Publishing Institution: United Nations University / Political Geography: China

1. Construction productivity and global inequality

Author:: Saumik Paul and Kunal Sen
Publication Date:: 11-2023
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Two well established stylized facts of economic development are a strong correlation between investment and income, and large differences in investment rates across countries. Construction is the largest component of investment. This paper examines the implications of heterogeneity in construction productivity on cross-country income disparity. We estimate the 10:1 spread in construction productivity among 145 countries in 2005 as a factor of 61.7-fold. Based on a general equilibrium model with input–output linkages, we find that the 10:1 spread in income per capita declines by 45 per cent when the construction productivity gap is eliminated. Sectoral characterization of the aggregate effect of a change in construction productivity shows heterogeneous sectoral contributions to income convergence. Electrical equipment, metals, and transport equipment play stronger roles in transforming the effect of a change in construction productivity to the aggregate level in China compared with other countries.
Topic:: Inequality, Investment, Productivity, Construction, and Income
Political Geography:: China and Global Focus

2. Elementary education in India versus China: Guidelines for NEP implementation

Author:: Naveen Kumar and Vinitha Varghese
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper documents the state of elementary education in India and China since the 1960s, key lessons for India from China’s shift in focus from ‘quantity’ to ‘quality’, and evidencebased guidelines for effective implementation of India’s New Education Policy 2020 (NEP 2020). The divergent policy focus has led to differential trajectories for elementary education in the two emerging economies, with China being decades ahead in improving literacy rates. China’s adoption of the New Curriculum Reform 20 years before India’s NEP 2020 has put China on the path to achieving equitable development of ‘quality’ compulsory schooling. India’s NEP 2020 has components that have the potential to improve quality, equity, and efficiency of the education system. This paper makes the following recommendations for effective implementation of some of the NEP 2020 components: (1) an additional worker should be recruited at every preschool centre; (2) more resources should be allocated towards implementation, evaluation, and needed recalibration of the management of school clusters; (3) teacher recruitment, training, and rewards should be revamped; (4) standardized tests should be protected from data corruption, fudging, or grade inflation; and (5) a national-level road map and regular evaluations have to be introduced to ensure participation of socio-economically disadvantaged groups in education.
Topic:: Education, Literacy, and Schools
Political Geography:: China, South Asia, India, and Asia

3. Taxless fiscal states: Lessons from 19th-century America and 21st-century China

Author:: Yuen Yuen Ang
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: How do modern fiscal states arise? Perhaps the most dominant explanation, based on the European experience, is that democratic institutions that limited the extractive power of states—exemplified by the 1688 Glorious Revolution in England—paved the way for the rise of fiscal capacity and subsequent prosperity. Revisionist accounts, however, reveal that this dominant narrative is flawed. In fact, numerous factors converged to enable the rise of European fiscal states, and in England, debt and land were particularly salient factors. Building off this literature, I bring attention to the role of ‘taxless public financing’ (i.e. financing public infrastructure through means other than taxation) in the making of fiscal states in two seldom compared cases: 19th-century America and 21st-century China. Both countries relied heavily on taxless financing to launch an infrastructure boom that spurred rapid growth along with massive corruption and financial risks.
Topic:: History, Finance, Tax Systems, and Land
Political Geography:: China, Asia, North America, and United States of America

4. The changing nature of work and earnings inequality in China

Author:: Chunbing Xing
Publication Date:: 06-2021
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines the evolution of China’s industrial and occupational structure in the last two decades and its impact on wage inequality. We find that non-routine cognitive and interpersonal tasks have increased, while routine cognitive tasks first increased and then declined. Occupation structural change is accompanying rising wage inequality. The wage premium for educated workers rose sharply in the 1990s and remained high thereafter. Occupations with high routine task intensity are associated with lower wages. While the return to education has become the largest contributor to wage inequality, routine task intensities have yet to play a significant role.
Topic:: Education, Labor Issues, Employment, Inequality, and Work Culture
Political Geography:: China and Asia

5. Transforming informal work and livelihoods in China

Author:: Carl Shu-Ming Lin, Linxiang Ye, and Wei Zhang
Publication Date:: 11-2020
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The informal sector has long been viewed as a locus of the disadvantaged, unskilled, and inexperienced workers in under-developed and developing economies. Workers in the informal sector, however, can learn skills and gain experience that could help them switch to better-paying jobs in the formal sector. But evidence of this is limited. China constitutes an important case study because it is the most populous country and has the largest labour force, consisting of over 290 million rural-to-urban migrants whose employment is mostly informal. Using three waves of nationally representative household surveys from 2014 to 2018, we study how the livelihoods of Chinese workers change when transitioning to different work statuses within or between formal and informal sectors. Our results show that transitioning jobs from the informal to the formal sector and from the self-employed to the wage-employed increases earnings, which improves the livelihoods of Chinese workers.
Topic:: Employment, Economic Development, Informal Economy, and Workforce
Political Geography:: China and Asia

6. Income and consumption inequality in China: A comparative approach with India

Author:: Carlos Gradín and Binbin Wu
Publication Date:: 08-2019
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We analyse income and expenditure distribution in China in a comparative perspective with India. These countries represent extreme cases in the relationship of inequality to both wellbeing indicators. Income is more highly concentrated than expenditure in India, especially at the top of the distribution. Both types of inequality are similar in China, although expenditure is more unequally distributed than income in urban areas. China has a much stronger correlation in individual ranks and levels between the two wellbeing distributions. As a result, expenditure inequality is higher in China than in India, but income inequality much lower. This results partially from differences in population composition, such as China being more urbanized and having smaller households, but mostly from differences in conditional income distributions, especially by attained education of the household head. We show that hybrid measures of wellbeing combining income and expenditure can be useful for such cross-country comparison.
Topic:: Inequality, Income Inequality, and Consumerism
Political Geography:: China, South Asia, India, and Asia

7. Toward gender equity and women’s empowerment

Author:: Jean-Philippe Platteau
Publication Date:: 10-2018
Content Type:: Policy Brief
Institution:: United Nations University
Abstract:: There are three main channels of women’s empowerment: legal or policy reforms, outside economic opportunities, and collective action. Legal (or policy) reforms are generally based on statutory laws that enact rules to be followed or prohibit certain practices. External economic opportunities for women represent alternative activities and places of working and living. Collective action brings women together to advance their collective interests.
Topic:: Gender Issues, Women, Discrimination, Equality, and Empowerment
Political Geography:: Pakistan, Africa, China, Europe, Turkey, India, Asia, and Senegal

8. Inequality dynamics in China: Income growth for the poor, but more for the rich

Author:: Shi Li and Terry Sicular
Publication Date:: 12-2018
Content Type:: Policy Brief
Institution:: United Nations University
Abstract:: In the late 1970s, China embarked on a major programme of economic transition and reform. Since then, China’s economy has been transformed from a socialist planned economy to a predominately market economy characterized by a combination of state, private, and mixed forms of ownership. Over the past forty years, household incomes have risen six-fold, poverty has declined dramatically, and in recent years a new class of ultra-rich has emerged. These developments have naturally led to questions about inequality trends in China.
Topic:: Economics, Poverty, Reform, Income Inequality, and Welfare
Political Geography:: China and Asia

9. Growth and Recovery in a Time of Default: Lessons from the Role of the Urban Sector in Argentina

Author:: Michael Cohen
Publication Date:: 03-2011
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: International narratives on Argentina's recovery from the crisis of 2001-02 tend to emphasize the role of rising commodity prices and growing demand from China. Argentina is said to have been 'lucky', saved by global demand for its agricultural exports. The international narrative has also been used by local agricultural exporters to justify their objections against higher export taxes during periods of high commodity prices. These narratives are not correct. Data on the country's recovery show that it was not led by agricultural exports but was fuelled by urban demand and production. When the Convertibility period ended and the peso was devalued in 2002, price increases for imports stimulated the production of domestic goods and services for consumers. This production in turn generated multiplier effects which supported small and medium-sized firms and helped to create many new jobs. This later produced a revival of the construction and then the manufacturing sectors as well.
Topic:: Agriculture, Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:: China, Argentina, and Latin America

10. The Global Financial Crisis and Africa's "Immiserizing Wealth"

Author:: Luc Soete and Alexis Habiyaremye
Publication Date:: 01-2010
Content Type:: Policy Brief
Institution:: United Nations University
Abstract:: Before the current global recession, many resource-rich African countries were recording unprecedented levels of growth due to a raw material price boom. However, the collapse in raw material prices and the ensuing severe economic difficulties have again exposed the vulnerability of these countries' natural resource export-focussed economic structures. In this research brief, we describe how Africa's abundance of natural resources attracted disruptive and predatory foreign forces that have hindered innovation-based growth and economic diversification by delaying the accumulation of sufficient stocks of human capital. We suggest that for their long-term prosperity, resource-rich African countries shift their strategic emphasis from natural to human resources and technological capabilities needed to transform those natural resources into valuable goods and services to compete in the global market.
Topic:: Economics, Emerging Markets, Industrial Policy, Global Recession, Natural Resources, and Financial Crisis
Political Geography:: Africa, China, and India

