Yihua Yu

Identifying the determinants and spatial nexus of provincial carbon intensity in China: a dynamic spatial panel approach

Is emission intensity of carbon dioxide (CO2) spatially correlated? What determines the CO2 intensity at a provincial level? More importantly, what climate and economic policy decisions should the China’s central and local governments make to reduce the CO2 intensity and prevent the environmental pollution given that China has been the largest emitter of CO2? We aim to address these questions in this study by applying a dynamic spatial system generalized method of moment technique. Our analysis suggests that provinces are influenced by their neighbours. In addition, CO2 intensities are relatively higher in the western and middle areas, and that the spatial agglomeration effect of the provincial CO2 intensity is obvious. Our analysis also shows that CO2 intensity is nonlinearly related to gross domestic product, positively associated with secondary-sector share and foreign direct investment, and negatively associated with population size. Important policy implications are drawn on reducing carbon intensity.

On the determinants of public infrastructure spending in Chinese cities: A spatial econometric perspective

Abstract In the context of fiscal decentralization, we use cross-sectional data of 242 Chinese cities in 2005 to explore the major factors contributing to the decline of public investment. The main finding is that a city government appears to reduce its own infrastructure spending as a response to the rise of infrastructure spending of its neighboring cities, revealing evidence of positive spillover effects of public infrastructure expenditure. This paper contributes to the existing literature by providing a new perspective for understanding the decline in public investment. In addition, this paper sheds some light on the ongoing debate on the nature of government competition in China and has important implications for policy makers in making fiscal arrangements among government tiers in a decentralized economy.

On the supply of China's healthcare resources in a decentralized healthcare system

Abstract The structure of Chinas current governance bears prominent features of fiscal decentralization. The supply of healthcare resources in China has clearly witnessed slower growth in the last two decades during which the fiscal decentralization process has taken place. Using Chinas provincial panel data, we examine the determinants of healthcare resource supply while paying particular attention to the role of fiscal decentralization. We find that the supply of healthcare resources is inversely related to the degree of decentralization, which, using spatial econometrics, is attributed to the presence of strategic substitutes in healthcare spending across city governments. These findings have important implications for policy makers in making fiscal arrangements among different government tiers.

Revisiting the residential electricity demand in the United States: A dynamic partial adjustment modelling approach

Abstract In recent years, price policies and price changes derived from environmental regulations have played a more important role to promote residential energy conservation. Using recent annual state-level panel data for 48 states, we estimate a dynamic partial adjustment model for electricity demand elasticities on price and income in the residential sector. Our analysis reveals that in the short run, one unit price increase will lead to 0.142 unit of reduction in electricity use after controlling for the endogeneity of electricity price. Thus, raising energy price in the short run will not give consumers much incentive to adjust their appliances to reduce electricity use. However, in the long run, one unit price increase will lead to almost one unit consumption reduction, ceteris paribus. In addition, we find new evidence that for states of higher per capita GDP, raising the electricity price may be more effective to ensure a cut in consumption.

Yardstick Competition and the Formation of Enterprise Zones in China

ABSTRACT While numerous studies have been found to examine the social and economic impacts of enterprise zones, studies on the formation of enterprise zones are surprisingly scant. This study aims to fill such a gap by examining the driving forces behind the formation of enterprise zones in China in the framework of fiscal competition. Using China’s city level data and a spatial econometric technique, we find that Chinese local governments tend to act strategically when considering establishing their own enterprise zones. The formation of enterprise zones seems to be not due to the result of local economic status, but the result of yardstick competition created across local governments.

On the nexus of environmental quality and public spending on health care in China: a panel cointegration analysis

Abstract Does pollution drive up public spending on health care? This paper aims to answer such a crucial question empirically using a panel data set of 31 Chinese provinces during the period 1997–2014. In particular, this paper explores the non-stationarity and cointegration properties between health care expenditure and environmental indicators in a panel cointegration framework; in doing so, it examines both the long-run and the short-run impacts of the per capita provincial GDP, waste gas emissions, dust and smog emissions, and waste water emissions on the per capita public health expenditure. We apply panel unit root tests, heterogeneous panel cointegration tests, FMOLS techniques, and a panel-based error-correction model. The conclusion is that, both in the long run and in the short run, public health care expenditure is positively affected not only by the provincial economy but also by the environmental quality.

Will Fiscal Decentralization Influence FDI Inflows? A Spatial Study of Chinese Cities

ABSTRACT Will fiscal decentralization policy impact Foreign Direct Investment (FDI) inflows in China? Will cities attract FDI at the expense of the environment? This study aims to answer these questions using China’s city-level data in 2014 and a spatial Durbin modelling approach. We find that: (1) Fiscal decentralization does promote FDI inflows; (2) FDI inflows show significant positive spatial agglomeration and spillover effects; (3) Lower environmental regulation stringency contributes to attracting FDI inflows and a stricter environmental regulation stringency in neighboring cities would impede local FDI inflows; (4) A lower level of environmental regulation stringency would, ceteris paribus, deteriorate fiscal decentralization’s stimulation on FDI inflows.

The Role of China’s Demand in Global Oil Price Dynamics

ABSTRACT Using a time-varying parameter VAR model, this article documents the evolution in the responses of the global oil market and the Chinese economy to the identified oil supply shock and the China demand shock. The positive oil supply shock raises output while reduces inflation in China, but the effects are more ambiguous compared with the advanced economies. The counterfactual simulations point to an important role of the China demand shock in driving up the oil price during 2007–2008 and the postrecession recovery phase.