the chinese economy past present and future since initiating reforms in 1978 china has experienced an unprecedented rate of economic growth and development to become the second largest economy in the world after the united states yet there is so much that we do not know about the internal workings and operations of the chinese economy in part because the available english language literature is but a fraction of the scholarly work on china english speaking scholars business people analysts and policy makers are typically excluded from chinese language scholarship analysis and commentary or are often limited to executive summary type articles from business literature outlets we hope to fill at least part of the gap in the story of china past present and future with nine up to date surveys on some of the critical issues facing china which have been written by leaders in the relevant fields of scholarship

the distribution of income in china preface notes on the contributors introduction k griffin z renwei part 1 the distribution of income household income and its distribution a r khan k griffin c riskin z renwei three features of the distribution of income during the transition to reform z renwei part 2 income and wealth in rural china the determinants of household income in rural china a r khan the distribution of wealth in rural china t mckinley income distribution and poverty in rural china c riskin part 3 employment and human capital workers in china s rural industries j knight s lina why urban wages differ in china j knight s lina the determinants of educational attainment j knight l shi annex the 1988 household sample survey m eichen z ming index

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

state misallocation and housing prices theory and evidence from china this paper examines the equilibrium price effects of the privatization of housing assets that were previously owned and allocated by the state i develop a theoretical framework that shows that privatization can have ambiguous effects on prices in the private market and that the degree of misallocation of the assets prior to privatization deter mines the subsequent price effects i test the predictions of the model using a large scale housing reform in china the results suggest that the removal of price distortions allowed households to increase their consumption of housing and led to an increase in equilibrium hous ing prices jel l33 018 p25 r31 r38 state participation in the housing market occurs in several forms in countries throughout the world the provision of subsidized housing as a welfare benefit to low income households is common throughout the western hemisphere in addition local governments in several cities in the united states have implemented regula tions that limit the increase of rents charged by landlords 1 this paper focuses on a form of state intervention in housing that occurs through the provision of subsidized homes to state employees the economic consequences of this area of research are potentially large as employer provided housing in the state sector is common throughout the developing world particularly in asia and sub saharan africa government regulation of the private market or the creation of a separate mar ket ensures that certain households have access to housing at prices that are below market value state interventions that aim to bring affordable housing to particu lar subsegments of the population can create economic inefficiencies they distort the decisions that individuals make regarding residential mobility joseph gyourko and peter linneman 1989 gordon a hughes and barry mccormick 1987 and employment michael svarer michael rosholm and jakob roland munch 2005 wang forthcoming and they lead to underinvestment in the construction and main

demographic transition and labour market changes implications for economic development in china china has witnessed a rapid demographic transition in recent decades which has driven changes in labour market outcomes as evidenced by labour shortages and increasing wages for unskilled workers in this paper the authors survey the literature on population transition factors influencing fertility and how these have changed and population policies in china the fundamental role of demographic transition in labour market changes is also reviewed in addition the paper discusses the implications of demographic transition and labour market changes for economic development in china including ageing impacts on potential economic growth rates and challenges to human capital accumulation

implicit delivery options and optimal delivery strategies for financial futures contracts abstract futures contract specification usually allow the short position some variation as to when where how much and what is to be delivered in this paper we derive the optimal delivery policy for the treasury bond futures contracts and find that our policy produces profits that are positive and statistically significant this indicates that future prices are too high in that the short position can earn profits by skillfully exercising his delivery options we find the actual delivery policies of market participants depart substantially from the optimal strategy the implications of these findings for futures traders and bond dealers are discussed

equilibrium pollution taxes in open economies with imperfect competition abstract this paper argues that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of pollution taxes this distortion can be decomposed into a rent capture effect and a pollution shifting effect the rent capture effect lowers equilibrium taxes as each country attempts to gain a competitive advantage over its trading partner and thereby capture foreign rent through net exports the pollution shifting effect raises equilibrium taxes as each country attempts to transfer production and its associated pollution to the other country this effect vanishes if pollution is perfectly transboundary because shifted pollution causes as much damage to the domestic environment as does domestic pollution the net effect on symmetric equilibrium taxes is negative except in the special case of perfect competition with no transboundary pollution in this case the two effects are mutually offsetting and the nash equilibrium is efficient when pollution is at least partially transboundary there also arises the usual transboundary externality and this reinforces the negative net strategic effect giving rise to equilibrium taxes that are lower than what is globally efficient

