Penelope B. Prime

Export performance and growth in China: a cross-provincial analysis

The role of exports in economic growth continues to be debated and tested in the literature on trade an development. China is a new player in this debate with its rapid entry into international makrets. This paper extends some of the previous empirical studies on the relationship between exports and economic growth in order to assess to what extent Chinas remarkable export growth has contributed to the countrys overall growth. The study utilizes data for 26 provinces between 1985 and 1993 in an export-augmented aggregate production function approach. The results of our study support the hypothesis that exports have contributed to the growthh of provincial incomes in China for the period examined with both the cross-sectional and pooled analyses, with the results being primarily determined by the coastal provinces compared with inland areas.

Change in the Concentration of Employment in Computer Services: Spatial Estimation at the U.S. Metro County Level

This article models the concentration of computer services activity across the U.S. with factors that incorporate spatial relationships. Specifically, we enhance the standard home-area study with an analysis that allows conditions in neighboring counties to affect the concentration of employment in the home county. We use county-level data for metropolitan areas between 1990 and 1997. To measure change in employment concentration, we use the change in location quotients for SIC 737, which captures employment concentration changes caused by both the number of firms and the scale of their activity relative to the national average. After controlling for local demand for computer services, our results support the importance of the presence of a qualified labor supply, interindustry linkages, proximity to a major airport, and spatial processes in explaining changes in computer services employment concentration, finding little support for the influence of cost factors. Our enhanced model reveals interjurisdictional relationships among these metro counties that could not be captured with standard estimates by state, metropolitan statistical area (MSA), or county. Using counties within MSAs, therefore, provides more general results than case studies but still allows measurement of local interactions.

Funding Economic Transition in China: The Privatization Option

An American specialist on the economy of China examines whether gradual and partial privatization remains a viable option for the future, or whether rapid privatization of remaining state-owned enterprises is now necessary. The paper presents estimates indicating that rising expenditures stemming from changes in the countrys economy, demographics, and technology will increase fiscal pressure on government revenues, resulting in fiscal shortfalls and exposing other vulnerabilities. Privatization is then assessed in terms of its potential to generate additional resources to support the next round of economic growth in China. Journal of Economic Literature, Classification Numbers: E62, H10, P20. 1 table, 54 references.

Sustaining China's Economic Growth: New Leaders, New Directions?

An American specialist on the economy of China assesses the options and obstacles the countrys new leadership will face as it attempts to sustain the current economic growth trajectory in the future. Putting the current situation in historical context, the author first reviews the reforms leading up to the agenda advanced by the previous leadership team (led by Hu Jintao) and then examines the health of Chinas economy in late 2012 (a situation she argues is characterized by the exhaustion of three key drivers of growth). The paper advances the thesis that further reforms and improvements in technology will be essential to sustained growth, and that additional reforms will be necessary before sustained innovation can take root. As signs of successful further reform going forward, readers are advised to look to increased private-sector legitimacy, a decline in state-sector monopoly power, and strengthening of legal foundations for reform policies.

China Rising: A Global Transformation?

China is rising. There seems to be little disagreement about this. With economic growth rates hovering around 10 percent per year for the past 30 years, an enormous demand for global resources, and an increasingly assertive foreign policy, China seems poised to become a major power in the twenty-first century. It is now common to hear politicians, pundits, and academics proclaiming that China will eventually become a peer rival to the United States. But how do we make sense of China’s rise—what does it really mean for China and for the world? Will China emerge within the existing global order, will it play by the existing rules and succeed? Or will China lead an “irresistible shift of global power to the east?” (Mahbubani 2008a) Does China’s rise reflect an impending “great transformation” that will lead to the articulation of alternative development and global governance models?

Capital Mobility and Investor Confidence: The Case of Hong Kong’s Reversion to China’s Sovereignty

The paper hypothesizes that capital flows to and from Hong Kong in the years prior to its reversion to Chinese sovereignty were determined in part by the credibility of Chinas economic and political policies towards Hong Kong. During the transition period, several events occurred that caused investors, foreign and domestic, to reexamine and revise their perceptions about concentrating their investment in Hong Kong. These events were the ongoing negotiations between China and Great Britain that resulted in the signing of the Joint Resolution and the Basic Law, the 1989 Tiananmen Square incident, and Deng Xaiopings visit to Chinas southern provinces in 1992. As a result, Hong Kong provides a particularly relevant example of the impact government policies can have on investor confidence and capital mobility.

Determinants of Firm Leverage

Using a large survey sample of manufacturing firms between 2003 and 2006, the majority of them not listed on either stock exchange, we studied financing behavior in China and tested a series of hypotheses about the determinants of firm leverage as derived from the pecking-order theory. Overall our results show that the theory well explains private firm financing where the amount of leverage is negatively related to profits, liquidity, and age, and positively related to firm size and average leverage ratio. However, different ownership types and firms located in different market environments do not have the same determinants of leverage, and their financing behavior is not well explained by the pecking-order theory. This suggests that Chinas economic and financial reforms have not yet been completed.

Economic Transformation in Russia and China: Two Comments on A Comparison

Two prominent Western observers of the economic transition and development in Russia and China evaluate and supplement the preceding paper (Malle, 2008), which compares the two economies by tracing their evolution from central planning to market-oriented systems. While in general supporting and agreeing with the premise of the comparative analysis presented in that paper, albeit pointing out some instances of disagreement, the authors add observations on the preconditions and structural differences between the countries, on the political context and framework of the transitions, as well as benchmarks for measuring Chinas success, and reasoned observations on the latter countrys policies and sustainable growth.

Exploring Wage Determination by Education Level

The purpose of this study is to explain urban wage differentials with a special focus on educational levels. The authors explore whether the share of people with a bachelor’s degree or higher in the community matters to the wages of those within specific educational cohorts, accounting for cost of living, human capital externalities, consumer externalities, policy factors, and local labor market conditions. Using data for all U.S. Metropolitan Statistical Areas between 2005 and 2012, the authors find that the presence of more highly educated people will result in a higher median wage in the community overall, as do many studies, but that this factor does not significantly increase the wage for any individual education cohort. These results are hidden if we only look at the entire workforce in the aggregate.

Economic and Management Education in China: The Pros and Cons of Emulating the US Model

In the early 1980s, China began its transition away from a planned economic system to a market-oriented economy. Marx and Mao Zedong thought were still taught, but the transition to Paul Samuelson and Michael Porter had begun. Today, three mainland business schools rank in the top global tier of MBA programs (Financial Times, 2012), and the hottest part of the job market at the American Economic Association is the Chinese universities hiring many of the best and brightest new PhDs. In 2007,14 schools attended to recruit 80 faculty positions (Li, 2010), and this market has grown since.