Trade liberalization, fiscal federalism, and foreign capital inflows in the context of the Chinese reforms

Economics, General;Economics, Finance

Yang, Qiumei

关键词: Economics, General;    Economics, Finance;   

Others  :  https://www.ideals.illinois.edu/bitstream/handle/2142/19562/9712493.pdf?sequence=2&isAllowed=y

美国|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

In recent years China is increasingly considered as a successful example for a transition towards a market economy. The growth rate of the Chinese economy has averaged 9.5 percent in the past fifteen years. What are the secrets behind the Chinese story? This dissertation aims to answer this question by analyzing three important areas in the Chinese economic reform--trade liberalization, the central-local governmental fiscal relation, and foreign investment.The first essay describes the extensive reforms to China's external sector from 1979 to 1994. It then estimates an econometric model to test the empirical effect of trade liberalization on exports employing unit root, cointegration, and recursive coefficient stability tests. The major result found in this paper is that after 1984, six years after China embarked its historical economic reform, the paper finds some evidence of structural break of liberalization of exports which is contrast to previous studies.In the second essay, I employ the Principal-Agent Model to discuss the impact of corruption in local tax administration on the tax revenue of the central government in China. When the central government does not have the information about the true income of firms and local governments have great discretion in manipulating the tax administration system, the tax revenue of the central government is subject to erosion due to collusion between firms and local governments. To solve the problem, the central government needs to design incentive-compatible tax revenue sharing schemes for local governments.The third essay provides empirical evidence of the determinants of foreign direct investment inflows into China. It first shows that including human capital in the neoclassical growth model does not resolve the question: "Why doesn't capital flow from rich to poor countries?" posed by Lucas (1990). Twenty nine provinces in China are tested with the result that predicted rates of return to physical capital in some poor provinces are more than 600 percent of those in Shanghai, the representative rich province. The paper finds that the size of the market and the growth of private economy are the main factors that determine the foreign capital investment in China.