valuation and optimal exercise of the wild card option in the treasury bond futures market the chicago board of trade treasury bond futures contract allows the short position several delivery options as to when and with which bond the contract will be settled the timing option allows the short position to choose any business day in the delivery month to make delivery in addition the contract settlement price is locked in at 2 00 p m when the futures market closes despite the facts that the short position need not declare an intent to settle the contract until 8 00 p m and that trading in treasury bonds can occur all day in dealer markets if bond prices change significantly between 2 00 and 8 00 p m the short has the option of settling the contract at a favorable 2 00 p m price this phenomenon which recurs on every trading day of the delivery month creates a sequence of 6 hour put options for the short position which has been dubbed the wild card option this paper presents a valuation model for the wild card option and computes estimates of the value of that option as well as rules for its optimal exercise the treasury bond futures contract on the chicago board of trade gives several delivery options to the short position the quality option which allows the short to deliver any of several eligible delivery bonds has already been studied fairly extensively because many bonds are eligible to be delivered against the futures contract and the conversion factors used to adjust for the bond actually delivered do not perfectly reflect relative price differences the short side trader will choose to deliver the cheapest eligible bond kilcollin 71 presents a discussion and analysis of conversion factors and their effects on the optimal delivery bond gay and manaster 4 present a theoretical valuation model for the quality option when two classes of commodities with uncertain end of period spot prices may be delivered garbade and silber 3 provide a similar analysis and estimate parameters of the valuation formula for a variety of agricultural commodity futures kane and marcus 6 have used monte carlo simulations to value the quality option in the treasury bond futures market in contrast the various timing options embedded in the delivery process have received comparatively little attention one of the most important of these is the so called wild card option the wild card option arises because the futures market closes each trading day at 2 p m central standard time which locks in the futures settlement price for the rest of the day while the short trader has until 8 p m of each trading day in the delivery month to declare an intent to deliver

environmental policy with endogenous plant locations in a game between the governments of two countries each chooses its own environmental policy the nash equilibria of the game are generally not pareto optimal on the one hand each country may want to attract industry giving it an incentive to choose low environmental taxes or standards on the other hand if disutility from pollution is sufficiently high each country might prefer that a firm locates only in other countries this effect tends to make the environmental policy under non cooperation stricter than it would be with cooperation

an equilibrium model of bond pricing and a test of market efficiency in two previous and related papers 3 4 the authors have reported the results of estimating a particular equilibrium model of bond pricing using quarterly data on canadian government bonds for the period 1964 to 1979 this paper reports the results of applying a similar model to the pricing of u s government bonds for the period 1958 1979 using data from the crsp government bond file the paper also extends the previous empirical analysis by evaluating the ability of the pricing model to detect underpriced and overpriced bonds the data reveal a strong relation between price prediction errors and subsequent bond returns

labor migration and earnings differences the case of rural china this article presents empirical evidence supporting the hypothesis that the decision of chinese rural people to migrate is affected by noneconomic forces using the 1820 rural household survey from sichuan province migration behavior and earnings are analyzed logistic probability models show that the decision to migrate is driven largely by the availability of rural non farm employment opportunities however if jobs are available in the province even at lower wages rural people will choose to stay rather than to migrate the major deterrent to migration is the lack of safety during transportation and in destination cities as well as forced separation from families moreover rural migrants are denied the legal right to reside permanently in cities furthermore findings reveal that although labor productivity in migrant activities is higher than it is in local non farm sectors the economic cost of migration in china is so high as to significantly limit reallocation one implication of this study is that without artificial barriers to labor migration the number of migratory workers would be higher since the important objective of the chinese government is to control rural to urban migration it is likely that restrictive migration policies will continue however putting aside the issue of social justice the economic efficiency loss under the chinese system should not be ignored

locating chinese urban housing policy in an international context china s economic development has often been contrasted with that of other transition economies in europe but academics have fought shy of making direct comparisons of urban housing reform in the two systems this paper fills this gap by making such direct comparisons adopting the market housing model advocated by the world bank as an analytical framework it finds that extensive housing privatisation in china is supported by a system of urban housing property rights and a growing residential mortgage market although china has a distinctive institutional framework there is also much variety among the european transition countries and a distinctive chinese model was not identified so this micro level analysis did not support the contention that china represents a form of contested modernity nonetheless a crucial point arises from china s hybrid status as a developing as well as a transition country the bulk of the urban migrant population remains excluded from formal housing policy and enabling st

urban biased policies and rising income inequality in china since the start of economic reforms in 1978 china has experienced the largest increase in income inequality of all countries for which comparable data are available according to the world bank 1997 china s gini coefficient increased from 28 2 in 1981 to 38 8 in 1995 based on official survey data another study that used internationally standard definitions for incomes estimated china s gini ratio at 38 2 in 1988 and 45 2 in 1995 a level that already surpassed many developing economies in asia azizur khan and carl riskin 1998 are these income inequality changes the consequence of institutional reforms that replaced egalitarian rewards with work incentives employment contracts and labor mobility this paper uses household survey data collected by china s state statistical bureau ssb to investigate the sources and causes of this rising inequality by analyzing gini ratios and generalized entropy measures i decompose the overall inequality into three sectoral components i inequality within rural areas ii inequality within urban areas and iii sectoral disparity the data indicate that increases in rural urban income differentials have been the driving factor behind the rising overall inequality in china i argue that urbanbiased policies and institutions including labor mobility restrictions welfare systems and financial policies of inflation subsidies and investment credits to the urban sector are responsible for the long term rural urban divide and the recent increases in disparity

