linking permit markets multilaterally we formally study the determinants magnitude and distribution of efficiency gains generated in multilateral linkages between permit markets we provide two novel decomposition results for these gains characterize individual preferences over linking groups and show that our results are largely unaltered with strategic domestic emissions cap selection or when banking and borrowing are allowed using the paris agreement pledges and power sector emissions data of five countries which all use or considered using both emissions trading and linking we quantify the efficiency gains we find that the computed gains can be sizable and are split roughly equally between effort and risk sharing

environmental policy intra industry trade and transfrontier pollution the paper discusses effects of domestic environmental policy on foreignemissions and on transboundary pollution we use a dixit stiglitz typemodel of monopolistic competition with an endogenous number of firms production generates environmental externalities which spill over to theother country it is shown that environmental policy has an impact onmarket structure at home and abroad these market structure effectsinduce changes in emissions abroad in contrast to what has been derivedin earlier contributions it turns out to be possible that tighterenvironmental standards at home lead to less emissions abroad the paperderives these results and provides the economic intuition behind them finally conditions for optimal environmental policies are derived

permit trading merely an efficiency neutral redistribution away from climate change victims in this paper we present a climate policy game with international emissions trading where governments first select their amounts of emissions permits these permits are transferred to firms and then traded competitively on an international market compared with a game without trading we find that the potential efficiency gains from permit trading which have been identified in other studies are totally undone if governments also employ a tax or subsidy on domestic emissions the only effect of permit trading in this case is a redistribution of income away from those most affected by climate change

localization economies vertical organization and trade this paper develops a model of regional production networks based on localization economies i consider an industry with two activities one with location specific external economies the other with constant returns under autarky localization economies imply the formation of an industry center agglomeration drives up wages in the center causing the constant returns activity to disperse to outlying regions trade recreates the regional production network on a global scale i apply the model to data from the mexican apparel industry estimation results on mexico s pre and post trade regional apparel wage structure are consistent with localization economies implications for the north american free trade agreement nafta are discussed this abstract was borrowed from another version of this item

intra industry trade between the industrial countries and the developing world abstract intra industry trade in manufactures between the industrial countries and the developing world is far from negligible and it cannot be explained away by the level of aggregation used our results indicate a complementarity between the heckscher ohlin family of explanations of trade between countries and the observed intra industry trade in manufactures between the industrial countries and the developing world further both natural and artificial barriers to trade seems to encourage such intra industry trade but this should provide little consolation to protection lobbies as the cost reductions implied by the intra industry trade adjustments will have high if they were to compensate for the welfare losses resulting from barriers to trade

the end of cheap chinese labor abstract in recent decades cheap labor has played a central role in the chinese model which has relied on expanded participation in world trade as a main driver of growth at the beginning of chi

estimating demand for spatially differentiated firms with unobserved quantities and limited price data extending the circular city model i derive a pricing equation that identifies key structural parameters from one firm s data simulations indicate demand shifters and rotators can be distinguished cost parameters are imprecise and the likeliest specification error biases estimates toward zero

inside china s cities institutional barriers and opportunities for urban migrants one of the most glaring legacies of 20thcentury chinese socialism is a sharp and widened divide between china s urban and rural areas china s widened urban rural divide arose from a socialist industrialization process which created a hastened heavy industrial base at the expense of its rural population china s vast rural population not only endured a standard of living far below that in the urban sector they were also denied access to many social welfare benefits and social mobility opportunities martin king whyte 1996 this urban rural gap in social and economic wellbeing together with a massive reservoir of rural surplus labor and an acute shortage of consumer goods formed the driving forces for china s change of migration control policy and for the rapid increase of rural migrants in chinese cities though the exact number of migrants is still hard to ascertain due to both a lack of consensus in the definition of migrant and the absence of an authoritative national survey migrants prominent presence in chinese cities is hardly disputable in china s largest cities for instance it is often quoted that at least one out of every five persons is a migrant and most likely a migrant from rural areas in shanghai the number of migrants rose tenfold in one decade from 0 26 million in 1981 to 2 81 million in 1993 the percentage of local residents who were migrants correspondingly rose from less than 5 percent in the early 1980 s to 21 7 percent in 1993 changming sun 1997 in beijing the number of migrants was 3 29 million in 1994 compared to a locally registered population of 10 63 million for the whole municipality and 6 million for its city districts dangsheng ji et al 1996 p 95 in city districts one out of every three persons in beijing is a temporary migrant from elsewhere most of these recorded migrants are also genuine migrants not short term visitors more than 60 percent had stayed for more than half of a year and only 17 percent had been in beijing for less than one month three quarters of all the surveyed migrant population listed business or employment as their purpose of stay ji et al 1996 pp 96 97 rural migrants account for over threequarters of all migrants in large chinese cities in shanghai for instance a survey in 1995 found that 88 1 percent of all migrants had their place of household registration in the countryside wang and zuo 1997 similarly in beijing where one expects to see a higher circulation of urban to urban migrants close to 80 percent of migrants surveyed in late 1994 were peasants before moving into beijing xiuhualiu 1996 p 112