11. The Internationalization of Chinese and Indian Firms: Trends, Motivations and Policy Implications

Author:: Sandeep Kapur and Suma Athreye
Publication Date:: 01-2009
Content Type:: Policy Brief
Institution:: United Nations University
Abstract:: The last two decades have seen a significant rise in the internationalization of firms from developing economies. In addition to their growing participation in international trade, a number of leading emerging economies are contributing to growing outflows of foreign direct investment (FDI) and cross-border mergers and acquisitions. According to the 2008 World Investment Report, outward flows of FDI from developing countries rose from about US$6 billion between 1989 and 1991 to US$225 billion in 2007. As a percentage of total global outflows, the share of developing countries grew from 2.7% to nearly 13.0% during this period.
Topic:: International Relations, Economics, Globalization, International Political Economy, Markets, Foreign Direct Investment, and Financial Crisis
Political Geography:: United States, China, and India

12. Poverty Reduction in China: Is High Growth Enough?

Author:: Guanghua Wan
Publication Date:: 04-2008
Content Type:: Policy Brief
Institution:: United Nations University
Abstract:: Should growth or inequality be prioritized in the design and execution of development policies ? An oft cited paper by Dollar and Kraay of the World Bank advocates growth as the primary objective of development. Opponents argue that growth may not be pro-poor, thus growth alone is insufficient for poverty reduction—the ultimate goal of development. They instead emphasize redistribution as an important policy instrument. From a practical point of view, most policies involve trade-offs between efficiency (i.e., growth) and equity, at least in the short-run. With this in mind, development strategists and policymakers face the challenge or dilemma: what should be prioritized in the design and execution of development policies?
Political Geography:: China

13. Approaching a Triumphal Span: How Far Is China Towards its Lewisian Turning Point?

Author:: Fang Cai
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: With the aid of an analytical framework of the Lewis model revised to reflect the experience of China, this paper examines the country's dualistic economic development and its unique characteristics. The paper outlines the major effects of China's growth as achieved during the course of economic reform and the opening-up of the country: the exploitation of the demographic dividend, the realization of comparative advantage, the improvement of total factor productivity, and participation in economic globalization. By predicting the long-term relationship between the labour force demand and supply, the paper reviews the approaching turning point in China's economic development and examines a host of challenges facing the country in sustaining growth.
Topic:: Development and Economics
Political Geography:: China and Asia

14. Beyond Industrialization: New Approaches to Development Strategy Based on the Service Sector

Author:: Peter Sheehan
Publication Date:: 05-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Industrialization occupies a central place in the rich tapestry of development theory and practice. Although that place has varied over time, many have agreed with Nicholas Kaldor that the kind of economic growth that leads to high real income per capita can only occur through industrialization. This paper argues that it is becoming increasingly difficult for most developing countries to achieve rapid growth through industrialization, and especially through export oriented activities. But the key mechanisms seen as driving the industrial take-off in much of the literature (internal increasing returns, transfer of labour into higher value activities and pecuniary externalities) are alive and well, and are evident in services as well as in industry. Furthermore, China is actively trying to move from a strategy based on industrialization to one based much more on agriculture and services, as the costs of the current pattern of industrialization become prohibitive, and India has demonstrated that rapid growth based primarily on the services sector is possible. Thus more attention needs to be given to strategies based on the expansion of the agricultural and services sectors, and to the ways in which better services in rural areas and higher rural output can combine to achieve rapid growth and improved human welfare in poor countries.
Topic:: Development
Political Geography:: China, India, and Asia

15. China and the Future of the Developing World: The Coming Global-Asian Era and its Consequences

Author:: Jeffrey Henderson
Publication Date:: 05-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The rise of China as an economic and political 'driver' of the global economy is likely to be one of the defining moments of world history. Its dynamism and international expansion are on the verge of creating a 'critical disruption' in the global order that has held sway for over 60 years. As such, China is beginning to reshape the world, presaging a new phase of globalization: a 'global-Asian era'. This new era is likely to be distinct from any of the earlier phases of globalization and China's global footprint, in terms of its business, economic and political actions and their geopolitical implications, is likely to be markedly different from what has gone before. This paper offers a framework by which we can begin to understand the coming global-Asian era (GAE) and some of its consequences, particularly as the latter are surfacing in the developing world. Having discussed the nature and dynamics of the GAE, the paper turns to sketch a series of vectors (trade, aid and energy security) along which the GAE is beginning to impact on developing countries. The paper argues that, at least for these vectors, the Chinese-driven GAE is providing opportunities as well as dangers for national development projects. It concludes by briefly speculating on the viability of the GAE.
Topic:: Development, Globalization, International Political Economy, International Trade and Finance, and Oil
Political Geography:: China and Asia

16. China in the World Economy: Dynamic Correlation Analysis of Business Cycles

Author:: Jarko Fidrmuc and Ivana Bátorová
Publication Date:: 01-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We analyse the business cycles in China and in selected OECD countries between 1992 and 2006. We show that, although negative correlation dominate s for nearly all countries, we can also see large differences for various frequencies of cyclical developments. On the one hand, nearly all OE CD countries show positive correlations of the very short-run developments that may correspond to intensive supplier linkages. On the other hand, business cycle frequencies (cycles with periods between 1.5 and 8 years) are typically negative. Nevertheless, countries facing a comparably longer history of intensive trading links tend to show also slightly higher correlations of business cycles with China.
Topic:: Economics and International Trade and Finance
Political Geography:: China and Asia

17. China's Development Strategy and Energy Security: Growth, Distribution and Regional Cooperation

Author:: Haider A. Khan
Publication Date:: 05-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper analyses both global and regional approaches to solving problems of energy security and ecological imbalance by addressing specifically the problems of China's energy security. China's growing energy dependence has become a major concern for both economic and national security policymakers in that country. The ambitious goal of modernization of the economy along the lines of the other newly industrialized economies (NIEs) of Asia has succeeded only too well, and it is difficult to reorient economic priorities. If examined rigorously, such an economic strategic assumption can be seen to entail the goal of creating further technological capabilities. In particular, China seems to be firmly committed to the creation of a largely self-sustaining innovation system as part of a knowledge-based economy of the future. Such innovation systems, called positive feedback loop innovation systems or POLIS have been created by advanced countries, and NIEs such as South Korea and Taiwan are proceeding to create these as well. But this will add to its energy burden and further dependence on the US as the power which controls the key sea lanes. Only a strategic reorientation to building a self-sustaining POLIS and appropriate regional cooperation institutions can lead to the way out of the current dilemma for China. Fortunately, such a model of POLIS which is distributionally and ecologically sensitive can be built for China and applied strategically to lead towards a sustainable development trajectory.
Topic:: Development, Energy Policy, Environment, and Regional Cooperation
Political Geography:: United States, China, Taiwan, Asia, and South Korea

18. China's Economic Growth: Trajectories and Evolving Institutions

Author:: Jun Zhang
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper investigates the institutional reason underlying the change in the trajectory of economic growth in post-reform China, and argues that the trajectory of growth was much more normal during the period of 1978-89 than in the post-1989 era. In the former period, growth was largely induced by equality-generating institutional change in agriculture and the emergence of non-state industrial sector. In the latter period, growth was triggered by the acceleration of capital investments under authoritarian decentralized hierarchy within self-contained regions. Such a growth trajectory accelerates capital deepening, deteriorating total factor productivity and leads to rising regional imbalance. This paper further argues that the change in the trajectory of growth is the outcome of changes in political and inter-governmental fiscal institutions following the 1989 political crisis.
Topic:: Economics, Government, Industrial Policy, and Political Economy
Political Geography:: China and Asia

19. China's Exports in ICT and its Impact on Asian Countries

Author:: Yuqing Xing
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper analyses China's ICT exports grow thin its two major markets Japan and the US from 1992 to 2004. It focuses on ICT products classified in SITC 75, 76 and 77. The empirical results show that Chinese exports had maintained two-digit annual growth during the period. The growth was much higher than the corresponding growth of the overall markets. By 2004, Chinese ICT exports accounted for 26 per cent of the total Japanese imports and 19 per cent of the total imports of the US in ICT products. In addition, the paper investigates whether the rapid growth of Chinese ICT exports crowded out that of other Asian countries: Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand. The empirical analysis shows that the crowding out effect differs across countries and products. The exports of Singapore and Philippines have been negatively affected by the growth of Chinese exports, but no crowding effect existed at all with Indonesia's exports.
Topic:: International Trade and Finance and Markets
Political Geography:: United States, Japan, China, Indonesia, Malaysia, Asia, South Korea, Philippines, Singapore, and Thailand