china s uneven progress against poverty while the incidence of extreme poverty in china fell dramatically over 1980 2001 progress was uneven over time and across provinces rural areas accounted for the bulk of the gains to the poor though migration to urban areas helped the pattern of growth mattered rural economic growth was far more important to national poverty reduction than urban economic growth agriculture played a far more important role than the secondary or tertiary sources of gross domestic product gdp rising inequality within the rural sector greatly slowed poverty reduction provinces starting with relatively high inequality saw slower progress against poverty due both to lower growth and a lower growth elasticity of poverty reduction taxation of farmers and inflation hurt the poor external trade had little short term impact

competition in regional environmental policies when plant locations are endogenous abstract a two region model is presented in which an imperfectly competitive firm produces a good with increasing returns at the plant level production of the good causes local pollution the firm decides whether to maintain plants in both regions serve both regions from a single plant or shut down if the disutility of pollution is high enough the two regions will compete by increasing their environmental taxes standards until the polluting firm is driven from the market alternatively if the disutility from pollution is not as great the regions will usually compete by undercutting each other s pollution tax rates

rural urban disparity and sectoral labour allocation in china this study examines china s rural urban segmentation and its causes in the context of economic reforms household survey and aggregate data indicate a v shaped process in which rural urban consumption and income differentials decreased between 1978 and 1985 but then have continually increased to historically high levels this sectoral division is consistent with production function estimates based on provincial data that reveal higher labour productivity in urban state owned industries than in rural industries and agriculture to explain the v shaped change we argue that the precedent of successful rural reforms raised farmers relative earnings but the remaining obstacles to an efficient sectoral allocation of labour have prevented china from eliminating dualism recent financial policies consisting of urban price subsidies and increased investment credits have also had influential distribution effects that are biased against the rural sector

changes in the structure of public housing provision in urban china housing provision in a socialist country is generally characterised by the dominance of public housing however provision of public housing is a complicated process which involves various social agencies in the case of china the simple notion of state provision covers huge differences between municipally managed and work unit housing the lack of understanding in the structure of public housing provision has led to unsuccessful efforts in promoting the commercialisation of housing in recent years this paper adopting a perspective of structure of housing provision shp attempts to examine the changes in public sector housing in china and to reveal the critical role of state work units in the shp housing reform has led to some significant changes in the shp the transformation however is far from a process of commercialisation or privatisation of public housing stock on the production side work units do withdraw themselves from direct involvement in housing construction however on the con

housing choice hindrances and urban spatial structure evidence from matched location and location preference data in chinese cities abstract in a monocentric city with a well functioning residential market pareto efficient spatial equilibrium entails the sorting of residents according to their bid rent gradient in descending order away from city center violation of this sorting condition creates opportunities for pareto improving trading of locations and can be sustained only if the market is hindered we propose a simple ordered location choice model using matched location and location preference data of individual households to examine violations of the pareto efficient spatial sorting condition in so doing we are able to identify population groups facing housing choice hindrances we find in a sample of chinese cities undergoing housing market liberalization that poor marketability of the previously state provided homes inadequate provision of housing finance and spatial mismatch between job market and housing market opportunities contribute to a pareto inefficient spatial structure

innovation in china innovation has been increasingly recognized as a critical force in national economic growth not only in developed countries but also in emerging countries such as china and india this paper provides a critical review of the literature related to china s innovation capability first i evaluate the current status of china s innovation capability as measured not only by the level of human capital and output of academic research but also by patents products and services that directly benefit economic growth i then review the development pathway of china s national innovation system since the economic reforms including policies the role of the government and the engagement of different actors in the national innovation system following that i examine theories and empirical evidence that help to explain the evolution of china s innovation capability finally using china s experience i analyze the relationship between innovation capability and economic development and highlight how the uneven spatial distribution of innovation capability may affect china s regional economic development

the rise in house prices in china bubbles or fundamentals the dramatic rise of house prices in many cities of china has brought huge attention from both the governmental and academic circles there is a huge debate on whether the increasing house prices are driven by market fundamentals or just by speculation like levin and wright 1997a 1997b we decompose house prices in china into fundamental and non fundamental components we also consider potential nonlinear feedback from the historical growth rate of house prices on the current house prices and propose a semiparametric approach to estimate the speculative components in the model we demonstrate that the non fundamental part contributes a relatively small proportion of the rise of house prices in china su and jin thank the nsfc for research support under grant no 70501001 citation hu jianying liangjun su sainan jin and wanjun jiang 2006 the rise in house prices in china bubbles or fundamentals economics bulletin vol 3 no 7 pp 1 8 submitted march 20 2006 accepted march 28 2006 url http www economicsbulletin com 2006 volume3 eb 06c20006a pdf

