the principle of promoting shared development, we adjusted the system design of personal income tax, valueadded tax, transfer payments, public service, and social insurance using a scenario analysis, and provided a path for reconstructing an accurate fiscal system.
There are four contributions of this paper: (1) We integrated direct taxes, indirect taxes, transfer payments, public services and basic social insurance into a unified analytical framework and comprehensively measured the redistribution effect and poverty reduction effect of Chinese fiscal system starting from the connotation of shared development; (2) We used the microdata of household survey from CFPS2012 to make full use of its abundant household information; (3) We used standard financial destination analysis method to make up for the limitations of the general equilibrium model, such as the loss of heterogeneous information, the inconsistency between model setting and micro foundation, and the unsuitability for shortterm evaluation; (4) We combined both anonymous measures and nonanonymous evaluation methods.
Keywords： Fiscal Incidence; Fiscal Redistribution; Fiscal Mobility; Poverty Reduction; Fiscal Impoverishing
JEL Classification： H22, H23

Summary： National economies and markets have become much more integrated in recent years, highlighting the importance of international tax issues in the international tax governance system. The old rules have revealed weaknesses that create opportunities for base erosion and profit shifting (BEPS), which refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to lowor notax locations. Thus, international policy makers must take strong action to ensure that profits are taxed where economic activities take place and value is created (OECD, 2015). BEPS has a larger impact on developing countries than on developed countries, given developing countries' greater reliance on corporate income tax (CIT) revenues. Therefore, China has actively participated in a project to address BEPS activities. To guide efforts to reform the international tax governance system, an understanding of BEPS activities in China's multinational enterprises is an important prerequisite.
In this context, this paper uses firmlevel data to study whether China's outward foreign direct investment (OFDI) enterprises use tax havens to shift profits, a practice that may lead to tax base erosion. Specifically, using data from the Chinese Annual Survey of Manufacturing combined with a directory of OFDI enterprises from 1998 to 2013, we can identify the exact time and destination of OFDIs and divide them into taxhaven and nontaxhaven categories. Then, we use the differenceindifferences (DID) method to identify the impact of tax havens on profit shifting. We also examine the dynamic effects, testing parallel trend assumptions and analyzing longterm effects. Further, we examine how profit shifting is carried out through transfer pricing using firms' export information, and through thin capitalization combined with capital control policy in China.
The empirical results comparing firms investing in nontax havens to those investing in tax havens show that the total profit of the latter group's domestic parent companies is reduced significantly, by 12%—14%. Regarding dynamic effects, there is no significant difference in the trend before OFDI, which indicates that the parallel trend assumption is established. In addition, the effect of profit shifting is increasing year by year, which may reflect the learning effect of tax avoidance. Furthermore, we find that tax base erosion is more significant in export enterprises, but the level of firms' financial costs and liabilities does not improve, which indicates that the channel of profit shifting is mainly through transfer pricing rather than thin capitalization.
Our work contributes to the literature on BEPS in three main ways. First, this paper is the first to use detailed microfirm data to study the BEPS of China's OFDI enterprises. Thus, it provides empirical evidence for understanding the profit shifting of Chinese enterprises, which is of practical relevance to China's participation in international tax governance systems and the supervision of irrational foreign investment. Second, this paper verifies the reliability of using the DID method as an identification strategy to study several aspects of China's profit shifting, thus ensuring the reliability of research conclusions. Finally, based on the Chinese institutional background, this paper examines the intermediate channels of transfer pricing and thin capitalization in profit shifting, thus enriching our understanding of the theoretical mechanism of profit transfer. The paper also suggests specific policy measures related to international tax governance based on the Chinese context, and it provides ideas on how to participate in such international systems while safeguarding the interests of developing countries and emerging economies.
Keywords： International Tax Governance System; Base Erosion; Profit Shifting; Tax Avoidance
JEL Classification： H20, H26, F23, F55, H87

Summary： Productivity gaps are the main cause of the regional disparities observed in China's economic development. In the late 1990s and early 21st century, the economic gap between East China and Midwest China narrowed, but the productivity gap between them widened. Does such divergence mean that the economic gap will also widen in the long run? Explaining the “riddle” of this narrowing of the economic gap despite a wider productivity gap could be one of the keys to achieving balanced economic development across China's regions.
