China reformed value-added tax (VAT) by removing investment from the tax base in northeastern provinces in 2004, which is a “natural experiment” of tax system. Using difference-in-differences method, this paper for the first time investigates the impact of VAT reform on China firms’ fixed asset investment, employment behavior, innovative activities, and productivity, and furthermore discusses the impact of firm behavior on industrial structural upgrade and employment by a firm-level panel data of large and medium-size manufacturing enterprises in China. We find that VAT reform significantly promotes firms’ fixed asset investment, and increases firms’ capital-labor ratio and productivity; while enhancing firms’ productivity is mainly by means of substituting labor with capital, rather than independent technology innovation; meanwhile, VAT reform distinctly decreases employment. Our findings have essential policy implication on the extension of VAT reform in the entire China.

We propose a political-economics model of decentralization (by the central govern-
ment) and collusion (between the local government and .rms) to explain high death
rates in the coalmine industry in China, where the local government allows the firms
to choose dangerous but profitable modes of production when collusion is feasible. Our model predicts that coalmine death rates are increasing in decentralization and collusion and decreasing in media exposure. We collect a provincial level panel dataset from 1995 to 2005 and compare the decentralization period (1998 to 2000) with the adjacent centralization periods. Consistent with the model, we find that decentralization increases death rates by about 30%. Assuming that the transaction costs of collusion are lower for native Safety governors (the o¢ cials responsible for safety regulations) and using within-governor estimations, we find that the intraction between nativeness and decentralization increases death rates by about 100%. We proxy media exposure by the number of newspaper names and find that it has a negative impact on death rates. In addition, we match the province-level data with the balance-sheet data of coalmine firms between 1998 and 2005 and provide additional evidence using these firm-level data.

Empirical research has called for intensive use of disaggregated data. One of the most heavily used data set in studying the corporate behavior and performance in China is Chinese Industrial Enterprises Database. As we will show, this data set suffers from data matching problems as well as measurement errors, unrealistic outliers and definition ambiguities etc., all of which practically lead to research results thereupon that are at best questionable. In this article, we briefly summarize the data set, selectively review its uses in previous studies, address some critical issues regarding its usage, and propose some remedies and recommendations.

Regional corruptness in China has a positive effect on the profitability of private firms, but not that of state-owned firms. A natural experiment of exogenous trade policy change suggests that corruption may help private firms circumvent government regulation.

This paper investigates how institutional environments, especially the contractual hazard and the political hazard, affect foreign investors' share ratios in joint-venture enterprises in China. We build a model combining Transaction Cost Economics and Property Rights Theory to describe the tradeoff that foreign investors face between choosing a larger share ratio and a smaller one. We argue that when the contractual hazard increases, foreign investors request larger shares to avoid being held up by their domestic partners, and when the political hazard increases, they hold smaller shares to circumvent the local government's grabbing hand. Moreover, the effect of the contractual hazard is channeled through enterprises' asset specificity. These theoretical predictions are verified by studying the relationship between the ownership structure of Chinese manufacturing joint-venture enterprises and the provincial-level institutions they are embedded in.

The independence of supervision agency is of great importance for anti-corruption. After the leadership transition of the provincial Congress of the Chinese Communist Party in 2006, Secretaries of Discipline Inspection Commission (SDICs) were suddenly dis- patched from the centre or transferred from another province in China (‘airborne’ SDICs) to enhance their independence in inspect- ing corruption cases. To investigate the effect of this policy reform, we collect data of SDICs and anti-corruption in 31 provinces from 2003 to 2014, and evaluate this policy using the difference-in-dif- ferences econometrics method. We find that there is no significant effect of these ‘airborne’ SDICs whether from the centre or another province on anti-corruption. This result is robust to different meas- urements of anti-corruption and subsamples. We argue that the dispatch of external SDICs is not enough to ensure the independ- ence of supervision agency, because local discipline inspection commissions (DICs) are still subject to local Chinese Communist Party committees in terms of personnel, funds and property. This paper has important policy implications for the current anti-corrup- tion campaign in China.