spatial aspects of chinese development issues outcomes and policies 1949 79 despite wide initial spatial inequalities and a respectable rate of national economic growth since 1949 available evidence suggests that certain key spatial inequalities in china have narrowed progress has been uneven however and there is no simple correlation to be found between the pursuit of maoist regional policies and the narrowing of spatial inequalities that actually occurred this points to the need to qualify the conclusion of many western scholars that maoist policies actually succeeded in achieving rapid sustainable growth while narrowing most differentials including spatial differentials

site density restrictions measurement and empirical analysis abstract restrictions on the density at which development can occur are a central tool of land use regulation yet they are understudied in the empirical literature in this paper we present a methodology to identify how much restrictions on the ratio of building space to lot area constrain developers our approach generates a measure of the distortion from the private optimum caused by restrictions as a function of land prices and the maximum allowed ratio of floor space to lot area we use this methodology to examine how the set of incentives facing different levels of local government in shanghai china affects density constraints on redevelopment sites in the city s emerging real estate market

the delivery option on forward contracts many futures contracts contain a delivery option which allows the short position a choice to deliver one of several varieties of a commodity several authors have argued that deliv ery options can have considerable value for a forward contract with a delivery option this paper shows that a continuously adjusted hedge will drive the value of the delivery option towards zero assuming perfect and frictionless markets tract the option to deliver one of several grades of a commodity on the delivery date recent papers by garbade and silber 3 and gay and manaster 4 have examined this delivery option and have suggested that this option reduces the futures price prior to the delivery date this paper examines a perfect market with continuous prices with an infinite number of deliverable varieties with ac tive forward markets for all deliverable varieties and without marking to market under these assumptions the value of the delivery option is shown to ap proach zero the paper shows that a continuously adjusted hedge exists that guarantees this result therefore the attachment of value to the delivery option

pension reform in china preparing for the future china is revamping its enterprise based old age security system and introducing a pension programme financed by the employer employee and the government through a combination of pooled funds and individual accounts the new system is expanding coverage to the urban workforce outside the state sector and protecting benefits against inflation the decentralised nature of the pension pools however limits increases in efficiency and portability of pension benefits sustainability of the revised system will require attention to fund management regulations and preparation for rapid population ageing by expanding coverage to rural wage earners and reducing benefits

a survey of recent research in chinese economic history in the past two decades or so the field of chinese economic history has become bigger more colourful and more diversified than ever before this article reviews the new development in scholarship in the filed of chinese economic history apart from the lingering debate on china s performance in pre modern times pre 1750 china s growth and development in the 19th and 20th centuries has attracted more scholarly attention and thus has become increasingly more important in the understanding of china

china s service trade this paper assesses the performance of china s service trade over recent decades by summarizing and presenting data on its size growth rate sectoral composition comparative advantage and degree of openness the evidence based on comparative analysis suggests that despite china s high growth rate the development of china s service trade lags behind its merchandise trade with a policy environment adjusted in china s 12th 5 year plan a growing significance of china s service trade to both china and the global economy is likely under the prospective development strategy china s service trade has already had large impacts on china s economic growth employment and technology diffusion we suggest that even more major impacts will follow in the years to come and that there are implications for global trade fdi and labor migration

china s urban housing reform price rent ratio and market equilibrium china s urban housing marketisation hinges on a sensible ratio of housing price to rent this research derives a rational level for such a ratio and examines its distortions under the chinese system it shows that the prevailing housing price to rent ratios are significantly higher than the rational level for both subsidised and free market housing unique chinese housing market equilibria are analysed and policy recommendations on commercialising chinese urban housing are suggested

the impact of migration on rural poverty and inequality a case study in china large numbers of agricultural labor moved from the countryside to cities after the economic reforms in china migration and remittances play an important role in transforming the structure of rural household income this article examines the impact of rural to urban migration on rural poverty and inequality in a mountainous area of hubei province using the data of a 2002 household survey since migration income is a potential substitute for farm income we present counterfactual scenarios of what rural income poverty and inequality would have been in the absence of migration our results show that by providing alternatives to households with lower marginal labor productivity in agriculture migration leads to an increase in rural income in contrast to many studies that suggest that the increasing share of nonfarm income in total income widens inequality this article offers support for the hypothesis that migration tends to have egalitarian effects on rural income for three reasons 1 migration is rational self selection farmers with higher expected return in agricultural activities and or in local nonfarm activities choose to remain in the countryside while those with higher expected return in urban nonfarm sectors migrate 2 households facing binding constraints of land supply are more likely to migrate 3 poorer households benefit disproportionately from migration

the delivery option on forward contracts a comment livingston contends that short futures long cash traders can eliminate the potential costs of the quality option through use of a dynamic trading strategy it is proposed here that if this is possible then futures prices will never reach a stable equilibrium alternatively if livingston s argument is flawed then no risk free arbitrage opportunities are likely to be available to either short cash long futures or long cash short futures traders under such conditions futures prices will reach an equilibrium when the expected return and risk of each type position are equally attractive