20. Comparing Regional Development in China and India

Author:: Yanrui Wu
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Economic growth in China and India has attracted many headlines recently. As a result, the literature comparing the two Asian giants has expanded substantially. This paper adds to the literature by comparing regional growth, disparity and convergence in the two economies. This is the first of its kind. The paper presents a detailed examination of economic growth in the regions of China and India over the past twenty years. It also provides an assessment of regional disparity in the two countries and investigates whether there is any evidence of regional convergence during the period of rapid economic growth. It attempts to identify the sources of regional disparity and hence draw policy implications for economic development in the two countries in the near future.
Topic:: Development
Political Geography:: China, India, and Asia

21. Development Path of China and India and the Challenges for their Sustainable Growth

Author:: Yuefen Li and Bin Zhang
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The segmentation of global manufacturing and services provided China and subsequently India with a golden opportunity to make full use of their absolute advantage—low cost yet educated labour—to integrate into the world economy within a comparatively shorter period of time than some earlier industrialisers. Though international trade functioned as a vent of surplus in view of the narrowness of their domestic markets at the beginning of their economic catch-up, the label of export-led model may not reflect the real picture as imports underwent dramatic increases during their respective growth periods, in particular for China. Foreign direct investment has played a pivotal role in their economic growth and has major presence in international trade and investment in leading sectors of both countries, giving rise to certain special features and weak links for their economic expansion and sustainability of fast economic growth. To maintain more broad-based, fast and balanced growth, it seems that both countries have to redress sectoral imbalances, encourage technology upgrading and cope with future changes in demographic profiles which constituted a trigger to fast economic growth at the time of their respective economic reform.
Topic:: Development and International Trade and Finance
Political Geography:: China, India, and Asia

22. Export Productivity, Finance, and Economic Growth: Are the Southern Engines of Growth Different?

Author:: Alessandra Guariglia and Amelia U. Santos-Paulino
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Using a panel of 139 countries over the period 1992-2003, we analyse the links between export productivity, economic growth and financial development indicators. We then investigate whether the links observed in China, India and Brazil systematically differ from those observed in other countries in the sample. We find that both GDP per capita and investment generally exert a positive and significant effect on export productivity. Except for Brazil, financial development is not an important determinant of export productivity. Moreover, except for Brazil, export productivity plays a positive effect on growth, and so does financial development for both China and Brazil, but not for India. Finally, in both India and Brazil, FDI is negatively associated with growth.
Topic:: International Trade and Finance
Political Geography:: China, India, Asia, Brazil, and South America

23. Export Productivity and Specialization in China, Brazil, India and South Africa

Author:: Amelia U. Santos-Paulino
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper analyses the patterns of export productivity and trade specialization profiles in the China, Brazil, India and South Africa, and in other regional groupings. In doing so, the investigation calculates a time varying export productivity measure using highly disaggregated product categories. The findings indicate that export productivity is mainly determined by real income and human capital endowments. Importantly, the study reveals significant differences in the export productivity and specialization patterns of countries with comparable per capita income levels. For instance, China's export productivity and implied export sophistication is in line with that of countries with higher per capita incomes, including some OECD industrial economies.
Topic:: Economics and International Trade and Finance
Political Geography:: Africa, China, India, Asia, South Africa, Brazil, and South America

24. Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis

Author:: Sumei Tang, E. A. Selvanathan, and S. Selvanathan
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In this paper, we investigate the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988-2003. Towards this purpose, a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques are used. The results show that while there is a bi-directional causality between domestic investment and economic growth, there is only a single-directional causality from FDI to domestic investment and to economic growth. Rather than crowding out domestic investment, FDI is found to be complementary with domestic investment. Thus, FDI has not only assisted in overcoming shortage of capital, it has also stimulated economic growth through complementing domestic investment in China.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: China

25. Foreign Direct Investment from China, India and South Africa in Sub-Saharan Africa: A New or Old Phenomenon?

Author:: John Henley, Stefan Kratzsch, Tamer Tandogan, and Mithat Külür
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The burgeoning literature on outward foreign direct investment from emerging markets has largely focused on analysing the motives of investors as reported by parent companies. This paper, instead, focuses on firm-level investments originating from China, India or South Africa in fifteen host countries in sub-Saharan Africa (SSA). The analysis is based on a sub-set of firms drawn from the overall sample of 1,216 foreign-owned firms participating in the UNIDO Africa Foreign Investor Survey, carried out in 2005. The sample of investments originating from China, India and South Africa is analysed in terms of firm characteristics, past and forecast performance in SSA over three years and management's perception of ongoing business conditions. Comparisons are made with foreign investors from the North. The paper concludes that while investors in SSA from the three countries are primarily using their investment to target specific markets, they are largely operating in different sub-sectors. While there appear to be specific features that firms from a given country of origin share, there are no obvious operating-level features they all share apart from market seeking.
Topic:: International Trade and Finance
Political Geography:: Africa, China, India, Asia, and South Africa

26. Global Growth and Distribution: Are China and India Reshaping the World?

Author:: Dominique van der Mensbrugghe, Maurizio Bussolo, Rafael E. De Hoyos, and Denis Medvedev
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Over the past 20 years, aggregate measures of global inequality have changed little even if significant structural changes have been observed. High growth rates of China and India lifted millions out of poverty, while the stagnation in many African countries caused them to fall behind. Using the World Bank's LINKAGE global general equilibrium model and the newly developed Global Income Distribution Dynamics (GIDD) tool, this paper assesses the distribution and poverty effects of a scenario where these trends continue in the future. Even by anticipating a deceleration, growth in China and India is a key force behind the expected convergence of per capita incomes at the global level. Millions of Chinese and Indian consumers will enter into a rapidly emerging global middle class—a group of people who can afford, and demand access to, the standards of living previously reserved mainly for the residents of developed countries. Notwithstanding these positive developments, fast growth is often characterized by high urbanization and growing demand for skills, both of which result in a widening of income distribution within countries. These opposing distributional effects highlight the importance of analysing global disparities by taking into account—as the GIDD does—income dynamics between and within countries.
Topic:: Development, Economics, and Poverty
Political Geography:: Africa, China, India, and Asia

27. The Impact of Higher Standards in Patent Protection for Pharmaceutical Industries under the TRIPS Agreement: A Comparative Study of China and India

Author:: Xuan Li
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: A comparative study is undertaken that explores Chinese and Indian pharmaceutical industries under different patent regimes. It is found that relative to India, which had implemented process patent until 2005, China with a product patent regime since 1993 suffers from both lower drug accessibility and availability (the latter is a missing parameter in the literature). Also, China lags behind in both lower R investment and patents filed by Chinese nationals. Based on these findings and associated legal interpretation, we conclude that higher patent protection in China generates negative impacts on the pharmaceutical industries. Thus, governments should utilize TRIPS flexibilities and other regimes like price control to offset the anticompetitive effect in designing patent policies.
Topic:: Treaties and Agreements
Political Geography:: China, India, and Asia

28. The Impact of Reform on Economic Growth in China: A Principal Component Analysis

Author:: Ligang Song and Yu Sheng
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The study decomposes the sources of Chinese growth by first making a distinction between technological progress and technical efficiency in the growth accounting framework, and then identifying a series of reform programmes, such as urbanization, structural change, privatization, liberalization, banking and fiscal system reforms as the key components in institutional innovation which facilitate the improvement of technical efficiency and through which economic growth. These components are then incorporated into the model specification, which is estimated based on a panel dataset by applying the principal component analysis (PCA) to eliminate the multicollinearity problem. The results show that urbanization, liberalization and structural change in the form of industrialization are the most important components in contributing to the improvement of technical efficiency and hence growth, highlighting the importance of government policies aimed at enhancing further urbanization, openness to trade and industrial structural adjustments to sustain the growth momentum in China. The study also found that the potential for further enhancing growth through technical efficiency in China is considerable, which can be realized by deepening state-owned enterprises (SOEs) restructuring, and banking and fiscal system reform.
Topic:: Economics
Political Geography:: China and Asia

29. Innovation Capacity and Economic Development: China and India

Author:: Peilei Fan
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Both China and India, the emerging giants in Asia, have achieved significant economic development in recent years. China has enjoyed a high annual GDP growth rate of 10 per cent and India has achieved an annual GDP growth rate of 6 per cent since 1981. Decomposing China and India's GDP growth from 1981 to 2004 into the three factors' contribution reveals that technology has contributed significantly to both countries' GDP growth, especially in the 1990s. R outputs (high-tech exports, service exports, and certified patents from USPTO) and inputs (R expenditure and human resources) further indicate that both countries have been very committed to R and their output is quite efficient.
Topic:: Government
Political Geography:: China, India, and Asia

