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Channels of interprovincial risk sharing in China

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  • Du, Julan
  • He, Qing
  • Rui, Oliver M.

Abstract

This paper decomposes consumption risk sharing among provinces in China over the 1980–2007 period. We find that 9.4% of the shocks to gross provincial product are smoothed by the interprovincial fiscal transfer system. This system also cushions a relatively large fraction of the province-specific shocks in the coastal provinces of China. Using a variety of indicators, we explore non-fiscal channels of consumption risk sharing. We find that the migration of rural labor to urban areas and the remittance of migrant wages play important roles in promoting interprovincial consumption risk sharing in the inland provinces of China. In contrast, the extent of risk sharing through financial intermediaries and the capital markets is very limited. These factors have resulted in a low degree of risk sharing among Chinese provinces, especially over the last decade.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 39 (2011)
Issue (Month): 3 (September)
Pages: 383-405

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Handle: RePEc:eee:jcecon:v:39:y:2011:i:3:p:383-405

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: Consumption risk sharing Chinese economy Fiscal system Credit markets Remittance;

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Cited by:
  1. He , Qing & Xue, Chang & Zhu, Chenqi, 2014. "Financial development and patterns of industrial specialization: Regional evidence from China," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 12/2014, Bank of Finland, Institute for Economies in Transition.
  2. Cécile BATISSE & Mary-Françoise RENARD & Nasser ARY TANIMOUNE, 2013. "Foreign Direct Investment across China: what should we learn from spatial dependences?," Working Papers 201312, CERDI.
  3. Masayoshi Hayashi, 2013. "On the Decomposition of Regional Stabilization and Redistribution," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-910, CIRJE, Faculty of Economics, University of Tokyo.
  4. Lai, Jennifer T. & McNelis, Paul D. & Yan, Isabel K.M., 2013. "Regional capital mobility in China: Economic reform with limited financial integration," Journal of International Money and Finance, Elsevier, Elsevier, vol. 37(C), pages 493-503.
  5. He, Qing & Leung, Pak-Ho & Chong, Terence Tai-Leung, 2013. "Factor-augmented VAR analysis of the monetary policy in China," China Economic Review, Elsevier, vol. 25(C), pages 88-104.

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