decentralization and macroeconomic performance in china regional autonomy has its costs abstract we give an empirical examination of the impact of fiscal and economic decentralization in china on the country s economic growth and inflation using a vector autoregressive var model with latent variables our econometric investigation offers strong evidence that there is a connection between decentralization and macroeconomic performance in china economic decentralization appears to be positively related to growth in real output for the entire postwar period in china fiscal decentralization seems to have adverse implications for the rate of inflation especially after the late 1970s decentralization would therefore seem to be good for growth and bad for price stability

estimating markups and market conduct with multidimensional product attributes we demonstrate how to estimate a model of oligopoly pricing when products are multi dimensionally differentiated we provide an empirical counterpart to recent theoretical work on product differentiation using specifications informed by economic theory we estimate price cost margins for products differentiated in many dimensions

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

the savings multiplier we develop a theory of macroeconomic development based on the novel concept of savings multiplier capital accumulation changes relative prices and income shares between generations creating further incentives to accumulate and thereby rising saving rates as the economy develops the savings multiplier hinges on two mechanisms first accumulation raises wages and leads to redistribution from the consuming old to the saving young second higher wages raise the price of services consumed by the old and the anticipation of such price rise prompts the young to increase their savings our theory captures important aspects of china s development and suggests new channels through which the one child policy and the dismantling of cradle to grave social benefits have fuelled china s savings and accumulation rates

when fiscal recentralisation meets urban reforms prefectural land finance and its association with access to housing in urban china by retrieving household level information from 127 938 household heads and fiscal data from 177 prefectures located in eastern and central china this research quantifies the net association between land finance and urban housing tenure while the results demonstrate that in 2005 china s urban housing market remained stratified and simultaneously favoured individuals possessing economic political and human capital the key finding is that net of other household and prefecture level effects land finance is significantly and negatively associated with local homeownership moreover both the demand and supply sides of the urban housing market contribute to such net association by demonstrating the internal links between urban housing and local finance this research not only provides a more holistic view of housing stratification during institutional changes but also lends empirical support to conceptual frameworks that explain a territory based coalition between local governments and selective enterprises

accounting for urban china s rising income inequality the roles of labor market human capital and marriage market factors this paper analyzes china s rising family income inequality since the early 1990s when the urban labor market started its transformation from a centrally controlled to a market driven one we document the trends in income inequality over the period of 1992 2009 using the urban household survey data and adopt the approach recently proposed by eika et al 2014 to decompose changes in income inequality we find that labor market factors accounted for about three quarters of the overall increases in income inequality while falling marriage rate contributed the other quarter changes in human capital levels and marital assortativeness have not contributed to the rising inequality jel d31 i26 j12

the invisible hand and the grabbing hand evidence from a survey of 105 shop owners in moscow and warsaw shows that the reliance on private protection as well as the burden of regulation and corruption are much greater in moscow the evidence suggests that the invisible hand model of government better fits the warsaw local government and the grabbing hand model is more appropriate for moscow the evidence implies that the singular focus on the speed of economic reforms to understand the success of transition is misplaced and that the quality of government may be as essential this abstract was borrowed from another version of this item

spatial differentiation and price discrimination in the cement industry evidence from a structural model we estimate a structural model of the cement industry that incorporates spatial differentiation and price discrimination focusing on the us southwest over 1983 2003 we leverage the structure of the model to obtain consistent estimates of the underlying parameters using data on market outcomes that are substantially aggregated our results indicate that transportation costs around 0 46 per tonne mile rationalize the data this friction enables relatively isolated plants to obtain higher prices from nearby customers we further find that disallowing price discrimination would create 30 million in consumer surplus annually and show how the model can identify suitable divestitures in merger analysis