30. International Integration and Regional Development in China

Author:: Thomas Gries and Margarete Redlin
Publication Date:: 07-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Concerns about the duration of China's growth and hence the question of a permanent significant contribution of China to world economic growth relate, amongst other things, to the problem of reducing regional disparity in China. While China's high average growth is driven by a small number of rapidly developing provinces, the majority of provinces have experienced more moderate development. To obtain broad continous growth it is important to identify the determinants of provincial growth. Therefore, we introduce a stylized model of regional development which is characterized by two pillars: (i) International integration indicated by FDI and/or trade lead to imitation of international technologies, technology spill overs and temporary dynamic scale economies, and (ii) domestic factors indicated by human and real capital available through interregional factor mobility. Using panel data analysis and GMM estimates our empirical analysis supports the predictions from our theoretical model of regional development. Positive and significant coefficients for FDI and trade support the importance of international integration and technology imitation. A negative and significant lagged GDP per capita indicates a catching up, non steady state process across China's provinces. Highly significant human and real capital identifies the importance of these domestic growth restricting factors. However, other potentially important factors like labor or government expenditures are (surprisingly) insignificant or even negative. Further, in contrast to implications from NEG models indicators for urbanization and agglomeration do not contribute significantly.
Topic:: Development
Political Geography:: China and Asia

31. Measuring the Competitive Threat from China

Author:: Rhys Jenkins
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In recent years there has been a growing literature that analyses the threat which Chinese exports pose to the exports of other developing countries. The paper provides a critique of the standard measures of export similarity which have been used to estimate the threat from China in these studies. Two alternative indices, the static and the dynamic index of competitive threat, are developed and estimated for 18 developing countries and compared with estimates for the standard measures. It is shown that the latter tend to underestimate the extent to which countries are threatened by China. They also distort both the rankings of countries according to the extent to which they face competition from China and the direction of change in the competitive threat over time.
Topic:: International Political Economy and International Trade and Finance
Political Geography:: China and Asia

32. Ownership Reform, Foreign Competition, and Efficiency of Chinese Commercial Banks: A Non-Parametric Approach

Author:: Shujie Yao, Zhongwei Han, and Genfu Feng
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Since China joined the WTO in 2001, the pressure for bank reforms has mounted as China ought to fully open up its financial market to foreign competition by 2006. Efficiency is key for domestic banks to survive in a liberalised environment, but it appears that the last hope for raising bank efficiency is through ownership reform. Whether ownership reform and foreign competition can solve China's banking problem remains to be tested. This paper aims to answer this question through using a non-parametric approach to analyse the efficiency changes of 15 large commercial banks during 1998-2005. We find that ownership reform and foreign competition have forced the Chinese commercial banks to improve performance, as their total factor productivity rose by 5.6 per cent per annum. This coincides with the recent bullish Chinese stock markets led by three listed state-owned commercial banks. Despite such encouraging results, we remain cautious about the future of the Chinese banks, as the good results may have been artificially created with massive government support and the fundamentals of the banks may be still weak.
Topic:: Economics and International Trade and Finance
Political Geography:: China and Asia

33. The Rise of the Southern Economies: Implications for the WTO-Multilateral Trading System

Author:: Silvia Nenci
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The rise of the emerging southern economies – China, India, Brazil, and South Africa (CIBS) – as both economic and political actors, is having significant and far-reaching impact on the world economy. Notwithstanding the increasing amount of study and research, there are still important knowledge-gaps with respect to a range of likely consequences of the dynamism of the Southern Economies. One of these gaps concerns the implications for the WTO-multilateral trading system. The present paper proposes a review of the southern participation in the multilateral integration process and suggests a methodology to assess the impact of CIBS' rise on the future of the WTO system. Through the analysis of the trajectories of 'impact' of the trade channel, the paper draws some suggestive remarks.
Topic:: International Organization and International Trade and Finance
Political Geography:: Africa, China, India, Asia, South Africa, Brazil, and South America

34. Trade Expansion of China and India: Threat or Opportunity

Author:: Guanghua Wan and Mahvash Saeed Qureshi
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: By exploring the export performances and specialization patterns of China and India, we assess their trade competitiveness and complementarity vis-à-vis each other as well as with the rest of the world. Our analysis indicates that (i) India faces tough competition from China in the third markets especially in clothing, textile and leather products; (ii) there is a moderate potential for expanding trade between the two countries; (iii) China poses a challenge for the East Asian economies, the US, and most of the European countries especially in medium-technology industries; (iv) India appears to be a competitor mainly for its neighbouring South Asian countries; and (v) complementarity exists between the imports of China and India, and the exports of the US, some European states and East Asian countries, especially Japan, Korea, Malaysia, Singapore and Thailand, implying opportunities for trade expansion; and finally (vi) the export structure of China is changing with the exports of skill intensive and high-technology products increasing and those of labour-intensive products decreasing gradually. This suggests that challenges created by China in traditional labour-intensive products might reduce in the long run.
Topic:: International Trade and Finance
Political Geography:: United States, Japan, China, Europe, South Asia, Malaysia, India, Asia, Korea, Singapore, and Thailand

35. Vulnerability, Trust and Microcredit: The Case of China's Rural Poor

Author:: Calum G. Turvey and Rong Kong
Publication Date:: 05-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper investigates the economic conditions of rural households in China. Historical survey data indicate that over 80 per cent of rural households earn less than 4,500 yuan in net disposable income each year, that for the vast majority of rural households disposable income is insufficient to meet food consumption needs, and that in terms of economic growth rural households are receiving an ever decreasing percentage of China's growing economy with rural household incomes being only 31 per cent of urban household income in 2004.
Topic:: Economics and Poverty
Political Geography:: China and Asia

36. A Tale of Two Countries: Spatial and Temporal Patterns of Rice Productivity in China and Brazil

Author:: Liangzhi You
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper looks at differences in spatial and temporal variation of rice yields in China and Brazil. We find that rice yields in China have converged over time and that rice production has become more and more homogeneous. In contrast, rice yields in Brazil have diverged over time, primarily due to variations in upland rice yields. Three hypotheses are put forward to explain the different behaviour of rice yields in Brazil and China: (i) differences in production systems (i.e., irrigated in China versus upland in Brazil); (ii) changes in rainfall patterns and (iii) bias in agricultural R favouring irrigated rice. Our empirical analysis provides support to the first two hypotheses by establishing that upland rice is subjected to much greater variation in yields than irrigated rice and that changing rainfall patterns affect mostly upland rice. We also provide evidence of the bias towards irrigated systems by looking at the patterns of varietal release.
Topic:: Agriculture
Political Geography:: China, Asia, Brazil, and South America

37. WIDER Special Issue: Inequality and Poverty in China

Author:: Guanghua Wan
Publication Date:: 06-2007
Content Type:: Journal Article
Institution:: United Nations University
Abstract:: A large group of smallish countries totalling about a billion people have sheered off from the rest of mankind. As the world becomes more socially integrated this giant pool of poverty will be both unacceptable and explosive. It is the world's biggest economic problem and we need to do something about it. To know what to do we need to start with a diagnosis. While the common fate of the bottom billion has been stagnation and poverty there has been no single cause. In my recently published book The Bottom Billion I propose four distinct traps that between them account for the problem, each requiring a distinct remedy. I also argue that globalization, though it has been benign for the majority of the developing world, is not working for the bottom billion and is not likely to do so. On the contrary, it is liable to make them increasingly marginalized.
Political Geography:: China and Europe

38. Changes in the Distribution of Wealth in China, 1995-2002

Author:: Renwei Zhao and Shi Li
Publication Date:: 01-2007
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper investigates some major changes in the wealth distribution in China using the data from two national household surveys conducted in 1995 and 2002. The surveys collected rich information on household wealth and its components, enabling a detailed analysis of changes in wealth distribution among Chinese households. Our analysis indicates that the wealth distribution in China as a whole became much more unequal in 2002 than it was in 1995. The housing reform, in which public apartments were sold to urban households at extremely low prices, has accelerated the accumulation of wealth among urban households on the one hand, and widened the wealth gap between urban and rural areas on the other.
Topic:: Demographics, Development, and Economics
Political Geography:: China and Asia

39. Regional Income Inequality in Rural China, 1985-2002: Trends, Causes and Policy Implications

Author:: Guanghua Wan
Publication Date:: 01-2007
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper depicts the trend of regional inequality in rural China for the period 1985- 2002. The total inequality is decomposed into the so-called within- and between components when China is divided into three regional belts (east, central and west). A regression-based accounting framework is then used to explore root sources of the rising inequality. Policy implications are discussed.
Topic:: Demographics, Development, and Economics
Political Geography:: China and Asia