unequal migration and urbanisation gains in china abstract we assess the role of internal migration and urbanisation in china on the nominal earnings of three groups of workers rural migrants low skilled natives and high skilled natives we estimate the impact of many city and city industry characteristics that shape agglomeration economies as well as migrant and human capital externalities and substitution effects we also account for spatial sorting and reverse causality location matters for individual earnings but urban gains are unequally distributed high skilled natives enjoy large gains from agglomeration and migrants at the city level both conclusions also hold to a lesser extent for low skilled natives who are only marginally negatively affected by migrants within their industry by contrast rural migrants slightly lose from migrants within their industry while otherwise gaining from migration and agglomeration although less than natives the different returns from migration and urbanisation are responsible for a large share of wage disparities in china

the pricing of options on default free bonds recent developments in the finance literature dealing with the valuation of contingent claims have been triggered by black and scholes 2 with their valuation of european options on corporate stocks the type of valuation model derived by black and scholes is attractive because it is independent of preferences this independence is possible due to the fact that the contingent claims are usually assumed to be contingent on traded assets or traded state variables for example a european call option is a claim contingent on the value of the corresponding stock to maintain the independence of the claim from preferences however some variables have to be discarded and considered as constants for example the rate of interest which is not a traded state variable is considered a constant in most of the literature see black and scholes 2 merton 11 and ingersoll 9 though this approximation might not cause important discrepancies in the case of corporate liabilities and options on corporate liabilities the effect of such an approximation on the value of default free bonds and options on default free bonds is more important since these liabilities depend only on the rate of interest

international trade and unemployment theory and cross national evidence abstract we present a model of trade and search induced unemployment where trade results from heckscher ohlin h o and or ricardian comparative advantage using cross country data on trade policy unemployment and various controls and controlling for endogeneity and measurement error problems we find fairly strong and robust evidence for the ricardian prediction that unemployment and trade openness are negatively related this effect dominates the positive h o effect of trade openness on unemployment for capital abundant countries which turns negative for labor abundant countries using panel data we find an unemployment increasing short run impact of trade liberalization followed by an unemployment reducing effect leading to the new steady state

the delivery option on forward contracts a note a number of futures contracts conveys to the short position various delivery options re garding the quality and exact timing of delivery moreover the compensation to the long position is not solely determined by the market value of the delivered asset at the time of delivery sometimes the long position can hedge this delivery risk by holding an appropriate portfolio of the underlying asset it often has been stated that whenever the long position can form a dynamic hedge against the delivery risk the delivery option has a zero value this paper demonstrates the implication of such erroneous intuition to the pricing of options it is shown that the root of the issue is the property of diffusion processes whereas within a given time interval a random variable either will never cross a given boundary or else cross it an inflnite number of times

variety growth and world welfare economists since john richard hicks have known that one of the principal means if not the principal means through which countries benefit from international trade is by the expansion of varieties the seminal work of paul r krugman 1979 brought the study of varieties into sharp focus by presenting a simple generalequilibrium model in which countries gain from trade through the import of new varieties since then economists have been hampered in their ability to quantify the impact of new varieties on national welfare by the econometric and data hurdles that need to be surmounted in this paper we document some stylized facts about the growth in global varieties which suggest that there may have been substantial welfare gains through the import of new varieties moreover we calculate the impact of increased variety on import prices and find that conventional measures of import price inflation may be dramatically biased upward classical international trade theory postulates that the elimination of trade barriers improves welfare by reducing the wedge between domestic and import prices as well as the ensuing deadweight loss an entirely different reason for the gains from trade arises from models of monopolistic competition if consumers value variety and countries cannot produce all varieties due to a fixed cost in the production of each variety countries stand to gain from trade because it expands the set of available varieties in these models the gains hinge crucially on a number of parameters and variables the first is the elasticity of substitution among varieties if varieties are highly substitutable as might be true for varieties of gasoline then increasing the number of varieties is unlikely to have much of an effect on prices and welfare second quality variation across varieties may matter presumably most americans care more about having access to french red wine than to japanese red wine finally import quantities matter as ceteris paribus one cares more about variety growth in big sectors than in small sectors in broda and weinstein 2004 we carefully estimate the impact of increased variety in the united states over the period from 1972 to 2001 using the most disaggregated import data available we document that the number of varieties imported by the united states defined as the number of import categories multiplied by the average number of source countries for each category quadrupled about half of this increase was due to increases in the number of categories and half due to a doubling of the number of countries from which the united states imported each good measuring the impact of this increase on u s import prices and welfare is a complex process that we will only discuss briefly here essentially we used robert c feenstra s 1994 methodology to estimate 30 000 elasticities and then construct an aggregate price index that is robust to common changes in quality variation the arbitrary splitting of categories the introduction of new goods and a host of other data problems after reconstructing the u s import price index we found that the price of u s imports has been falling at a rate 1 2 percent per year faster than one would have thought without taking new varieties into account to get some sense of the enormity of this bias consider that the impact of quality adjustments on the consumer price index is estimated to be 0 6 percent per year using this adjusted import price index we estimate the impact of new imported varieties on broda research department federal reserve bank of new york 33 liberty street new york ny 10045 weinstein economics department columbia university 420 w 118th street new york ny 10027 and nber we thank joshua greenfield for excellent research assistance we thank robert feenstra and peter klenow for excellent comments 1 the extension of trade does not primarily imply more goods the variety of goods available is also increased with all the widening of life that that entails there can be little doubt that the main advantage that will accrue to those with whom our merchants are trading is a gain of precisely this kind this is a gain which quantitative economic history which works with index numbers of real income is ill fitted to measure or even to describe hicks 1969 p 56