Prior studies mainly applied the new economic geography (NEG) theory, or the “new” NEG (NNEG) theory, to explain regional disparities in China. However, the NEG theory can explain economic gaps but not productivity gaps, as the productivity of firms is homogeneous under this theory. When firms of homogeneous productivity are under the influence of agglomeration and dispersion forces, their location will influence regional economic gaps but not productivity gaps. Building on the NEG theory, the NNEG theory provides new insights for studying productivity gaps by introducing heterogeneous firm productivity. However, the focus of the NNEG theory is the market size and location of firms with heterogeneous productivity, rather than factor costs and other dispersion forces. The high cost of labor and other inflow factors in East China is the dispersion force involved in the narrowing economic gap in recent years. As such, the NNEG theory is also unable to explain the aforementioned riddle.
This paper constructs a theoretical model to study how the location of firms with heterogeneous productivity is influenced by market size (agglomeration force) and labor cost (dispersion force), and how that location influences regional gaps in China. The main findings are as follows: (1) The location of firms with heterogeneous productivity explains the narrowing economic gap and widening productivity gap, but the separate agglomeration of firms with heterogeneous productivity is due to the difference in labor costs, not market size. (2) When the labor cost differs between regions, the dispersion force is dominant. In the process of market integration, lowproductivity firms in developed regions first move outward, and the economic gap between regions narrows while the productivity gap widens. With the deepening of market integration, highproductivity firms also move outward, and the productivity gap narrows. (3) When the labor costs of regions are equal, the agglomeration force is dominant. In the process of market integration, both lowand highproductivity firms will be located in big markets; in this situation, the economic gap between regions narrows, but the productivity gap remains stable. This paper uses a large amount of firm data to confirm the theoretical model.
This paper makes two contributions. First, it expands the NNEG theory by studying how firms with heterogeneous productivity make their location choices, both when the agglomeration force dominates and when the dispersion force dominates. Second, this paper explains not only the riddle of the early 21st century, when the economic gap narrowed despite a widening productivity gap, but also the situation in the 1990s, when the economic gap between regions widened but the productivity gap remained stable. In the 1990s, labor costs were almost equal between East China and Midwest China, so the agglomeration force was dominant. In the process of market integration, East China, as a big market, attracted both highand lowproductivity firms; the economic gap between regions widened, but the productivity gap remained stable. In the early 21st century, the labor cost gap between East China and Midwest China began to expand, and so the dispersion force was dominant. Lowproductivity firms in East China first moved to Midwest China, causing the economic gap to narrow, but the productivity gap widened. The divergence of productivity is temporary, however. With the deepening of market integration, highproductivity firms in East China will move to Midwest China, and the productivity gap will narrow.
Keywords： Economic Gap; Productivity Gap; Newnew Economic Geography Theory; Market Size; Labor Cost
JEL Classification： J38, O12, R12

Summary： After the reform of stateowned enterprises in the 1990s, China's domestic market gradually formed a vertical competition structure in which “private enterprises dominate the downstream market and large and mediumsized stateowned enterprises dominate the upstream market”. In 2015, the Central Committee of the Communist Party of China issued the Guiding Opinions on Deepening the Reform of StateOwned Enterprises, which divided stateowned enterprises into commercial and public welfare categories and promoted reforms based upon category. However, this classification emphasizes the reform of different types of stateowned enterprises and does not pay attention to the vertical competition structure that formed in the reform process. Therefore, an unavoidable question is whether this particular vertical competition structure leads to lower resource allocation efficiency. If so, how does the existing industrial policy implemented based on this vertical competition structure affect the efficiency of resource allocation? Is there an optimal industrial policy that maximizes resource allocation efficiency and social welfare? This article attempts to answer the above questions.
This paper constructs a vertical structure model in which upstream stateowned enterprises have an oligopolistic market structure and downstream private enterprises have a monopolistic structure. The model shows that the asymmetric competition structure creates a tendency toward insufficient entry of downstream private enterprises, reducing the efficiency of resource allocation and negatively affecting the overall level of social welfare. Further, this paper summarizes the industrial policies presently implemented in China as an “interactive subsidy” policy and embeds it into the vertical structure model for analysis. It is found that this policy further increases the tendency of downstream private enterprises to enter insufficiently. Finally, this paper proposes an industrial policy of “upstream taxation and downstream subsidies”, which can promote the redistribution of profits of stateowned enterprises and encourage the entry of downstream private enterprises, thereby alleviating the misallocation of resources caused by the vertical structure and improving overall societal welfare.