40. Mobilizing Talent for Global Development

Author:: Andrs Solimano
Publication Date:: 08-2006
Content Type:: Policy Brief
Institution:: United Nations University
Abstract:: The generation of new ideas and their application for productive uses is an important engine for growth and development. This is an area in which developing countries usually lag behind developed countries and is where development gaps are more evident. Behind the generation of ideas, innovations, and new technologies there is 'human talent': an inner capacity of individuals to develop ideas and objects, some of them with a high economic value. The 'human factor' is critical to the success or failure of many endeavours. Several countries, particularly China and India, followed by Russia, Poland, and some Latin American countries, are becoming an important source of talented people with PhDs and degrees in science, engineering, and other areas that can lead to change in the international patterns of comparative advantages and reduce development gaps. Part of the new talent formed in developing countries goes to live and work to developed countries, typically the USA, UK, and other OECD nations. At the same time multinational corporations are outsourcing several of their productive and service activities, including research and development, to developing countries (China and India are main destinations) to take advantage of the (less expensive) talent being developed there. Today, therefore, we see a double movement of talent and capital around the globe: on the one hand talent from developing countries is moving north seeking better opportunities where people are equipped with more capital, technologies, and effective organizations. On the hand capital from the north pursues talent in the south; a process largely led by multinational corporations.
Topic:: Development, Economics, Human Welfare, and Migration
Political Geography:: United States, China, United Kingdom, and India

41. Poverty, Pro-Poor Growth and Mobility: A Decomposition Framework with Application to China

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 12-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper proposes a framework for incorporating longitudinal distributional changes into poverty decomposition. It is shown that changes in the Sen-Shorrocks-Thon index over time can be decomposed into two components—one component reflects the progressivity of income growth among the original poor, the other measures the extent of downward mobility experienced by the incumbent poor. The decomposition is applied to appraising poverty trends in China between 1988 and 1996. The results indicate that the proposed decomposition can complement the widely-used growthdistribution decomposition in providing insights into poverty dynamics.
Topic:: Development and Poverty
Political Geography:: China and Asia

42. China's Regional Inequality in Innovation Capability, 1995-2004

Author:: Guanghua Wan and Peilei Fan
Publication Date:: 12-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Relying on a recently developed decomposition framework, this paper explores spatial distribution of innovation capability in China. It is found that at the regional level, China's inequality in innovation capability increased from 1995 to 2004. At the provincial level, the inequality decreased from1995 to 2000, but increased from 2000 to 2004. Location, industrialization and urbanization, human capital, and openness (foreign direct investment) are significant contributors to the inequality in innovation capability. Unbalanced development in high-tech parks exerts a growing explanatory power in driving innovation disparity, which implies that institutional factor plays a direct role.
Topic:: Civil Society and Demographics
Political Geography:: China and Asia

43. Poverty Reduction in China: Trends and Causes

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 12-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Applying the Shapley decomposition to unit-record household survey data, this paper investigates the trends and causes of poverty in China in the 1990s. The changes in poverty trends are attributed to two proximate causes; income growth and shifts in relative income distribution. The Foster-Greer-Thorbecke measures are computed and decomposed, with different datasets and alternative assumptions about poverty lines and equivalence. Among the robust results are: (i) both income growth and favourable distributional changes can explain China's remarkable achievement in combating poverty in rural areas in the first half of the 1990s; (2) in the second half of the 1990s, both rural and urban China suffered from rapidly rising inequality and stagnant income growth, leading to a slow-down in poverty reduction, even reversal of poverty trend.
Topic:: Development, Economics, and Poverty
Political Geography:: China and Asia

44. Gender Wage Differentials in China's Urban Labour Market

Author:: Fang Cai and Meiyan Wang
Publication Date:: 11-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper describes and decomposes wage differences between female and male workers. The results indicate that females receive low wages because of unequal pay within sectors, and that the wage gap caused by the difference in sectoral attainment is small. The results also reveal that a lion's share of the wage differential between females and males is attributable to discrimination rather than to the human capital difference between the genders. Eliminating discriminations against females with a focus on intra-sectoral inequality is crucial for reducing female/male wage differentials.
Topic:: International Relations, Development, and Political Economy
Political Geography:: China and Asia

45. Gender Earnings Differentials and Regional Economic Development in Urban China, 1988-97

Author:: Ying Chu Ng
Publication Date:: 11-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Gender earnings differentials in urban China by region and their changes during the first decade of economic reform are examined. It is found that the female–male earnings ratio increased during the early stage of reform. The male earnings premium, overall, showed an increasing trend in the later stage of reform. Decomposition of the gender earnings differential reveals that a relatively lower percentage of the differential could be explained by gender differences in productive characteristics in the fast growing regions and in regions with a rapid pace of reform. The cross-sectional results highlight the possible existence of gender discrimination, particularly in the later stages of economic reform and development. Both market competition and the effects of wage decentralization play a role in shaping the gender earnings differentials. Gender earnings differentials varied by region and over time, generally in tandem with the pace of economic reform and development. The decomposition of the overtime changes in the earnings gap indicated that improvement in females' productive characteristics during the reform period constantly enhanced the earnings of females relative to those of males. The overtime changes in the returns to females' characteristics, however, work to counter any narrowing of the gender earnings gap.
Topic:: International Relations, Development, and Gender Issues
Political Geography:: China and Asia

46. The Urban-Rural Income Gap and Inequality in China

Author:: Shi Li, Ximing Yue, Terry Sicular, and Björn Gustafsson
Publication Date:: 11-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Using new household survey data for 1995 and 2002, we investigate the size of China's urban-rural income gap, the gap's contribution to overall inequality in China, and the factors underlying the gap. Our analysis improves on past estimates by using a fuller measure of income, adjusting for spatial price differences and including migrants. Our methods include inequality decomposition by population subgroup and the Oaxaca-Blinder decomposition. Several key findings emerge. First, the adjustments substantially reduce China's urban-rural income gap and its contribution to inequality. Nevertheless, the gap remains large and has increased somewhat over time. Second, after controlling for household characteristics, location of residence remains the most important factor underlying the urban-rural income gap. The only household characteristic that contributes substantially to the gap is education. Differences in the endowments of, and returns to, other household characteristics such as family size and composition, landholdings, and communist party membership are relatively unimportant.
Topic:: International Relations, Development, and Human Rights
Political Geography:: China and Asia

47. Regional Inequality, Industry Agglomeration and Foreign Trade: The Case of China

Author:: Yin Ge
Publication Date:: 09-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: How do foreign trade and foreign direct investment affect regional inequality? Foreign trade and investment may affect internal economic geography, and the resulting industry agglomeration may contribute to regional inequality. This paper provides empirical evidence supporting this linkage. The results indicate that the increasing regional inequality in China has been accompanied by an increase in the degree of regional specialization and industry agglomeration. Foreign trade and foreign investment are closely related to industry agglomeration in China. Industries dependent on foreign trade and FDI are more likely to locate in regions with easy access to foreign markets, and exporting industries have a higher degree of agglomeration.
Topic:: Economics, Industrial Policy, and International Trade and Finance
Political Geography:: China and Asia

48. The Public Distribution Systems of Foodgrains and Implications for Food Security: A Comparison of the Experiences of India and China

Author:: Guanghua Wan and Zhang-Yue Zhou
Publication Date:: 09-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: A comparative study of the public distribution systems of foodgrains in India and China is expected to reveal lessons and experiences that are valuable to policymakers. This is particularly important for developing countries in their endeavour to ensure food security. This paper undertakes such an exercise. The main features and developments of the two public distribution systems are first highlighted. This is followed by a comparative analysis of their similarities and differences. The role of public foodgrain distribution systems in ensuring food security is then evaluated. Finally, policy implications are drawn.
Topic:: Human Welfare and Poverty
Political Geography:: China, India, and Asia

49. Financial Development and Income Inequality in Rural China 1991-2000

Author:: Zhicheng Liang
Publication Date:: 09-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Financial development can exert a significant influence on the distribution of income. In this paper, using Chinese provincial data over the period of 1991-2000 and applying the generalized method of moment (GMM) techniques, we investigate the relationship between finance and inequality in rural China by testing alternative existing theories concerning the finance-inequality nexus. A negative and linear relationship between finance and inequality is found in our estimations. The empirical results show that financial development significantly reduces income inequality in post-reform rural China.
Topic:: Demographics, Development, and Economics
Political Geography:: China and Asia

50. Fiscal Decentralization and Political Centralization in China: Implications for Growth and Inequality

Author:: Xiaobo Zhang
Publication Date:: 09-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: China's current fiscal system is largely decentralized while its governance structure is rather centralized with strong top-down mandates and a homogenous governance structure. Due to large differences in initial economic structures and revenue bases, the implicit tax rate and fiscal burdens to support the functioning of local government vary significantly across jurisdictions. Regions initially endowed with a broader nonfarm tax base do not need to rely heavily on preexisting or new firms to finance public goods provision, thereby creating a healthy investment environment for the nonfarm sector to grow. In contrast, regions with agriculture as the major economic activity have little resources left for public investment after paying the expenses of bureaucracy. Consequently, differences in economic structures and fiscal burdens may translate into a widening regional gap.
Topic:: Development, Economics, and Politics
Political Geography:: China and Asia