strategic trading behavior and price distortion in a manipulated market anatomy of a squeeze abstract this paper investigates an attempted delivery squeeze in a bond futures contract traded in london using cash and futures trades of dealers and customers we analyze their strategic trading behavior price distortion and learning in a market manipulation setting we argue that marked differences in settlement failure penalties in the cash and futures markets create conditions that favor squeezes we recommend that regulators require special flagging of forward term repurchase agreements on the key deliverables that span futures contract maturity dates and that exchanges mark to market their contract specifications more frequently or consider a cash settled contract on a basket of bonds

housing tenure choice in transitional urban china a multilevel analysis summary using a 1996 national survey of housing in china and a multilevel modelling technique we examine housing tenure choice in transitional urban china where households have been granted limited freedom of choice in the housing market since the housing reforms of 1988 we e nd that both market mechanisms and institutional forces affect households tenure choice in urban china while some socioeconomic factors such as age household size household income and housing price have similar effects on tenure choice as in the west others such as the number of workers and marital status have rather different effects in addition factors characterising institutional relationships among the state work units and households such as hukou job rank and work unit rank still play important roles in tenure choice

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

the housing led growth hypothesis revisited evidence from the chinese provincial panel data this paper investigates the relationship between housing investment and economic growth in china utilising province level data via recently developed panel unit root tests and panel co integration analysis the empirical results suggest a stable long run relationship between housing investment non housing investment and gdp in china in addition the existence is demonstrated of bi directional granger causality between housing investment and gdp at the national level the panel error correction model supports the hypothesis that housing investment appears to have a dual role acting as both a driver and follower in china s economic fluctuations however the impacts of housing investment on economic growth in three sub regions are found to be strikingly different

income inequality in the people s republic of china trends determinants and proposed remedies the issue of income inequality in the people s republic of china prc has attracted world wide attention leading to a sizable literature this paper attempts to provide a nonexhaustive literature review of the prc s inequality trends and determinants and suggested government interventions it discusses profiles of income inequality along three dimensions interhousehold disparity regional divides and urban rural gaps this is followed by an exploration of the driving forces behind rising inequality including the notorious hukou system policy biases location or geographic factors globalization and education finally the paper summarizes and proposes government interventions for containing or reducing income inequality in the prc important areas for future research are also suggested in the final section of the paper

the process of commercialisation of urban housing in china the role of the state in housing has been the subject of controversial debate recently in china more and more decision makers consider that the supply of housing should be left to market forces of demand and supply various new policies have been introduced from as early as 1979 designed to commercialise and reform the public sector dominated housing system this paper provides a review of housing reforms and a systematic account of the key features of the commercialisation process it focuses principally on the attempts to privatise public sector housing in urban areas in the context of the major characteristics and problems of the urban housing system the development of reform policies and legislation and current reform practice

the needham puzzle why the industrial revolution did not originate in china one of the most intriguing issues for students of chinese history and comparative economic history is why did the industrial revolution not occur in china in the fourteenth century at that time almost every element that economists and historians usually considered to be a major contributing factor to the industrial revolution in late eighteenth century england also existed in china chinese civilization like the civilizations of mesopotamia egypt and india originated from agriculture the first unified empire qin was formed in 221 b c by 300 b c chinese society had developed into a form that had many characteristics of a market economy with most land privately owned a high degree of social division of labor fairly free movement of labor and well functioning factor and product markets this comparatively developed market economy probably created important attitudes toward profit and contributed to the swift diffusion of the best technology in the han dynasty 206 b c a d 220 the iron tipped plow moldboard and seed drill were widely used in the northern part of china where the main crops were millet and wheat the most significant improvements in chinese agriculture came with the population shift from the north to the rice growing areas south of the yangtze river that started at the beginning of the ninth century and especially after the introduction of a new variety known as champa rice from indochina at the beginning of the eleventh century 2 this variety characterized by better drought resistance and faster ripening enabled farmers to extend the agricultural frontier from the lowlands deltas basins and river valleys to the better watered hill areas and allowed production of two and even three crops a year 3

urbanization and urban systems in the people s republic of china research findings and policy recommendations this paper provides a literature review on urbanization in the people s republic of china prc research findings indicate that the prc s urbanization is incomplete its level of urbanization lags behind its industrialization and development status and while there are too many small cities the large cities are not large enough this is mainly because of the institutional constraints exerted by the hukou and land systems on labor mobility which have led to segregation efficiency loss distortion in the urban system and adverse impacts on equity as discussed in this study major policy recommendations are offered for removing the distortions and steering the prc s urbanization onto an efficient and equitable path