Economists always have disputes over the relationship between corruption and economic growth. From the end of 2012 to the present, the Communist Party of China has launched a fierce anti-corruption campaign so that a large number of officials suspected of corruption were investigated. Anti-corruption, however, did not actually promote economic growth. To explain this, we build a framework based on government regulation and mixed oligopoly. The basic views are as follows: First, on the premise of meeting the government's budget balance, fighting against corruption accompanied with removing inefficient regulation is the optimal anti-corruption policy, which will facilitate economic growth. Second, given there are inefficient regulations, lower cost of corruption and superior employment pressure; no anti-corruption is a better choice than anti-corruption. Current Chinese anti-corruption campaigns focusing solely on anti-corruption rather than removal of regulation are useless to economic development. These movements contribute to the development of the state-owned enterprises at the cost of private sectors' growth. As a result, the whole economic growth has been dragged down.

PurposeThe stability maintenance system has played an essential role in maintaining social stability although it also has brought about social problems worthy of attention. Admittedly compensation-based stability maintenance policy can address the appeals of citizens whose rights are infringed and the dissolving effect in the provision of compensation can save the cost of stability maintenance but such stability maintenance system lacks equilibrium.Design/methodology/approachThe establishment of a strict assessment system for stability maintenance performance can encourage the stability maintenance authorities to eliminate the “fuse effect” as much as possible and ensure the effective implementation of the stability maintenance system. However, the rigorous stability maintenance performance assessment also provides the possibility for profit-driven petitions.FindingsDue to the continuous accumulation of social dissatisfaction and the lack of stability maintenance equilibrium in the ...

By introducing asymmetric information of investors' abilities and finitely repeated games into the classic holdup model, this paper revisits the relationship between property rights and reputation under incomplete contracting environment and obtains some different insights. First, even facing holdup agents can make efficient investments due to the reputation effect in some periods of relationship, which is sharply contrary to existing research. Second, although reputation is an incentive tool for agents, property rights are complementary or even necessary for reputation, and reputation itself is not enough to motivate agents to make first-best investments without ownership. Third, this paper explains underinvestment, efficient investment, and overinvestment in a unified dynamic model of property rights.

This paper investigates how collusion between regulators and firms affects workplace safety using the case of China's coal mine deaths. We argue that decentralization makes collusion more likely and that its effect is strengthened if the transaction costs of collusion are lower. These hypotheses are tested by investigating the impact of decentralization contingent on regulators' characteristics. Exploring both decentralization and centralization reforms in the coal mine industry, we find that decentralization is correlated with an increase in coal mine death rates. Moreover, this increase in mortality is larger for the regulators with lower transaction costs (proxied by the locality of origin).

China reformed value-added tax (VAT) by removing investment from the tax base in northeastern provinces in 2004, which is a "natural experiment" of its tax system. Using difference-indifferences method, this paper for the first time investigates the impact of VAT reform on China firms' fixed asset investment, employment behavior, innovative activities, and productivity, and furthermore discusses the impact of firm behavior on industrial structural upgrade and employment with a firm-level panel data of large and medium-sized manufacturing enterprises in China. We find that VAT reform significantly promotes firms' fixed asset investment, and increases firms' capital-labor ratio and productivity; while enhancement of firms' productivity is mainly achieved by means of substituting labor with capital, rather than independent technology innovation; meanwhile, VAT reform distinctly decreases employment. Our findings have essential policy implications on the extension of VAT reform in the entire China.

The impact of political cycle: Evidence from coalmine accidents in China This paper examines the impact of political cycle on coalmine accidents in China. The political cycle is formed by the major local meetings of legislative bodies held every year in all provinces of China. This is because the government has a strong incentive to maintain social stability during the meetings and to focus on economic growth in other times. We test how such cycles affect coalmine fatality using monthly data at the provincial level between 2000 and 2010. We find that the number of accidents and casualties were significantly lowered during the local events of ''two sessions'' after controlling for other time fixed effects. The temporary reduction of accidents seemed to have been achieved by controlling production rather than by improving safety measures. The magnitude of the cycle for accidents is enlarged in provinces where media exposure is stronger and where the vice governor in charge of safety is faced with a possible extension to another term in the current post. Journal of Comparative Economics 41 (4) (2013) 995-1011.

China's coalmining fatalities were 140 times higher than the U.S. in the last decade. To shed light on this issue, we form and examine a unique panel dataset of 25,387 firm-year observations for China's coalmining industry. We show that a firm's leverage significantly determines its coalmining fatality: A 10% increase in the debt ratio leads, on average, to a 3% increase in the number of death tolls. It suggests that reducing leverage in coalmining firms can be an effective way to curb employee fatalities. Our study highlights the importance of corporate finance in helping solving social and institutional problems.