51. The Impacts of Growth and Inequality on Rural Poverty in China

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper analyzes the evolution of poverty in China from the late 1980s to the late 1990s, employing a version of Shapley decomposition tailored to unit-record household survey data. The changes in poverty trends are attributed to two proximate causes— income growth and shifts in income distribution. Different datasets, poverty lines, poverty measures, and equivalence scales are used to examine the robustness of the results. Potential biases arising from ignoring differential regional prices and inflation are also investigated. Notwithstanding some ambiguities in the results, it is consistently found that rural poverty increased in the second half of the 1990s and adverse distributional changes are the main cause.
Topic:: Demographics, Development, and Poverty
Political Geography:: China and Asia

52. The Inequality-Growth Nexus in the Short and Long Runs: Empirical Evidence from China

Author:: Guanghua Wan, Zhao Chen, and Ming Lu
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper argues that the conventional approach of data averaging is problematic for exploring the growth—inequality nexus. It introduces the polynomial inverse lag (PIL) framework so that the impacts of inequality on investment, education, and ultimately on growth can be measured at precisely defined time lags. Combining PIL with simultaneous systems of equations, we analyze the growth—inequality relationship in postreform China, finding that this relationship is nonlinear and is negative irrespective of time horizons.
Topic:: Civil Society, Development, and Education
Political Geography:: China and Asia

53. Financial Development, Growth, and Regional Disparity in Post-Reform China

Author:: Zhicheng Liang
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Deepening financial development and rapid economic growth in China have been accompanied by widening income disparity between the coastal and inland regions. In this paper, by employing panel dataset for 29 Chinese provinces over the period of 1990-2001 and applying the generalized method of moment (GMM) techniques, we examine the impacts of financial development on China's growth performance. Our empirical results show that financial development significantly promotes economic growth in coastal regions but not in the inland regions; the weak finance-growth nexus in inland provinces may aggravate China's regional disparities.
Topic:: Conflict Resolution, Development, and Economics
Political Geography:: China and Asia

54. Spatial Convergence in China: 1952-99

Author:: Geoffrey J.D. Hewings, Dong Guo, and Patricio Aroca
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The purpose of this paper is to examine the convergence process in China by taking into account the spatial interaction between factors. The paper shows that there has been a dramatic increase in the spatial dependence of China's per capita GDP in the last 20 years. The consequence of space plays an important role, which is reflected in the influence of a neighbour's condition on the mobility of a province's income distribution from one category to another. The dynamics of the process showed evidence that China's distribution has gone from one of convergence to stratification, and from stratification to polarization.
Topic:: Demographics, Development, and Economics
Political Geography:: China and Asia

55. Financial Sector Development and Growth: The Chinese Experience

Author:: Mingming Zhou and Iftekhar Hasan
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper documents the financial and institutional developments of China during the past two decades, when China was successfully transformed from a rigid centralplanning economy to a dynamic market economy following its unique path. We empirically examine the relationship between financial development and economic growth in China by employing a panel sample covering 31 Chinese provinces during the important transition period 1986-2002. Our evidence suggests that the development of financial markets, institutions, and instruments have been robustly associated with economic growth in China.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: China and Asia

56. Rethinking Import-substituting Industrialization: Development Strategies and Institutions in Taiwan and China

Author:: Tianbiao Zhu
Publication Date:: 07-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Conventional explanations of Taiwan and China's economic success point to the shift from an import-substituting industrialization (ISI) strategy to an export-oriented industrialization (EOI) strategy. This paper argues that the development strategies in Taiwan and China have always been a combination of ISI and EOI strategies during their entire miracle-creating period; far from the shift from ISI to EOI strategies, export promotion was used in both cases to sustain ISI, which has always been the central focus of development. Behind this strategy there is a set of institutions in both Taiwan and China, which has played a key role in supporting ISI, in particular, the government, the bank sector, public enterprises, and their relationship.
Topic:: Development and Industrial Policy
Political Geography:: China, Israel, Taiwan, East Asia, and Asia

57. National Food Policies Impacting on Food Security: The Experience of India, a Large Populated Country

Author:: S.S. Acharya
Publication Date:: 07-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: India accounts for 16.7 per cent of the world's food consumers. With the exception of China, India's size in terms of food consumers is many times larger than the average size of the rest of the countries. At the time of independence in 1947, India was in the grip of a serious food crisis, which was accentuated by the partition of the country. The demand for food far exceeded supply, food prices were high and more than half of the population living below the poverty line with inadequate purchasing power. With high rates of population growth, the dependence on imported food increased further. However, the situation improved considerably after the mid-1960s, when new agricultural development strategy and food policies were adopted. The production of staple cereals increased substantially, mainly contributed by productivity improvements. The dependence on food imports decreased and the country became a marginal net exporter of cereals. There was also an improvement in physical and economic access of households to cereals and other nutritive food products. The proportion of households reporting hunger went down and the incidence of economic poverty reduced. This paper reviews the Indian approach to tackling the severe problem of food insecurity, which India faced immediately after independence. It reviews the evolution of food policy, the major policy instruments deployed, intervention in food marketing system, and the current status of food security/insecurity. The paper also identifies the lessons emerging from the experience of India. In developing countries characterized by large segments of the rural population dependent on food production for livelihood and by the high incidence of poverty, food insecurity and malnutrition, the strategy to improve food security must encompass programmes to increase food production that combine improved technology transfer, price support to food producers and supply of inputs at reasonable prices to farmers, improvements in food marketing system, employment generation, direct food assistance programmes, and improvement in the access to education and primary health care.
Topic:: Health and Human Welfare
Political Geography:: China, India, and Asia

58. Widening Gap of Educational Opportunity? A Longitudinal Study of Educational Inequality in China

Author:: Min-Dong Paul Lee
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This study attempts to convey an accurate and dynamic account of educational inequality in China during the last decade. The study finds that there is clear evidence of rapid expansion of education, and younger students all over China are benefiting from the expansion. One of the most notable achievements is the virtual elimination of gender bias against girls in educational attainment. However, analysis of province-level school enrolment data over the last decade shows evidence of persistent regional inequality of educational attainment. Students from inland provinces continue to face strong structural inequality in educational opportunity, and this structural inequality becomes more pronounced as they progress to higher grades. Moreover, inter-cohort analysis reveals that the inter-provincial inequality in upper grades is increasing for younger cohort of students, meaning that educational inequality in China is deteriorating further. Lastly, a decomposition analysis shows that the causes of inter-provincial educational inequality are quite complex and cannot simply be explained by the urban-bias hypothesis that is often suggested as the main source of income inequality.
Topic:: Education, Human Rights, and Poverty
Political Geography:: China and Asia

59. Development of Financial Intermediation and the Dynamics of Rural-Urban Inequality: China, 1978-98

Author:: Qi Zhang, Mingxing Liu, and Yiu Por Chen
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Using China as a test case, this paper empirically investigates how the development of financial intermediation affects rural-urban income disparity (RUID). Using 20-year province level panel data, we find that the level of financial development is positively correlated with RUID. Examining two subperiods, 1978-88 and 1989-98, we test several competing hypotheses that may affect RUID. We find that the increase of RUID may be explained by fiscal policy during the first period and financial intermediates during the second period. In addition, we show that the direction of the Kuznets effect on RUID is sensitive to changes in government development policies. The rural development policies during the first period may have enhanced the rural development and reduced RUID. However, the financial intermediary policy during the second period focused on urban development and increased both urban growth and intra-urban inequalities, thus leading to an increase in RUID. Finally, we show that RUID is insensitive to the provincial industrial structure (the share of primary industry in GDP). These results are consistent with the traditional urban-bias hypothesis and are robust to the inclusion of controls for endogeneity issues. This study adds to the economic inequality literature by clarifying the effects of government policies on the underlying dynamics on convergent and divergent effects on rural-urban inequality.
Topic:: Development, Economics, and Government
Political Geography:: China and Asia

60. How Should We Measure Global Poverty in a Changing World?

Author:: Kuan Xu and Lars Osberg
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Before effective anti-poverty policy can be designed and implemented, the extent, trend and distribution of poverty must be identified. In this sense, poverty measurement is a crucial intermediate step in public policymaking and development planning. This paper asks whether the estimated proportion of the world's population with income below US$1 (adjusted according to purchasing power parity) per day is a good measure of trends in global poverty. We argue that the answer depends on two important issues in the measurement of poverty—the definition of the poverty line, and how best to summarize the level of poverty In this paper, we survey the literature on poverty measurement, demonstrate the importance of considering poverty incidence, depth and inequality jointly, present a simple but powerful graphical representation of the Sen and SST indices of poverty intensity (the poverty box) which is the FGT index of order 1 and extend our empirical work to China using the commonly accepted international poverty line definition of one half median equivalent income.
Topic:: International Relations, Development, and Poverty
Political Geography:: China and Asia