environmental regulation in an open economy abstract environmental regulation by a large trading country affects the world price of traded commodities a series of second best environmental taxes are derived which explicitly incorporate trade effects for cases which depend on the type of externality the regulating country s commodity trade balance and the presence or absence of trade taxes in the regulated market a coordinated policy solution using both tax and tariff instruments also is derived the practical implications for domestic environmental policy making which emerge from the theoretical results are evaluated

quality option profits switching option profits and variation margin costs an evaluation of their size and impact on treasury bond futures prices this paper provides empirical evidenee that the quality option in f bond futures is much less valuable than previously indicated in addition a dynamic trading strategy involving multiple switches of the cash bonds held in a long cash versus short futures position is shown to produce substantially greater profits than the single exercise of the quality op tion these findings suggest that the optimal management of long cash short futures positions is likely to involve dynamic trading strategies while passive strategies appear more appropriate for short cash long futures positions it is also shown that required variation margin payments are frequently large and may impact the profitability and risk of such positions to a greater extent than either of these options further evidenee is given indicating that observed t bond futures prices reflect an imputed value for the options and risks inherent in such positions

income inequalities in china evidence from household survey data on the basis of a household data set this paper compares household income inequality in urban and rural china decomposes inequality into intra and interprovincial components and analyzes the contribution of various income sources to total income equality the main findings of the paper are first that unlike in most developing economies income inequality in urban areas is lower than in rural areas second nationwide income inequality is due mostly to intraprovincial inequality third components of income associated with economic reforms are more unequally distributed than the rest

an increase in the retirement age in china the regional economic effects abstractchina s pension system is in need of comprehensive reform one measure on which we focus is to increase the retirement age it is likely that a change in retirement age will have significantly different effects across china s regions interregional disparities are already very substantial in china and it will be important to know how changes in pension arrangements will affect disparities we consider four policies to increase the retirement age from 60 to 61 they differ according the use made of the extra revenue generated by the policy all four policies increase welfare and reduce the interregional welfare gap

region specific estimates of the determinants of real estate investment in china this paper utilises a reduced form equilibrium model to investigate the possible sources of real estate investment differentials among 22 provinces five autonomous regions and four municipalities of the people s republic of china the model is estimated using panel data from 2001 to 2006 yielding a total of 186 observations specifically empirical results suggest that demographic economic and planning factors are the major determinants to cause real estate investment to vary among chinese regions the relatively small coefficient estimate of real interest rates indicates that it has a significant but modest impact based on the coefficient estimates this paper finally suggests that the chinese government should focus and work on several policy parameters in order to achieve a more balanced state of real estate investment across chinese regions

urban income inequality in china revisited 1988 2002 abstract using newly available spatial price deflators this paper shows that inequality evaluations in the literature overstate the magnitude of inequality and inequality changes in china as well as the role played by regional differences in the recent inequality rise

urban rural gap and poverty traps in china a prefecture level analysis urban rural gap and regional inequality are long standing problems in china and result in considerable number of studies this article examines the dynamic behaviours of incomes for both urban and

pension reform in china challenges and opportunities china s current segmented pension system features regional imbalance fiscal inefficiency social inequality and economic unsustainability it is a result of three decade evolution guided by vague long term objectives constrained by economic and political circumstances and swayed by interest group infighting expecting rapid population ageing and economic transformation china aims to establish a national pension system that provides wide coverage basic security multi level options and sustainability by 2020 the paper reviews the history of china s pension system examines proposed reform options and discusses the challenges and opportunities faced by the reform

residential redevelopment and the entrepreneurial local state the implications of beijing s shifting emphasis on urban redevelopment policies the entrepreneurial nature of local government activities has significantly influenced socioeconomic and spatial changes in urban china it is against this backdrop that property led redevelopment projects were implemented in beijing after 1990 guided by a programme whose very success depended on the participation of real estate capital for financial contributions in 2000 however a new policy was put in practice which aimed at supplying affordable housing on government provided land to increase the rehousing rate this paper analyses the implications of this shifting emphasis on beijing s redevelopment policy and examines whether the local government has become less entrepreneurial and more socially inclusive in its redevelopment approach based on the case study of two redevelopment projects the paper argues that the local state s entrepreneurial nature has persisted and that this is largely due to its power to dispose of urban land use rights effectively making local governments de facto landlords