incentives to provide local public goods fiscal federalism russian style abstract based on a unique data set on russian city budgets this paper shows that revenue sharing between regional and local governments provides local governments with no incentive to increase tax base or provide public goods any change in local government s own revenues is almost entirely offset by changes in shared revenues this leads to governmental over regulation of private businesses it is shown that fiscal incentives are a determinant of the formation of private business and the efficiency of public goods provision the russian federalism is compared to the chinese federalism where fiscal incentives reputedly are stronger in many provinces

regional decentralization and fiscal incentives federalism chinese style abstract aligning the interests of local governments with market development is an important issue for developing and transition economies using a panel data set from china we investigate the relationship between provincial government s fiscal incentives and provincial market development we report three empirical findings first we find that during the period of fiscal contracting system the discrepancy between ex ante contracts and ex post implementation was relatively small suggesting that the fiscal contracts were credible second we find a much higher correlation about four times between the provincial government s budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform third we find that stronger ex ante fiscal incentives measured by the contractual marginal retention rate of the provincial government in its budgetary revenue are associated with faster development of the non state sector as well as more reforms in the state sector in the provincial economy this holds even when we control for the conventional measure of fiscal decentralization finally we compare federalism chinese style to federalism russian style

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

the human capital roots of the middle income trap the case of china china like other middle income countries is facing the challenges of the next stage of development as its leaders seek to guide the nation into becoming a high income country in this article we explore one of the major challenges that china is facing in the transition from middle to high income the management of inequality in particular we explore the possible roots of future inequality that is associated with a nation s underinvestment in the human capital of broad segments of its population to meet this goal we describe two challenges that china faces in the light of rising wage rates and highly unequal income distribution today we first discuss the structural and institutional barriers that are discouraging many students and their parents from staying in school to achieve the levels of learning that we believe are necessary for preparing individuals for employment in the coming decades we also identify severe nutritional and health problems we believe that these nutrition and health problems unless addressed will continue to create human capital deficiencies in poor areas of rural china and locking in decades of hard to address inequality

human capital and china s future growth in this paper we consider the sources and prospects for economic growth in china with a focus on human capital first we provide an overview of the role that labor has played in china s economic success we then describe china s hukou policy which divides china s labor force into two distinct segments one composed of rural workers and the other of urban workers for the rural labor force we focus on the challenges of raising human capital by both increasing basic educational attainment rates as well as the quality of education for the urban labor force we focus on the issues of further expanding enrollment in college education as well as improving the quality of college education we use a regression model to show the typical relationship between human capital and output in economies around the world and demonstrate how that relationship has evolved since 1980 we show that china has made substantial strides both in the education level of its population and in the way that education is being rewarded in its labor markets however as we look ahead our results imply that china may find it impossible to maintain what appears to be its desired growth rate of 7 per cent in the next 20 years a growth rate of 3 per cent over the next two decades seems more plausible finally we present policy recommendations which are rooted in the belief that china continues to have substantial room to improve the human capital of its labor force

extending the sectoral coverage of an international emission trading scheme in a model inspired by the eu emissions trading scheme non cooperative countries allocate their emissions to internationally trading and non trading sectors each country is better off with trading than without and aggregate welfare is maximized with all sectors in the trading scheme we analyze the effects of extending the sectoral coverage of the trading scheme in a two country model with quadratic abatement costs if only the original trading sector is asymmetric between countries the welfare change is always positive and the same in both countries if the original and additional trading sectors are asymmetric one country might lose but there is an aggregate welfare gain if the original trading sector and the non trading sector are asymmetric both countries always gain

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

endogenous altruism theory and evidence from chinese twins this paper studies the endogenous formation of intersibling altruism the theory suggests that parental incentive to foster children s fraternal love is positively related to efficiency gains from

tailwinds from the east how has the rising share of imports from emerging markets affected import prices this paper quantifies the effect of the rising share of imports from emerging market economies emes on import price inflation in the uk using a panel regression approach that accounts for heterogeneity across industries we estimate that between 1999 and 2011 the rise in china s import share of manufactured goods lowered uk import price inflation by around 0 5 percentage points per year we call this the tailwind rising imports from other eme country groups are not found to have any significant impact our approach allows us to decompose this effect two thirds arises from the direct impact of switching to lower cost chinese goods the remaining third comes from other exporters lowering their prices in response to stronger competition from china we find no evidence that higher inflation rates in emes has so far reduced or reversed the sign of this tailwind