61. Poverty Accounting by Factor Components: With an Empirical Illustration Using Chinese Data

Author:: Guanghua Wan
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The purpose of this paper is to develop two poverty decomposition frameworks and to illustrate their applicability. A given level of poverty is broadly decomposed into an overall inequality component and an overall endowment component in terms of income or consumption determinants or input factors. These components are further decomposed into finer components associated with individual inputs. Also, a change in poverty is decomposed into components attributable to the growth and redistributions of factor inputs. An empirical illustration using Chinese data highlights the importance of factor redistributions in determining poverty levels and poverty changes in rural China.
Topic:: Development, Economics, and Poverty
Political Geography:: China and Asia

62. Threshold Estimation on the Globalization-Poverty Nexus: Evidence from China

Author:: Zhicheng Liang
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: China has experienced rapid integration into the global economy and achieved remarkable progress in poverty reduction over the last two decades. In this paper, by employing panel data covering twenty-five Chinese provinces over the period of 1986- 2002, and applying the endogenous threshold regression techniques, we empirically investigate the globalization-poverty nexus in China, paying particular attention to the nonlinearity of the impact of globalization on the poor. Estimation results provide strong evidence to suggest that there exists a threshold in the relationship between globalization and poverty: globalization is good for the poor only after the economy has reached a certain threshold level of globalization.
Topic:: Economics, Globalization, and Poverty
Political Geography:: China and Asia

63. Development Strategy, Viability, and Economic Institutions: The Case of China

Author:: Mingxing Liu, Pengfei Zhang, Shiyuan Pan, and Justin Yifu Lin
Publication Date:: 05-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper explores the politically determined development objectives and the intrinsic logic of government intervention policies in east developed countries. It is argued that the distorted institutional structure in China and in many least developed countries, after the Second World War, can be largely explained by government adoption of inappropriate development strategies. Motivated by nation building, most least-developed countries, including the socialist countries, adopted a comparative advantage defying strategy to accelerate the growth of capital-intensive, advanced sectors in their countries. In the paper we also statistically measure the evolution of government development strategies and the economic institutions in China from 1950s to 1980s to show the co-existence and coevolution of government adoption of comparative advantage defying strategy and the trinity system.
Topic:: Development, Economics, and Government
Political Geography:: China and Asia

64. Economic Development Strategy, Openness and Rural Poverty: A Framework and China's Experiences

Author:: Justin Yifu Lin and Peilin Liu
Publication Date:: 04-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper argues that both openness and poverty in a country are endogenously determined by the country's long-term economic development strategy. Development strategies can be broadly divided into two mutually exclusive groups: (i) the comparative advantage-defying (CAD) strategy, which attempts to encourage firms to deviate from the economy's existing comparative advantages in their entry into an industry or choice of technology; and (ii) the comparative advantage-following (CAF) strategy, which attempts to facilitate the firms' entry into an industry or choice of technology according to the economy's existing comparative advantages.
Topic:: Development, Economics, and Poverty
Political Geography:: China and Asia

65. Globalization and the Urban Poor in China

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 04-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines the distributional impact of globalization on the poor in urban China. Employing the kernel density estimation technique, we recovered from irregularly grouped household survey data the income distribution for 29 Chinese provinces for 1988-2001. Panels of the income shares of the poorest 20, 10 and 5 per cent of the urban residents were then compiled. In a fixed-effect model, two of the central conclusions of Dollar and Kraay (2002)—that 'the incomes of the poor rise equi-proportionately with average income' and that trade openness has little distributional effect on poverty—were revisited. Our results lend little support to either of the Dollar-Kraay conclusions, but instead indicate that average income growth is associated with worsening income distribution while globalization in general, and trade openness in particular, raises the income shares of the poor. It is also found that openness to trade and openness to FDI have differential distributional effects. The beneficial effect of trade was not restricted to the coastal provinces only, but also weakened significantly after 1992. These findings are robust to allow for nonlinearity in the effect of globalization and to control for the influence of several other variables.
Topic:: Economics, Globalization, and Poverty
Political Geography:: China and Asia

66. International Finance and the Developing World: The Next Twenty Years

Author:: Tony Addison
Publication Date:: 02-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Much has changed in international finance in the twenty years since UNU-WIDER was founded. This paper identifies five broad contours of what we might expect in the next twenty years: the flow of capital from ageing societies to the more youthful economies of the South; the growth in the financial services industry in emerging economies and the consequences for their capital flows; the current strength in emerging market debt, and whether this represents a change in fundamentals or merely the effect of low global interest rates; the impact of globalization in goods markets in lowering inflation expectations, and therefore global bond yields; and the implications of the adjustment in global imbalances between Asia (in particular China) and the United States for emerging bond markets as a whole. The paper ends by noting the paradox that today we see ever larger amounts of capital flowing across the globe in search of superior investment returns, and yet the financing needs of the poorer countries are still largely unmet.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States, China, and Asia

67. Rising Spatial Disparities and Development

Author:: Ravi Kanbur and Anthony J. Venables
Publication Date:: 09-2005
Content Type:: Policy Brief
Institution:: United Nations University
Abstract:: Amidst a growing concern about increasing inequality, the spatial dimensions of inequality have begun to attract considerable policy interest. In China, Russia, India, Mexico, and South Africa, as well as most other developing and transition economies, there is a sense that spatial and regional disparities in economic activity, incomes and social indicators, are on the increase. Spatial inequality is a dimension of overall inequality, but it has added significance when spatial and regional divisions align with political and ethnic tensions to undermine social and political stability. Also important in the policy debate is a perceived sense that increasing internal spatial inequality is related to greater openness of economies, and to globalization in general.
Topic:: International Relations, Foreign Policy, Demographics, and Development
Political Geography:: Russia, China, India, South Africa, and Mexico

68. Why Do Poverty Rates Differ From Region to Region? The Case of Urban China

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper proposes a semi-parametric method for poverty decomposition, which combines the data-generating procedure of Shorrocks and Wan (2004) with the Shapley value framework of Shorrocks (1999). Compared with the popular method of Datt and Ravallion (1992), our method is more robust to misspecification errors, does not require the predetermination of functional forms, provides better fit to the underlying Lorenz curve and incorporates the residual term in a rigorous way. The method is applied to decomposing variations of urban poverty across the Chinese provinces into three components – contributions by the differences in average nominal income, inequality and poverty line. The results foreground average income as the key determinant of poverty incidence, but also attach importance to the influence of distribution. The regional pattern of the decomposition suggests provincial groupings based not entirely on geographical locations.
Topic:: Demographics, Economics, and Poverty
Political Geography:: China and Asia

69. Globalization and Regional Income Inequality: Evidence from within China

Author:: Guanghua Wan, Zhao Chen, and Ming Lu
Publication Date:: 11-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: China's recent accession to the WTO is expected to accelerate its integration into the world economy, which aggravates concerns over the impact of globalization on the already rising inter-region income inequality in China. This paper discusses China's globalization process and estimates an income generating function, incorporating trade and FDI variables. It then applies the newly developed Shapley value decomposition technique to quantify the contributions of globalization, along with other variables, to regional inequality. It is found that (a) globalization constitutes a positive and substantial share to regional inequality and the share rises over time; (b) capital is one of the largest and increasingly important contributor to regional inequality; (c) economic reform characterized by privatization exerts a significant impact on regional inequality; and (d) the relative contributions of education, location, urbanization and dependency ratio to regional inequality have been declining.
Topic:: Economics and Globalization
Political Geography:: China and Asia

70. Output and Price Fluctuations in China's Reform Years: What Role did Money Play?

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The Chinese economy underwent cyclical fluctuations in growth and inflation in the reform period. Contrasting views exist on the role of money in such fluctuations. This paper assesses these views employing structural VEC models based on the exchange equation. It is found that in the long run money accommodates, rather than causes, changes in output and prices. In the short run, price fluctuations are mostly attributable to shocks that have permanent effects on prices and money but not on real output. These shocks also account for a large proportion of fluctuations in money, and strongly influence the movements of output.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: China and Asia

71. What Accounts for China's Trade Balance Dynamics?

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper proposes a structural VAR model which extends the frameworks of Hoffmaister and Roldós (2001) and Prasad (1999). The model is then used to analyse the sources of China's trade balance fluctuations in the period of 1985–2000. Efforts are made to distinguish the forces which underlie the long-run trend in trade balance from those with transitory impacts. The effects of four types of shock are examined—the foreign supply shock, the domestic supply shock, the relative demand shock, and the nominal shock. Among other findings, two emerge as important. First, the movements in China's trade are largely the result of real shocks. Second, the Renminbi is undervalued, yet changes in the exchange rate bear little on the trade balance. Therefore, monetary measures would not suffice to redress China's trade 'imbalance'.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: China and Asia

72. China's Business Cycles: Perspectives from an AD–AS Model

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper represents a first attempt to study China's business cycles using a formal analytical framework, namely, a structural VAR model. It is found that: (a) demand shocks were the dominant source of macroeconomic fluctuations, but supply shocks had gained more importance over time; (b) the driving forces of demand shocks were consumption and fixed investment in the first cycle of 1985–90, but shifted to fixed investment and world demand in the second cycle of 1991–96 and the post-1997 deflation period; and (c) macroeconomic policies did not play an important part either in initiating or counteracting cyclical fluctuations.
Topic:: Demographics, Economics, and Emerging Markets
Political Geography:: China