This paper makes marginal contributions to the literature in three main aspects. First, the vertical structure model that we construct, which is characterized by oligopolistic upstream stateowned enterprises and monopolistic competition in downstream private enterprises, is more in line with the reality of China's situation and more accurately portrays the effects of vertical structure patterns on resource allocation and social welfare. Second, after showing the impact of the vertical structure on resource misallocation, this paper further embeds industrial policies in the vertical structure model, taking into account the impact of market and policy distortions on resource allocation and social welfare. This is another important innovation of this paper. Finally, from a policy perspective, the findings suggest that further stateowned enterprise reform is needed beyond merely classification reforms (e.g., introduction of market competition mechanisms or realization of equity diversification). It is also possible to promote the redistribution of stateowned enterprises' profits by implementing specific industrial policies to correct the resource misallocation caused by the vertical structure and improve overall social welfare.
The policy implications of this paper are very clear. Appropriate industrial policies are still very important in situations where the market itself is subject to distortions and resource misallocation. In the context of continuing to promote the reform of stateowned enterprises, we should introduce new ideas and recognize the possible flaws of the market structure. Through specific industrial policies, it is possible to correct resource misallocation, improve social welfare, and strengthen stateowned enterprises.
Keywords： Vertical Structure; Interactive Subsidy; Resource Misallocation; Industrial Policy
JEL Classification： D43, L13

Summary： Innovation underpinned the Western world's rise, and the fundamental roots of that innovation have long been a concern of scholars. As the rise of the Western world dates to the Age of Discovery, scholars have naturally focused on maritime culture. Hegel, as well as LIANG Qichao (LIANG Chichao), an influential scholar and reformer who lived a century ago, believed that maritime culture bred the rise of the Western world while rustic culture led to the fall of China. This paper empirically studies the effects of maritime culture on innovation in light of two important observations. First, historians have credibly argued that maritime culture flourished in southeast China, although rustic culture prevailed in the rest of China. There is thus enough cultural variation for empirical studies. Second, the effects of geography and culture in southeast China may be disconnected. There are three ethnic groups in southeast China: Hakka, Cantonese, and Hoklo. Entrepreneurs form merchant groups in accordance with ethnicity. The Hakka are a typical agrarian ethnic group, completely inheriting the rustic culture from north China, with very little historical record of overseas exploration. The Cantonese had a maritime culture, with a 2000year history of maritime trade. However, the marine culture of the Hoklo was much more profound, generating enough trade volume to bring China's money system into the silver standard and giving rise to armed smuggling, colonization, and largescale emigration. These three culturally divergent ethnic groups mingled in Guangdong province, making it possible to identify the effects of culture while keeping geographic factors mostly fixed.
We construct a unique villagelevel data set of ethnic distribution in Guangdong, and match it with the Chinese industrial enterprises database (2005—2007) by firm address. Then, we define the ethnic background of firms based on location as our explanatory variable. To test the correlation between entrepreneur ethnicity and firm locationbased ethnicity, we identify ethnicityspecific surnames and analyze their proportions, and we find that the correlation is indeed strong. We restrict our attention to multiethnic prefectures, and we control prefecture dummy variables and a series of other variables. Hence, our results essentially capture differences between firms of different ethnic backgrounds (i.e., of different merchant groups) within the same prefecture. The tobit model is used for our regressions. To obtain the cleanest possible results, we first restrict our attention to a subsample where ethnic distribution is mostly exogenous. In the 17th century, the Qing government prohibited inhabitancy in the coastal regions of southeast China in a law known as Qianhailing. After the abolishment of Qianhailing, much of the land in coastal regions was derelict due to original owners' deaths or refusal to move back. Many immigrants of other ethnic groups were drawn to the area, resulting in a highly exogenous ethnic distribution in these regions. Using the regions once subject to the Qianhailing policy as the sample, it is found that Hoklo firms have the highest R&D intensity, Hakka firms have the lowest, and Cantonese firms are in the middle. These findings suggest that a maritime culture stimulates innovation.
When the sample is extended to multiethnic regions of the whole province, the results are similar. We further control more geographic variables, regional prosperity, demographic variables of ethnic groups, and variables related to wars and riots; the results remain robust. We then restrict our sample to coastal prefectures, coastal counties, and even multiethnic towns, and the results remain robust. To guarantee that our results are not driven by the possibility that Hakka entrepreneurs prefer “sunset” or resourceintensive industries, we delete industries with low R&D intensity on average and resourceintensive industries, and we control for the average R&D intensity of fourdigit industries; all of the results remain robust. We also use the probit model and later use innovation output as the explained variable. The results are consistent. Finally, we found that the effects of ethnicity are reinforced by government subsidies. This paper sheds light on the role of rustic culture as a constraint on innovation, and it advances a novel methodology for merchant group studies.