federalism as a commitment to reserving market incentives the authors advance a new perspective in the study of federalism their approach views federalism as a governance solution of the state to credibly preserving market incentives market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures the salient features of federalism decentralization of information and authority and interjurisdictional competition help provide credible commitment or these purposes in addition the authors suggest that some federalism are self sustaining

land leasing and local public finance in china s regional development evidence from prefecture level cities by analysing the evolution of local governments roles in different periods of china s growth in transition this paper explores local fiscal incentives to use subsidised land and infrastructure as key instruments in regional competition for manufacturing investment since the mid 1990s local land development behaviour is related to china s current land use institutions and intergovernmental arrangements on the basis of panel data covering prefectural level cities from 1999 to 2003 the paper empirically identifies and compares the fiscal impacts of different forms of land leasing by negotiation versus by auction tender policy implications are drawn from this analysis for the further reform of china s urban land system and fiscal institutions

international emissions trading with endogenous allowance choices abstract this paper compares endogenous choices of tradable and non tradable emission allowances by non cooperative countries i find that the cost savings of trading do not necessarily lead to less pollution in particular environmentally more concerned countries usually choose less allowances if these are tradable but this may be offset by the choice of more allowances on the side of environmentally less concerned countries moreover if the establishment of a trading system requires the unanimous approval of all countries there may be no agreement on trading even if it were to lead to less pollution overall conversely a trading system may find unanimous approval even if it induces more pollution

how institutional and organizational characteristics explain the growth of contingent work in china china s traditional model of long term employment has been undermined by an increased reliance on nonrenewable fixed term and temporary agency employment contracts in this study the author draws

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

rising regional inequality in china fact or artifact summary china s local populations can be counted in two ways people with hukou household registration from each place and people actually residing in each place for most of the first three decades of the reform era the hukou count denominated per capita gdp figures output and living standards were overstated in coastal provinces and understated in the interior the distortion grew bigger as the non hukou migrants increased to over 100 million much of the apparent increase in inter provincial inequality is a statistical artifact caused by this distortion the recent switch to using the resident count to denominate gdp introduced new distortions

environmental policy in open economies and monopolistic competition this paper analyses the implications of international trade for non cooperative environmental policy in the case of local production externalities a particular focus is on the potential effects of regulations on the variety of goods and the resulting international spillover caused by trade a tougher domestic standard negatively affects the utility of the households abroad since such a policy reduces their variety of imports due to fewer domestic product inventions or their consumption of each imported brand due to higher import prices ignoring the negative spillover non cooperative governments implement inefficiently strict standards in equilibrium in contrast to this clear cut inefficiency result the impact of international trade on the state of the environment is ambiguous

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

wage growth landholding and mechanization in chinese agriculture this paper uses farm panel data from china to examine the dynamics of land transactions machine investments and the demand for machine services recently china s agriculture has experienced a large expansion of machine rentals and machine services provided by specialized agents which has contributed to mechanization of agricultural production the empirical results show that an increase in nonagricultural wage rates leads to expansion of self cultivated land size a rise in the proportion of nonagricultural income or the migration rate also increases the size of self cultivated land interestingly however relatively educated farm households decrease the size of self cultivated land which suggests that relatively less educated farmers tend to specialize in farming the demand for machine services has also increased if agricultural wage and migration rate increased over time especially among relatively large farms the results on crop income support the complementarity between rented in land and machine services demanded which implies that scale economies are arising in chinese agriculture with mechanization and active land rental markets

intra industry trade and strategic interaction theory and evidence abstract we conduct a theory based empirical study of intraindustry trade in homogeneous products we derive an oligopolistic model of intra industry trade which is an extension of the segmented market model of trade initially proposed by brander j a 1981 intra industry trade in identical commodities journal of international economics 11 1 14 the empirical implementations of the model are investigated in the context of the petrochemical industry our analysis employs a unique data set containing detailed product and location specific data on the petrochemical industries in germany and the united states allowing for different empirical specifications we find that cross product variations in bilateral intra industry trade of petrochemicals are well explained by the variables suggested by the theoretical model

just how low are china s labour costs this paper provides a new perspective on chinese international competitiveness in manufacturing using relative unit labour costadvantage than that implied by a comparison of wages alone china s cost advantage derives from large currency devaluations thas t preceded the establishment of a de facto peg around 1995 and rapid productivity growth in the period since 1995 we nd that chinese unit labour costs are about 25 40 per cent of us labour costs they are also low relative to costs in the eu japan mexico korea and most other newly industrialising countries however china s relative unit labour costs indicatea substantially smaller cost