growth population and industrialization and urban land expansion of china china is experiencing urbanization at an unprecedented rate over the last two decades the overall goal of this paper is to understand the extent of and the factors driving urban expansion in china from the late 1980s to 2000 we use a unique three period panel data set of high resolution satellite imagery data and socioeconomic data for entire area of coterminous china consistent with a number of the key hypotheses generated by the monocentric model our results demonstrate the powerful role that the growth of income has played in china s urban expansion in some empirical models the other key variables in the monocentric model population the value of agricultural land and transportation costs also matter adapting the basic empirical model to account for the environment in developing countries we also find that industrialization and the rise of the service sector appear to have affected the growth of the urban core but their role was relatively small when compared to the direct effects of economic growth we also make a methodological contribution demonstrating the potential importance of accounting for unobserved fixed effects

interprovincial disparities in china output and consumption 1952 1987 the flood of economic information from china in recent years has permitted reassessment of the chinese model of development and the extent to which china s own development experience has conformed to it the prevailing consensus of the 1970s concerning the substance of the model itself typically characterized in terms of the chinese leadership s objectives and priorities and its strategy for pursuing them has stood up quite well the same cannot be said about past appraisals of the extent to which china s economic reality has been reshaped to accord with the model s prescriptions one of the most widely remarked elements of the chinese model is the high priority assigned to regional objectives and more specifically to balance in the distribution of productive capacity and equity in the distribution of income and hence consumption during the maoist era i e prior to 1979 the central government pursued regional objectives through such measures as interregional transfers of investment resources effected via the planning system subsidization of health and education expenditures in poor regions and attempts to maintain a safety net of state relief effected largely via control of grain surpluses in short there is little doubt that prior to 1979 the chinese leadership placed an unusually high value on the spread of modern growth and the improvements in welfare associated with it and persistently acted to limit the emergence or widening of interregional disparities although china s post mao leaders have shown greater concern with efficiency and with the potential trade offs between efficiency and such goals as balance and equity their continuation of many redistributive policies indicates that they have not abandoned regional objectives but how successful has china been in achieving these objectives

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

free trade and global warming a trade theory view of the kyoto protocol this paper demonstrates how three important results in environmental economics true under mild conditions in closed economies are false or need serious amendment in a world with international trade in goods since the three results we highlight have framed much of the ongoing discussion and research on the kyoto protocol our viewpoint from trade theory suggests a re examination may be in order specifically we demonstrate that in an open trading world but not in a closed economy setting 1 unilateral emission reductions by the rich north can create self interested emission reductions by the unconstrained poor south 2 simple rules for allocating emission reductions across countries such as uniform reductions may well be efficient even if international trade in emission permits is not allowed and 3 when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions

the erroneous use of china s population and per capita data a structured review and critical test hundreds of studies in economics misinterpret china s subnational population and per capita data the most widely used population counts are of hukou registrations from each province prefecture county or city rather than of the people living in each place and generating local gross domestic product over 220 million people have left their place of registration while almost none had when reforms began creating time varying errors in estimates of per capita income of subnational units we survey empirical articles in blue ribbon journals in development journals and in regional and urban economics journals that use china s subnational data over 80 of articles use these data erroneously most commonly the wrong population or employment counts are used to measure the size of subnational units and per capita data are calculated with the wrong denominator for how variables are interpreted we provide examples of errors from each group of journals and a critical test of one highly cited study specifically we show that if hukou registrations are erroneously used to measure the local population following existing practice conclusions about driving forces for urban area expansion are reversed we give recommendations for more careful use of china s subnational population and per capita data

the evolution of the housing market and its socioeconomic impacts in the post reform people s republic of china a survey of the literature the development of the housing market in the people s republic of china is not only a major component of chinese economic growth but also has wide ranging influential impacts on chinese society a burgeoning number of papers have examined the housing market in the postreform people s republic of china from various perspectives this paper aims to provide a thorough survey of the key literature in the field and then supply a complete picture of the dynamics of the housing market in the people s republic of china to assess the functional efficiency of this nascent market we pay particular attention to the literature that is related to the academic debate over the chinese housing bubble issue the structure and operation of the housing market is another major concern in this paper finally we summarize the key insights of the literature that we surveyed note research gaps in the literature and discuss further research directions in this field

a numerical simulation analysis of hukou labour mobility restrictions in china abstract we use numerical simulation methods to analyze the hukou system of permanent registration in china which many believe has supported growing relative inequality over the last 20 years by restraining labour migration both between the countryside and urban areas and between regions and cities our aim is to inject economic modelling into the debate on sources of inequality in china which thus far has been largely statistical we first use a model with homogeneous labour in which wage inequality across various geographical divides in china is supported solely by quantity based migration restrictions urban rural areas rich poor regions eastern central and western non coastal zones eastern and central western development zones eastern central western zones more disaggregated 6 regional classifications and an all 31 provincial classification we calibrate this model to base case data and when we remove migration restrictions all wage and most income inequality disappears results from this model structure points to a significant role for hukou restrictions in supporting inequality in china we then present a further model extension in which urban house price rises retard rural urban migration the impacts of removing hukou restrictions on migration are smaller but are still significant finally we modify the model to capture labour productivity differences across regions calibrating the modified model to estimates of both national and regional gini coefficients removal of migration barriers is again inequality improving but less so