Keywords： Innovation; Marine Culture; Ethnic Group; Merchant Group; Overseas Chinese
JEL Classification： Z13, O32, N85

Summary： China's economy has sustained unprecedented economic growth over the past four decades. Exports have played a key role in this success. In the current “new era”, it is essential to continue opening up and participating in the global market to maintain the prosperity of the Chinese economy. However, international trade faces higher bilateral informational barriers than domestic sales, and these barriers can limit firms' efforts to increase their export share in the global market. In addition, competition in international trade is becoming much fiercer in the context of globalization, making it harder for firms to survive in the global market. Nevertheless, trade networks are an effective way for firms to access market information and maintain close business relationships, benefits that can facilitate exports (Chaney, 2016). The literature has focused mainly on how networks external to a firm, i.e., social networks, influence its export behavior (Rauch & Trindade, 2002; Combes et al., 2005; Yang & Li, 2016). Few studies have paid attention to firms' selfgenerated networks, which are built and maintained by firms themselves instead of others. In view of this, this paper analyzes how a selfgenerated export network affects firms' export behavior.
Unlike an export network that is external to a firm, a selfgenerated export network is built by the firm itself based on its own export experience. Through it, the firm can search for global market information based on its existing export relationships. Firms' existing export destinations can serve as the nodes for networking, thus benefiting exports in the ensuing period. Based on this idea, we construct a selfgenerated export network indicator by matching the 2000—2013 Chinese custom dataset, CEPII global trade dataset, and product proximity index dataset developed by Hausmann. We also construct a “fictitious distance” variable measuring the average distance between firms' existing export destinations and each of their new destinations. We nest our network variables into the traditional gravity equation. By adding network variables into the gravity equation, we separate the role of informational barriers from bilateral distance and conduct our empirical analysis. Our results show that a selfgenerated network can significantly promote firms' export behavior. A oneunit increase in the standard deviation of the selfgenerated export network will increase a firm's exporting probability by 31%, its survival rate by 3%, and its export volume by 365%. Furthermore, we find that the fictitious distance performs better than the actual distance between China and destination countries, especially when considering its dynamic effects on firms' export behavior. The magnitude of the estimated effect of fictitious distance grows over time, while that of actual distance decreases. Finally, we find that a selfgenerated export network facilitates trade through information dissemination, and this effect is diminishing as the fictitious distance increases. This mechanism is more effective when the destination country has worseoff institutions, revealing an important relationship between the network and institution quality. As differentiated products require more specific market information than homogeneous ones, we find that the export of differentiated products relies much more on the network, while homogeneous products are less affected.
This paper contains insights relevant to Chinese exports and economic development. Recently, trade protectionism has induced increasing trade frictions between countries. Meanwhile, the SinoAmerican “trade war” has made it more difficult for Chinese firms to maintain export relationships with the Western world. Our results suggest that selfgenerated networks may help firms become more resilient to such threats. To maintain China's healthy export growth in the future, it is crucial to help firms build and maintain their own selfgenerated export networks. Furthermore, such networks may perform better when used in concert with networks external to the firm. Thus, governments should provide better platforms to help individual firms enhance collaboration with external networks.
Keywords： Trade Network; Export Behavior; Informational Barrier; Gravity Equation
JEL Classification： D85, F14, F15, L24
 

Summary： The development of cities involves not only scale expansion, but also structural upgrading and layout optimization. In the process of industrial development, structures are transformed and upgraded and spaces are optimized and adjusted. Based on the public land ownership and land reserve system, local governments in China have implemented land supply as the main policy control method. Land is an important input factor in industrial production. The change in production costs resulting from a change inland prices is a major driving force for industrial efficiency and layout optimization. The present study explores a reasonable price strategy for industrial land supply. This strategy reveals the “black box” of regional industrial efficiency changes and provides a reference for the precise allocation of land resources.
Adopting the “new” new economic geography (NNEG) theoretical framework, we use the Chinese Industrial Enterprises and Dynamic Monitoring and Supervision System of Land Market databases. We comprehensively apply spatial positioning technologyand the SSBMDEA model to construct districts and counties of 35 cities in China from 2007 to 2012. Using the urban master plans of cities as a reference, we divide the “centralperiphery” space within each city. We then include the effect of prices on the level of industrial efficiency from multiple dimensions, along with the existence of a selection effect and its acting mechanism. We consider the slope of the sample as an instrumental variable of industrial land price, and an unconditional distribution characteristicparameter correspondence function is used to solve endogeneity issues.