the quality and efficiency of public service delivery in the uk and china abstractthe quality and efficiency of public service delivery in the uk and china regional studies this paper examines the efficiency of public service delivery at a regional level in both the uk and china using a method based on data envelopment analysis dea that measures aggregate country level inefficiency this country level inefficiency is then decomposed into three components 1 lack of best practices at a regional level 2 quality of the public service delivery and 3 potential efficiency gains realizable via reallocation of expenditure across regions the empirical results indicate that most uk inefficiency comes from the reallocation effect while most chinese inefficiency is attributable to lack of best practices quality explains more of the expenditure variations in the uk relative to china the paper speculates about fiscal de centralization as a possible explanation for such differences

strategic interaction in local governments industrial land supply evidence from china land is an important tool for local governments to attract investments and promote local economic growth in china based on panel data of chinese prefecture level cities from 2003 to 2012 this paper employs spatial panel data models to examine the strategic interaction among local governments in industrial land supply and to indentify its possible sources the empirical results show that there exists strategic interaction among local governments in industrial land leasing price local governments industrial land leasing price is significantly impacted by the action of neighbouring cities they mimic each other in terms of industrial land leasing price to attract outside investments empirical evidence reveals that the strategic interaction comes from both yardstick competition and resource flow effects local governments react more to their neighbours industrial land leasing price during political cycle periods

catching up structural transformation and inequality industry level evidence from asia this article empirically investigates the effect of structural transformation on wage inequality in asia using industry level data for three skill groups of workers while structural transformation associated with technological progress productivity catching up and capital deepening has contributed to asia s sustained growth its effect on income inequality remains uncertain our results show that the process of economic transformation has exacerbated inequality in the region by increasing the relative share of high skilled workers in total compensation this is mainly due to a shift toward more productive and more intensive in the use of skilled labor activities both within and between industries however we also find that policy responses especially investments in education mitigate the increase in inequality

the u s demographic transition between 1800 and 1940 the u s went through a dramatic demographic transition in 1800 the average woman had 7 children and 94 percent of the population lived in rural areas by 1940 the average woman birthed just 2 kids and only 43 percent of populace lived in the country the question is what accounted for this shift in the demographic landscape the answer given here is that technological progress in agriculture and manufacturing explains these facts

international emissions trading good or bad abstract using a non cooperative climate policy game applied in the literature we find that an agreement with international emissions trading leads to increased emissions and reduced efficiency

incentives equality and contract renegotiations theory and evidence in the chinese banking industry renegotiation plays an important role in contract theory but the empirical study of renegotiation is almost non existent in the literature using a unique dataset from the chinese banking industry we find that the large majority of managerial incentive contracts are renegotiated after performances are realized we develop a model of contract renegotiation where supervisors and managers sign incentive contracts and then renegotiate them in the unique equilibrium of the model incentive contracts are almost always renegotiated ex post even though renegotiation is fully anticipated incentive contracts affect performance the predictions of the model find strong support from our empirical results

intra industry trade in intermediate products pollution and internationally increasing returns this paper examines the relationship between intra industry trade in intermediate products pollution and increasing returns we develop a two country model in which production occurs in two stages final and intermediate good production intermediate goods are produced under monopolistic competition and final good production exhibits increasing returns with respect to the number of varieties of intermediates pollution occurs in the production of the final good when polluting intermediates are used we analyze the effects of international trade in intermediate products on pollution output and welfare under an endogenous tax scenario and with two types of pollution functions the results show that because of increasing returns international trade either leads to lower total pollution in each country or lower pollution per unit of output in at least one country in addition intra industry trade causes countries to import the environmental quality of their trading partners

the effects of rising labour costs on global supply chains the case of china s cotton yarn industry abstractrapid economic growth in china and india has resulted in rapidly rising labour costs in those countries in this study a muth type model is used to assess the potential effects of this deve

incentives information and organizational form we model an organization as a hierarchy of managers erected on top of a technology here consisting of a collection of plants in our framework the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him we argue that different organizational forms give rise to different information about managers performance and therefore differ according to how effective incentives can be in encouraging a good performance in particular we show that under certain assumptions the m form multi divisional form is likely to provide better incentives than the u form unitary form because it promotes yardstick competition i e relative performance evaluation more effectively we conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for chinese data

