Justin Yifu Lin

Fiscal Decentralization and Economic Growth in China

We employ a province-level data set to assess the contribution of fiscal decentralization initiated in the 1980s to economic growth in China. Controlling for other concurrent reform measures, we find that fiscal decentralization has raised the growth rate of per capita GDP at the province level. This is consistent with the hypothesis that fiscal decentralization increases economic efficiency. In addition, we also find that the rural reform, non-state sector development, and capital accumulation are the key driving forces of the impressive growth in China over the past twenty or so years.

Should Industrial Policy in Developing Countries Conform to Comparative Advantage or Defy it? A Debate between Justin Lin and Ha-Joon Chang

This is the first in an occasional series of DPR Debates, designed to illuminate specific issues of international development policy. Each debate will bring together two well-known researchers or practitioners, giving them the opportunity, over three rounds, to test and challenge each others ideas. The debates are intended to be robust but accessible, rooted in rigorous research but useful to the wide readership of Development Policy Review.

The Relationship between Credit and Productivity in Chinese Agriculture: A Microeconomic Model of Disequilibrium

Credit is an important element in agricultural production systems. It allows producers to satisfy the cash needs induced by the production cycle which characterizes agriculture: preparation, planting, cultivation, and harvesting of the crops are typically done over a period of several months in which very little cash revenue is earned, while expenditures on materials, purchased inputs, and consumption must be made in cash. Cash income is received a short time after the harvest. In the absence of credit markets, farmers would have to maintain cash reserves so as to facilitate production and consumption in the next cycle. The availability of credit allows both greater consumption and greater purchased input use and thus increases welfare of the farmers.

Ineffective phagocytosis of amyloid-β by macrophages of Alzheimer's disease patients

The defective clearance of amyloid-beta (Abeta) in the brain of Alzheimers disease (AD) patients is unexplained. The immunohistochemical studies of the frontal lobe and hippocampus show perivascular and intraplaque infiltration by blood-borne macrophages containing intracellular Abeta but only inefficient clearance of beta deposits. Neurons and neuronal nuclei, respectively, express interleukin-1beta and the chemokine RANTES, which could induce the inflammatory cell infiltration. To clarify the pathophysiology ofbeta clearance, we examined Abeta phagocytosis by monocytes and macrophages isolated from the blood of age-matched patients and controls. Control monocytes display excellent differentiation into macrophages and intracellular phagocytosis of Abeta followed by beta degradation or export. AD monocytes show poor differentiation and only surface uptake of Abeta and suffer apoptosis. HLA DR and cyclooxygenase-2 are abnormally expressed on neutrophils and monocytes of AD patients. AD patients have higher levels of intracellular cytokines compared to controls. Thus Abeta clearance is not restricted to brain microglia and involves systemic innate immune responses. In AD, however, macrophage phagocytosis is defective, which may elicit compensatory response by the adaptive immune system.

Collectivization and China's Agricultural Crisis in 1959-1961

The agricultural crisis in China in 1959-61, after the initial success of the collectivization movement, resulted in 30 million extra deaths. In this paper, a game theory hypothesis proposes the main cause of this catastrophe. I argue that, because of the difficulty in supervising agricultural work, the success of an agricultural collective depends on a self-enforcing contract, in which each one promises to discipline oneself. A self-enforcing contract, however, can be sustained only in a repeated game. In the fall of 1958, the right to withdraw from a collective was deprived. The nature of the collectivization was thus changed from a repeated game to a one-time game. As a result, the self-enforcing contract could not be sustained and agricultural productivity collapsed. The empirical evidence is consistent with this hypothesis.

Food Availability, Entitlements and the Chinese Famine of 1959–61

Food availability decline and Sens entitlement are two leading approaches in understanding causes of famine. Previous research based on case studies has given independent support to each approach. This paper analyses the Chinese famine of 1959-61 by considering jointly the urban bias and the decline in food availability as causes. We find that both factors contributed significantly to the increase in death rates during this famine. To our knowledge, this paper is the first econometric study to assess the importance of famine causes using the entitlement approach.

Education and Innovation Adoption in Agriculture: Evidence from Hybrid Rice in China

This paper uses the diffusion of F1 hybrid rice as a case for examining the effects of education on the adoption of new technology in China. A simple behavioral model that treats the adoption of hybrid rice as a portfolio selection problem is presented. The implications of the model are tested with farm-level data collected from a sample of 500 households in Hunan Province. The results from a dichotomous probit model and a two-limit tobit model are consistent with the hypothesis that education has a positive impact on the adoption of new technology.

Development Strategy, Viability, and Economic Convergence*

The paper argues that an economys industry/technology structure is endogenously determined by the economys endowment structure. For the convergence to occur, the government of an LDC should target the upgrading of endowment structure instead of the industry/technology structure in its development strategy. If the government chooses to pursue an industry/technology structure, which is inconsistent with the comparative advantage determined by the economys endowment structure, the firms in the governments priority sectors will be nonviable and the government needs to suppress the function of market and distort all kinds of prices as a way to protect the nonviable firms. Convergence will fail to occur as a result. Regression results from cross-country panel data are consistent with the predictions of the above arguments.

The Household Responsibility System Reform in China: A Peasant's Institutional Choice

Since 1978, the Chinese government has implemented a series of major reforms, including diversification of the rural economy, production specialization, crop selection in accordance with regional comparative advantage, expansion of free markets, and a marked rise in state procurement prices. These reforms have brought about dramatic changes in Chinas rural areas. However, the most important change was the emergence and eventual prevalence of the household responsibility system (HRS), which restores the individual household and replaces the production team system as the unit of production and accounting in rural areas. After the chaos of the Cultural Revolution, Chinas moderate leaders started to reconsider Chinas rural policies. Although the government admitted that solving the labor management problems within production teams was the key to improving productivity and recommended measures to relate rewards to performance more closely, the HRS was considered the reverse of the socialist principle of collective farming and was prohibited (Editorial Board of China Agriculture Yearbook 1980, p. 58). The official position at that time maintained that the production team was to remain the basic unit of production and accounting. Nevertheless, toward the end of 1978, first secretly and later with the blessing of local authorities, a small number of production teams in Anhui Province, which was frequently victimized by flood and drought, began to experiment with contracting land, other resources, and output quotas to individual households.

The household responsibility system reform and the adoption of hybrid rice in China

Abstract This paper studies the diffusion of hybrid rice before and after the recent institutional change from the collective team system to the household-based farming system in rural China. A simple model which treats the adoption of hybrid rice as a portfolio selection problem is presented. The model is tested against time-series cross-county data collected from Hunan province in south China. The empirical evidence suggests that: (1) adoption behavior in the collective system was not consistent with the predictions of the theoretical model (this evidence indicates the existence of administrative intervention in influencing production decisions in the collective system); (2) there was a significant change in the structure of the adoption function following the transition from the collective system to the household-based system; and (3) adoption behavior in the household system is consistent with the predictions of the theoretical model.