The main findings are the following. First, overall, the land price has a considerable effect on improving industrial efficiency; a higher price leads to higher industrial efficiency. Second, in terms of urban interior space, the improvement effect shows strong spatial heterogeneity according to market access and distance from downtown. Central areas have the strongest effect, followed by suburban areas, and then outer suburbs. Because the improvement effect is mainly due to the difference in affordability of land costs for heterogeneous companies, the effect is unsustainable. Finally, the industrial efficiency advantages arising from higher land prices are mainly due to the selection effect; the stronger selection effect in higherpriced zones lefttruncates the productivity distribution. The selection effect in higherpriced zones can mainly be explained by the lower entry proportion and higher exit probability of inefficient companies. One of the implications of these findings is that the government should fully exploit the selection effect of land prices on firm efficiency and further optimize the marketoriented mechanism of industrial land bidding/selling. In addition, the degree of government intervention in the land market should be reduced, and the incentives of local governments to “manage land” based on fiscal and taxation goals should be eliminated.
This paper contributes to the literature in several ways. First, using microdata on parcel land transactions, we accurately characterize the spatial evolution features of industrial land prices in inner cities through spatial location technology using Xgeocoding and semiparametric estimation. This study also uses microdata to support an indepth study of the effect of industrial land prices on industrial efficiency at the district and county levels, and develops the spatial scale of existing empirical research. Second, by applying the NNEG theory and unconditional distribution characteristicparameter correspondence function, we creatively explore and verify the selection effect of higherpriced land zones. We identify the mechanism of the selection effect in higherpriced zones from the perspective of the entry and elimination of heterogeneous firms. Further, we distinguish the acting mechanism between the lower proportion of inefficient companies entering the market and higher corporate elimination risk. Third, unlike studies that use population density or employment density to identify urban centralperipheral areas, the present work is the first to define central urban areas, suburban areas, and outer suburbs based on the urban master plans of major cities. This approach intuitively reflects the spatial heterogeneity of the selection effects of industrial land prices under government guidance.
Keywords： Newnew Economic Geography; Selection Effect; CorePeriphery; Industrial Land Price
JEL Classification： R10, R52, L52

Summary： China's economy has made great strides, but with economic development has come natural resource depletion and serious environmental pollution. China now ranks second globally in GDP, but it ranks first in terms of both pollutant emissions (SO2, PM25, oxynitride, etc.) and primary energy consumption. This has forced China to change modes from traditional development to green development. The three key factors in green development are economic development, resource conservation, and environmental protection.
When rapid development occurs, the degree of economic agglomeration also increases. However, there is no consensus in empirical studies about how economic agglomeration affects economic growth and environmental quality. This raises the question of how economic agglomeration will affect green economy efficiency, as measured by an index that comprehensively considers economic growth, resource conservation and environmental protection. The answer to this question will be helpful in formulating industrial policies, achieving the goals of energy conservation and emissions reduction, and contributing to China's sustainable future development.
Based on panel data from prefecturelevel cities and municipalities during the 2004—2016 period, we first use the nonradial directional distance function (NDDF) method to formulate the green economy efficiency index. For our analysis of how economic agglomeration affects green economy efficiency, we identify two instrumental variables (IVs) to address the potential endogeneity problem of reverse causality: terrain relief and whether each city had a railway by 1933, both of which satisfy the relevant and exogenous conditions. When applying the twostage OLS method, the relationship between economic agglomeration and green economy efficiency is an inverted “U” shape. That is, when the degree of economic agglomeration is in a reasonable range, its increase can improve green economy efficiency because the positive externalities—e.g., lower costs of transportation and communication, more employment opportunities in the labor force market, and spillover effects among different enterprises—can boost productivity. Within this range, there is more desirable output with fewer pollutants emitted. However, when the degree of economic agglomeration is too high, the local infrastructure cannot meet the demand of the increased labor force, and the local economy and natural resources will be pressured. There will be severe transportation congestion, and the productivity of enterprises will drop. Thus, the emergence of negative externalities will harm green economy efficiency.