73. Divergent Means and Convergent Inequality of Incomes among the Provinces and Cities of Urban China

Author:: John Knight, Li Shi, and Zhao Renwei
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Two precisely comparable national household surveys relating to 1988 and 1995 are used to analyse changes in the inequality of income in urban China. Over those seven years province mean income per capita grew rapidly but diverged across provinces, whereas intra-province income inequality grew rapidly but converged across provinces. The reasons for these trends are explored by means of various forms of decomposition analysis. Comparisons are also made between the coastal provinces and the inland provinces. The decompositions show the central role of wages, and within wages profitrelated bonuses, together with the immobility of labour across provinces, in explaining mean income divergence. The timing of economic reforms helps to explain the convergence of intra-province income inequality. Policy conclusions are drawn.
Topic:: Demographics, Development, and Economics
Political Geography:: China and Asia

74. Income Inequality in Rural China: Regression-based Decomposition Using Household Data

Author:: Guanghua Wan and Zhangyue Zhou
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: A considerable literature exists on the measurement of income inequality in China and its increasing trend. Much less is known, however, about the driving forces of this trend and their quantitative contributions. Conventional decompositions, by factor components or by population subgroups, only provide limited information on the determinants of income inequality. This paper represents an early attempt to apply the regression-based decomposition framework to the study of inequality accounting in rural China, using household level data. It is found that geography has been the dominant factor but is becoming less important in explaining total inequality. Capital input emerges as a most significant determinant of income inequality. Farming structure is more important than labour and other inputs in contributing to income inequality across households.
Topic:: Demographics, Development, and Economics
Political Geography:: China and Asia

75. Fifty Years of Regional Inequality in China: A Journey through Central Planning, Reform, and Openness

Author:: Ravi Kanbur and Xiaobo Zhang
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper constructs and analyses a long-run time-series for regional inequality in China from the Communist Revolution to the present. There have been three peaks of inequality in the last fifty years, coinciding with the Great Famine of the late 1950s, the Cultural Revolution of the late 1960s and 1970s, and finally the period of openness and global integration in the late 1990s. Econometric analysis establishes that regional inequality is explained in the different phases by three key policy variables; the ratio of heavy industry to gross output value, the degree of decentralization, and the degree of openness.
Topic:: Development, Economics, Industrial Policy, and Political Economy
Political Geography:: China and Asia

76. International Trade, Location and Wage Inequality in China

Author:: Songhua Lin
Publication Date:: 09-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Models of economic geography predict that transportation costs directly affect demand for goods and the supply of intermediate inputs. One of the reasons that international trade is concentrated in the coastal provinces of China is that they have lower transportation costs in transporting goods to other countries than do provinces in the interior. This paper examines the relationship between the provincial wage rate and each province's access to international markets, and to suppliers of intermediate inputs. A gravity equation is first estimated to construct these 'market access' and 'supplier access' variables. In the second stage, the effect of market access and supplier access on the wage rate is estimated. It is found that about one quarter of the provincial wage differences in the coastal provinces and 15 per cent of the wage differences in the interior provinces can be explained by these economic geography variables.
Topic:: Industrial Policy and International Trade and Finance
Political Geography:: China, Israel, and East Asia

77. Externalities in Rural Development: Evidence for China

Author:: Martin Ravallion
Publication Date:: 07-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper tests for external effects of local economic activity on consumption and income growth at the farm household level using panel data from four provinces of post-reform rural China. The tests allow for nonstationary fixed effects in the consumption growth process. Evidence is found of geographic externalities, stemming from spillover effects of the level and composition of local economic activity and private returns to local human and physical infrastructure endowments. The results suggest an explanation for rural underdevelopment arising from underinvestment in certain externality-generating activities, of which agricultural development emerges as the most important.
Topic:: Development and Economics
Political Geography:: China and Asia

78. Trade Liberalization, Agriculture, and Poverty in Low-income Countries

Author:: Kym Anderson
Publication Date:: 03-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper offers an economic assessment of the opportunities and challenges provided by the WTO's Doha Development Agenda, particularly through agricultural trade liberalization, for low-income countries seeking to trade their way out of poverty. After discussing links between poverty, economic growth and trade, it reports modelling results showing that farm product markets remain the most costly of all goods market distortions in world trade. It focuses on what such reform might mean for countries of South Asia and sub-Saharan Africa in particular, both without and with their involvement in the MTN reform process. What becomes clear is that if those countries want to maximize their benefits from the Doha round, they need also to free up their own domestic product and factor markets so their farmers are better able to take advantage of new market-opening opportunities abroad. Other concerns of low-income countries about farm trade reform also are addressed: whether there would be losses associated with tariff preference erosion, whether food-importing countries would suffer from higher food prices in international markets, whether China's WTO accession will provide an example of trade reform aggravating poverty via cuts to prices received by Chinese farmers, and the impact on food security and poverty alleviation. The paper concludes with lessons of relevance for low-income countries for their own domestic and trade policies.
Topic:: Agriculture, Economics, Emerging Markets, International Trade and Finance, and Poverty
Political Geography:: Africa and China

79. One Third of the World's Growth and Inequality

Author:: Danny Quah
Publication Date:: 03-2002
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper studies growth and inequality in China and India—two economies that account for a third of the world's population. By modelling growth and inequality as components in a joint stochastic process, the paper calibrates the impact each has on different welfare indicators and on the personal income distribution across the joint population of the two countries. For personal income inequalities in a China-India universe, the forces assuming first-order importance are macroeconomic: Growing average incomes dominate all else. The relation between aggregate economic growth and within-country in- equality is insignificant for inequality dynamics.
Topic:: Development and Economics
Political Geography:: China, South Asia, India, and Asia

80. From the Grabbing Hand to the Helping Hand: A Rent Seeking Model of China's Township-Village Enterprises

Author:: Jiahua Che
Publication Date:: 01-2002
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: I present a study of ownership of firms under government rent seeking. Using its control of regulated inputs, a government agency extracts rents from a manager who undertakes an investment. Such a government rent seeking activity leads to a typical hold-up problem. Government ownership is shown to serve as a second best commitment mechanism through which the government agency will restrain itself from the rent seeking activity and even offer the manager support and favor such as tax breaks and subsidies. This mechanism works at a cost as government ownership compromises ex post managerial incentives and creates distortion in resource allocation. Nevertheless, government ownership may Pareto dominate private ownership under certain conditions. These conditions correspond to a host of stylized empirical observations concerning local government-owned firms (township-village enterprises) during China's transition to a market economy.
Topic:: Development, Emerging Markets, and Government
Political Geography:: China and Asia

81. Household Income Dynamics in Rural China

Author:: Martin Ravallion and Jyotsna Jalan
Publication Date:: 01-2002
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: It is well known in theory that certain forms of non-linear dynamics in household incomes can yield poverty traps and distribution-dependent growth. The potential implications for policy are dramatic: effective social protection from transient poverty will be an investment with lasting benefits, and pro-poor redistribution will promote aggregate economic growth. We test for non-linearity in the dynamics of household expenditures and incomes using panel data for rural south-west China. While we find evidence of non-linearity, there is no sign of a dynamic poverty trap. Existing private and social arrangements in this setting appear to protect vulnerable households from the risk of destitution. However, the concavity we find in the recursion diagram does imply that the speed of recovery from an income shock is lower for the poor, and that current inequality reduces growth in mean incomes.
Topic:: Development and Economics
Political Geography:: China and Asia

82. Wage Reform, Soft Budget Constraints and Competition

Author:: Jian Sun
Publication Date:: 02-1999
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Since the beginning of the Chinese economic reforms in 1978, there has been a series of effort to reform the labour compensation practice in state-owned enterprises to strengthen the link between pay and productivity. Despite the reforms, however, rapid increases in wage rates occurred in state-owned enterprises. Moreover, although state-owned enterprises have much lower productivity gains than non-state enterprises, they pay substantially higher wages and have faster wage growth.
Topic:: Economics, Globalization, Industrial Policy, and International Political Economy
Political Geography:: China and Asia

83. The Weightless Economy in Economic Development

Author:: Danny Quah
Publication Date:: 01-1999
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Can the increasing significance of knowledge-products in national income—the growing weightless economy—influence economic development? Those technologies reduce "distance" between consumers and knowledge production. This paper analyzes a model embodying such a reduction. The model shows how demand-side attributes—consumer attitudes on complex goods; training, education, and skills for consumption (rather than production)—can importantly affect patterns of economic growth and development. Evidence from the failed Industrial Revolution in 14th-century China illustrates the empirical relevance of the analysis.
Topic:: Development, Economics, and Science and Technology
Political Geography:: China

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COLUMBIA UNIVERSITY PRESS