whither russia a review of andrei shleifer s a normal country in this review the author reflects on the heated debates around views about russia s postcommunist transition expressed in essays collected in new andrei shleifer s book a normal country russia after communism harvard university press 2005 which were initially published at different times during transition she focuses on the three questions that have been in the center of the debate among academics and policymakers what should the sequencing and the speed of reforms be should a country have political centralization for fiscal decentralization to be efficient is russia normal the author argues that russia s most recent history provides convincing evidence in support of the logic of political and economic transformation as it was understood by shleifer as early as the beginning of the 1990s

m form hierarchy with poorly diversified divisions a case of khrushchev s reform in soviet russia we test the premise of the theoretical literature that m form political hierarchies are effective in creating yardstick competition between regional divisions only when those divisions have sufficiently diversified or similar industrial composition the reason for this is that the competition among poorly diversified inter related divisions creates incentives for regional leaders to pursue policies that inhibit industrial growth in neighboring regions in order to make their own region look better from the point of view of the center we use a unique episode in soviet history when a traditional soviet unitary form u form hierarchy was replaced by a multidivisional form m form organization namely khrushchev s sovnarkhoz reform first we demonstrate that during this reform regional leaders were subjected to relative performance evaluation which created incentives to generate industrial growth second we show that these career concerns resulted in higher growth in regions with sufficiently diversified and therefore self contained economies and lower growth in highly specialized regions

is trade in permits good for the environment we analyze the impact of trade in emission permits on environmental policy when countries trade a differentiated good pollution is always higher with tradable permits as compared to the case where permits are not internationally tradable if pollution is a pure global public bad i e the marginal damage from transboundary pollution is the same as that from local pollution the permit price under trade equals the domestic marginal damage from own emissions if pollution is not a pure global public bad i e the marginal damage from transboundary pollution is less than that from local pollution trade results in a permit price lower than the domestic marginal damage from own emissions pollution is higher under trade relative to autarky regardless of the nature of transboundary pollution the permit price equivalent pollution tax is lower and pollution is higher with internationally tradable permits than with nontradable permits

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2

government in transition abstract the speed of economic reforms is not the only important determinant of the success of the transition to a market economy the transition of government from a communist state to an institution supporting a market economy is as critical survey evidence shows that russia lags significantly behind poland in the transition of its government which may account for its inferior economic performance despite adopting similar economic reforms i argue that the lack of turnover of old communist politicians and the creation of inappropriate electoral and fiscal incentives for these politicians may account for the poor performance of the russian government and suggest some strategies for improving the situation

economic transition and labour market dynamics in china an interpretative survey of the turning point debate has the chinese economy approached the lewisian turning point that marks the ending of the initial phase of industrial transformation fuelled by surplus labour in this paper we undertake an interpretative survey of the literature on this issue in the context of china s labour market conditions prior to the reforms and structural change of the past three decades the available evidence is mixed and our assessment makes a strong case for probing institutional constraints to labour mobility from an economy wide perspective going beyond the confines of the rural economy

zhu rongji might be right understanding the mechanism of fast economic development in china understanding the facilitating role of regional governments and the source of regional competition is the key to demystifying the success of china s fast economic development since the 1990s this paper as the product of the lecture the author delivered at the world economy china annual lecture on 3 november 2011 at university of nottingham provides a framework that better illustrates the mechanism that motivates china s economic growth over the past 20 years it shows that the current growth mechanism in china is largely the result of institutional reforms and fiscal recentralisation that occurred in 1994 under the leadership of premier zhu rongji being allowed to have their own source of tax revenue under the new fiscal reform chinese regional governments are motivated to pursue the goal of economic growth through fast capital formation and industrialisation the newly designed intergovernmental fiscal relationship as the most important reform programme in china has also helped create a growth incentive that is compatible between central and local governments and resulted in a tibout type regional competition in the sense that inefficient use of resources including public land would be substantially eliminated by the strategic behaviour of regional governments being more attractive to external direct investment such regional competition makes the regional governments preserve and use the markets rather than replace them and has generated consistent and powerful development momentum for the post 1994 economy of china

the case for international emission trade in the absence of cooperative climate policy we evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self interest to do so we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies countries decisions about their participation in a trading system and about their initial permit endowment are made noncooperatively so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains despite this we find that emission trade agreements can be effective that smaller groupings pairing developing and developed world partners often perform better than agreements with larger rosters and that general equilibrium responses play an important role in shaping these outcomes