Analyses of agglomeration effects in secondary and tertiary industries generate similar results to those identified for overall economic agglomeration of a city. In addition, we identify and test four possible channels through which economic agglomeration influences green economy efficiency: infrastructure, knowledge spillover, advanced level of labor force, and environmental regulation. Finally, various robustness checks are conducted to prove that our results are credible.
This paper makes several contributions. First, we add an energy factor into the production function and prove by mathematical expression that economic agglomeration can affect green economy efficiency. Second, we identify two IVs for the variable economic agglomeration: terrain relief (using GIS techniques and geographic elevation data) and whether each city had a railway by 1933 (for which historical information was accessed). Third, we find an inverted “U” shapedcurve between economic agglomeration and green economy efficiency.
These findings have profound policy implications. No administrative measures should be taken to impose artificial limits on internal migration to large cities in China. Within a certain range, an improved degree of economic agglomeration is conducive to the improvement of green economy efficiency. At the same time, the capacity of local infrastructure and natural resources should be taken into account to prevent the negative effects of excessive agglomeration.
Keywords： Economic Agglomeration; Green Economy Efficiency; Agglomeration Effect; Congestion Effect; IV Method
JEL Classification： K32, O13, P18

Summary： Since the beginning of its reform, China has urbanized rapidly: its urbanization rate increased from 179% in 1978 to 585% in 2017. The challenge China faces today is forming reasonable development strategies for its urban systems. In China and other developing countries, the formation and development of urban systems are not just a function of market power, but are also influenced strongly by state institutions and regionbased policies such as capital, trade, and fiscal favoritism. Capital is a key input for driving economic growth and plays a central role in the development of regions and cities, especially in China, where economic growth depends heavily on investment. Many studies find that there is distortion of capital allocation across regions (Dollar & Wei, 2007; Desmet & Henderson, 2014; Chen et al., 2017). Therefore, to understand urban development in China, it is important to investigate the influence of capital allocation distortion across regions.
To understand the economic effects of intercity capital allocation on the urban hierarchy, we develop a structural model based on the theoretical framework of Desmet & RossiHansberg (2013) and China's history of urban economic development. We decompose what determines city size into four components—total factor productivity, amenity, congestion and capital cost—and analyze the economic effects of capital allocation across cities on the urban hierarchy in China. The effect of intercity capital allocation in China is estimated with data from three sources: the Annual Survey of Industrial Production conducted by the National Bureau of Statistics of China, a 1% randomized sample of China's census data in 2005 and the City Statistics Year Book of China in 2006. Finally, we quantify the effects of crosscity capital misallocation on city size and social welfare through counterfactual analyses.
Our estimation suggests that crosscity capital misallocation causes distortion in the urban hierarchy of China, lowering the numbers of largeand mediumsized cities while increasing the number of smallsized ones. In addition, elimination of capital misallocation would raise social welfare by 38% and reallocate 50% of population. The efficiency loss caused by capital misallocation would double under the spatial equilibrium in which laborers move freely. On one hand, part of the total capital is misallocated from highly productive cities. On the other hand, the capital misallocation will further distort the mobility of labor, which leads to the oversupply of labor in poorly governed cities. Twofold distortion of this kind exaggerates efficiency losses. Aside from promoting the mobility of labor, the findings suggest that policy makers should focus on improving the efficiency of crosscity capital allocation to achieve the optimal spatial distribution of China's urban hierarchy, as this would be in the public's interest.
This paper has two main contributions. First, we combine two strands of the literature, those dealing with spatial equilibrium and the efficiency of resource allocation, and use a structural model to quantify the effects of capital misallocation on both the urban hierarchy and social welfare in China. One significant finding is that, taking into account the congestion or agglomeration effect, capital misallocation will curtail the efficiency of labor allocation. This distortion severely aggravates the present welfare losses of Chinese urban residents. Second, we find that placebased policies play salient roles in regional development, although existing studies focus only on their partial influences on local economies (Zheng et al., 2017). To some extent, this paper fills the gap in the literature from the perspective of spatial general equilibrium. Still, as it considers such equilibrium in the absence of migration friction, this paper has some shortcomings in addressing restrictions on labor mobility, which require further investigation.
Keywords： Efficiency of Capital Allocation; Spatial General Equilibrium; Citysize Distribution; Structural Model
JEL Classification： R12, R23, R53

Summary： Since the reform and opening up of China, rapid economic development has come at the cost of massive energy consumption and serious environmental pollution. In recent years, frequent air pollution has raised concerns among the public, government, and scholars. The haze pollution problem is especially acute in China's more urbanized regions. Hence, more attention should be paid to the potential effects of China's accelerated urbanization. Whether haze pollution is exacerbated in the process of urbanization is an important issue that warrants detailed investigation. However, prior studies have not provided clear empirical evidence or suggested mechanisms to explain this issue.