Empirical research has called for intensive use of disaggregated data. One of the most heavily used data set in studying the corporate behavior and performance in China is Chinese Industrial Enterprises Database. As we will show, this data set suffers from data matching problems as well as measurement errors, unrealistic outliers and definition ambiguities etc., all of which practically lead to research results thereupon that are at best questionable. In this article, we briefly summarize the data set, selectively review its uses in previous studies, address some critical issues regarding its usage, and propose some remedies and recommendations.

Economists always have disputes over the relationship between corruption and economic growth. From the end of 2012 to the present, the Communist Party of China has launched a fierce anti-corruption campaign so that a large number of officials suspected of corruption were investigated. Anti-corruption, however, did not actually promote economic growth. To explain this, we build a framework based on government regulation and mixed oligopoly. The basic views are as follows: First, on the premise of meeting the government's budget balance, fighting against corruption accompanied with removing inefficient regulation is the optimal anti-corruption policy, which will facilitate economic growth. Second, given there are inefficient regulations, lower cost of corruption and superior employment pressure; no anti-corruption is a better choice than anti-corruption. Current Chinese anti-corruption campaigns focusing solely on anti-corruption rather than removal of regulation are useless to economic development. These movements contribute to the development of the state-owned enterprises at the cost of private sectors' growth. As a result, the whole economic growth has been dragged down.

This paper investigates how institutional environments, especially the contractual hazard and the political hazard, affect foreign investors' share ratios in joint-venture enterprises in China. We build a model combining Transaction Cost Economics and Property Rights Theory to describe the tradeoff that foreign investors face between choosing a larger share ratio and a smaller one. We argue that when the contractual hazard increases, foreign investors request larger shares to avoid being held up by their domestic partners, and when the political hazard increases, they hold smaller shares to circumvent the local government's grabbing hand. Moreover, the effect of the contractual hazard is channeled through enterprises' asset specificity. These theoretical predictions are verified by studying the relationship between the ownership structure of Chinese manufacturing joint-venture enterprises and the provinciallevel institutions they are embedded in.

Using political mobility data for 189 leaders from China’s central state-owned enterprise (CSOEs) in 2008-2011, for the first time this paper investigates the mechanism of political turnover for leaders as quasi-government officers in CSOEs. We find that: (1) the likelihood of promotion of these leaders increases with their economic performance measured as growth rate of operating revenue, while the likelihood of demotion decreases with their economic performance; (2) these leaders with CCP central committee member have higher probability of promotion than their counterpart; (3) these leaders with Ph.D. degree have higher probability of promotion than their counterpart; (4) compared to growth rate of operating revenue, growth rate of maintaining and increasing the value of state capital has no significant effect on promotion; (5) the compensation linked to position in CSOEs has no impact on leaders’ promotion, which indicates that leaders in CSOEs look more likely government officia...

We investigate whether the presence of major corporate customers, one of the most important firm stakeholders, affect firm stock price crash risk. Using data on a large sample of U.S. firms from 1979 to 2014, we find that customer concentration is significantly and positively associated with future stock price crash risk. The results hold in various robustness checks and endogeneity tests. This positive association is primarily driven by suppliers in the durable goods sector and is attenuated among firms that report high R&D expenses. Finally, we find that firms with a higher degree of customer concentration are more likely to disclose unexpected very bad news. Overall, our findings suggest that the presence of major customers imposes performance pressure on managers, which induces them to hoard bad news. Once a tipping point has been reached, the bad news is released all at once, leading to a stock price crash.

"At the center of the on-going debate about the U.S. Social Security system is the question of whether the way the system is financed can cope with the future challenges posed by the retiring Baby Boom generation. The “reformers”suggest changing the design of the system by moving to fully funded defined
contribution retirement plans. Others argue that the so-called demographic problems are being used as an excuse to privatize the system. But both sides spend almost all of their energy and time figuring out the timing of insolvency of the system and the validity of the assumptions made in each forecast. In contrast, the present study closely examines the changing macroeconomic dynamics of the system since the 1960s. The analysis shows that undermining of the system is caused not by demographic changes or financing mechanisms but by low wages and medical inflation.
Keywords: U.S. Social Security, PAYG, wages, healthcare expenditures
JEL Classification Codes: H55, I10, J14, J26, J31"