Using provinciallevel panel data from 1998 to 2013, this paper constructs a composite index of nightlight data and PM25 concentration from satellite monitoring to measure, respectively, the level of urbanization and degree of haze pollution. We examine the different influences of two kinds of urbanization promotion modes (i.e., compact intensive pattern and scale expansion pattern) on haze pollution. The results indicate that China's haze pollution has a significant spatial spillover effect. After controlling for this effect and the endogeneity problem, we find a significantly positive relationship between haze pollution and urbanization, rather than an inverted Ushaped curve relationship. This indicates that China's urbanization process is still exacerbating haze pollution.
However, regional sample analyses indicate that there is a significant inverted Ushaped curve relationship in eastern China. This implies that the aggravation of haze pollution is a phased phenomenon with accelerated urbanization rather than an inevitable outcome of urbanization, and that haze pollution can decouple from urbanization under some conditions. Mechanism analyses show that the agglomeration effect and the structural effect are the two main transmission channels through which urbanization affects haze pollution, while the mediating effect of technical progress is not statistically significant.
These findings have important policy implications for haze pollution abatement against the backdrop of China's accelerated urbanization. We advise the government to adhere to the principle of regional joint defense and control for haze pollution governance and give priority to compact cities, restricting the blind expansion of city scale. Generally, achieving the winwin of urbanization promotion and haze pollution reduction is a complex and systematic project. Our findings suggest that decoupling urbanization and haze pollution as soon as possible will require changing the current mode of extensive urbanization.
The marginal contributions of this paper lie in the following four aspects. First, we build a novel and comprehensive indicator of urbanization based on global nightlight data monitored by satellites because of the drawbacks (i.e., institutional deficiency and statistical error) of the more traditional urbanization measure of urban population proportion. Second, we take river length, wildfire activity, and birth rate as instrumental variables of urbanization to further control for the endogeneity problem and obtain robust results. Third, we identify the different impacts of two urbanization modes (i.e., compact intensive pattern and scale expansion pattern) on haze pollution. For the first time, we confirm that the compact expansion pattern is conducive to reducing haze pollution, while the scale expansion pattern has the opposite effect. Fourth, we examine the mechanism of urbanization affecting haze pollution using the mediating effect model.
Keywords： Urbanization; Haze Pollution; PM25 Concentration; Night Light Data; GS2SLS
JEL Classification： O13, O18, Q53, R23

Summary： The antimonopoly law (AML) of China plays a key role in maintaining fair market competition. In 2015, the central government laid out general requirements for “strengthening market price supervision and antimonopoly law enforcement and gradually establishing the basic status of competition policy” to reform and adjust the AML's enforcement system, legislative principles, and implementation guidelines. Therefore, empirical research on the effects of the AML's implementation is of significant theoretical and practical value.
Following enactment of the AML, the Ministry of Commerce (MOFCOM) received 1,731 merger cases from 2008 to 2016, of which 1702 were approved unconditionally and 27 with conditions; two were prohibited. This paper initially explores three interrelated issues through both quantitative testing and representative case studies: (1) What factors does the MOFCOM consider in regulating mergers? (2) Is there a certain preference in the choice of regulatory approach? (3) Does this tendency influence the effects of the AML's implementation?
To answer these questions, we collected microdata from the centralized review and relief documents of the MOFCOM and formed a database involving 86 merger cases (71 being equity acquisitions) and more than 10 variables, including industrial structure, M&A characteristics, and relief methods. This paper uses probit and negative binomial regression models to analyze the MOFCOM's remedy decisions in the merger database. The findings reveal that (1) the market's concentration and changes in market share dominate the MOFCOM's remedy decisions, and (2) the MOFCOM prefers using behavioral remedies. These preferences are in line with the tendency of antitrust law practices in other countries and have some of the characteristics of industryspecific regulations. Further, case studies examining AML enforcement in patentintensive industries yield the following findings: (1) Behavioral remedies face high supervision costs and difficulties in implementation and are more likely than structural remedies to be revoked. (2) The generalization of behavioral relief may also have unwanted effects such as inhibiting technological innovation, blurring the boundary between government and the market, and “regulating” antitrust behavior. (3) The fragmented enforcement and implementation of China's AML system not only contributed to the low efficiency of behavioral remedies but also led regulators to prefer such remedies.
Using standardized econometric analysis, this paper finds that the “unilateral effects” and “coordinated effects” principles followed in enforcing the AML and the tendency to use behavioral remedies negatively affected the efficiency of market competition. This paper also makes contribution by uncovering invalid enforcement and regulatory characteristics of behavioral remedies in knowledgeand patentintensive industries, which are inconsistent with the goal of structural reform.
Our findings have the following policy implications: (1) There is a need to reduce the loopholes caused by fragmented supervision and law enforcement and allow the competition policy to fulfill its basic role in market resource allocation. (2) The enforcement rules for “concentration of undertakings” reviews should be improved, and clear legislative principles and quantifiable judgment indicators are needed. (3) The information and feedback in merger review and relief decisions should be more transparent. Consistent with our prediction, the central government in 2018 decided to consolidate AML enforcement power with the creation of a State Market Supervisory Authority, and a series of antitrust rules were amended or implemented, including the “Automotive Industry Antimonopoly Guide”, the “Abuse of Intellectual Property Antimonopoly Guide”, and the “Guidelines for General Conditions and Procedures for Monopoly Agreement Exemption”.
In future research, we will continue to update the database of China's AML enforcement and test the effects of regulatory remedy decisions on market structure, monopoly power, pricing conduct, and welfare.
Keywords： Merger Remedies; Concentration of Undertakings; Behavioral Remedies; Antitrust Law
JEL Classification： K21, L40, D78, C24

Summary： The fundamental component of Confucian cultures is familism, which stresses that family ties are the most important of all social relationships. Fukuyama (1995) suggests that in countries where the cultural value of familism is stronger, people are raised to trust their close family networks and to distrust outsiders. Weber (1904) argues that a culture based on strong familism may place restraints on the development of economic activities, which require a more individualistic form of entrepreneurship and the absence of nepotism. However, China seems to provide a counterexample to Weber's notion, given that it is among the most familyfocused cultures in the world yet achieved rapid economic growth over the past 40 years. Does this mean China is somehow different, with unique features that allow familism to promote rather than impede economic development? This is the question that we address in this paper.
We analyze the relationship between familism culture and economic development in the Chinese setting. Unlike previous research that provides crosscountry evidence on the effect of familism culture on economic growth (Bertrand & Schoar, 2006; Alesina & Giuliano, 2014), our paper is among the first to provide firmlevel evidence on the economic outcome of familism culture by showing how familism affects the development of family business. Specifically, we examine the following two questions. First, does company founders' belief in familism hinder corporate governance reform in the preIPO stage? Here, corporate governance reform refers to the departure of family members from their management positions, reductions in controlling (family) shareholders' control rights and cashflow rights, and separation between control rights and cashflow rights. Second, does corporate governance reform over the preIPO period translate into improvements in longrun postIPO stock returns and sales growth?
To test the above questions, we develop a measure of firmlevel familism culture. As familism mainly manifests as trusting family members more than outsiders, we calculate provincelevel familism culture using World Value Survey (WVS) data on the extent to which people in a particular province trust family members vs. acquaintances. The familism belief of the founder of a family firm is defined as the familism culture of the province where he or she was born.
Our empirical results show that founders with stronger familism beliefs are less likely to conduct governance reform in the preIPO stage. Specifically, in firms with stronger familism cultures, family members are less likely to depart from top management positions or reduce their control rights and cashflow rights, and those rights are less likely to be separated. Our results are robust after controlling for timevarying province and industry fixed effects and after using the IV method to address endogeneity concerns. In addition, we find that these effects are stronger when firms' headquarters are located in provinces with more underdeveloped labor markets and when controlling family members have weaker educational backgrounds. Further research also shows that familism culture affects governance reform through the family internal inheritance mechanism rather than through the social environmental mechanism. Finally, firms that implement fewer changes in management and governance yield lower postIPO stock returns and slower sales growth.
This paper has important theoretical and practical implications. First, it is among the first works to provide firmlevel evidence on the economic outcome of familism culture. Thus, it contributes to the literatures on culture and finance and on corporate governance in emerging markets. Second, our findings have important implications for investors' decisions. Founders' belief in familism can be likened to a firm's DNA, being imprinted through family education and difficult to change. Therefore, investors should consider such beliefs as a risk factor when selecting investment targets.
Keywords： Familism Culture; Corporate Governance Reform; Firm Performance
JEL Classification： G30, G32