Advanced Search
MyIDEAS: Login

Consumption Fluctuations and Welfare: Evidence from China

Contents:

Author Info

  • Ho, Chun-Yu
  • Ho, Wai-Yip Alex
  • Li, Dan

Abstract

Summary This paper examines inter-provincial consumption risk sharing and intertemporal consumption smoothing across Chinese provinces before and after the 1979 economic reform. Our results indicate that the degree of consumption risk sharing among Chinese provinces is lower than that within the United States and across the national boundaries of OECD countries. On the other hand, the level of consumption smoothing among Chinese provinces is higher than that across OECD or European Union countries, but lower than that in the United States. Moreover, our results show that consumption risk sharing and smoothing in China have deteriorated since the 1979 economic reform. Finally, we show that eliminating consumption fluctuations yields substantial welfare gains, which suggests that stabilization policies are desirable for China.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VC6-508XB9R-1/2/d87df6470149ca19ca718f8b9721e5c1
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 38 (2010)
Issue (Month): 9 (September)
Pages: 1315-1327

as in new window
Handle: RePEc:eee:wdevel:v:38:y:2010:i:9:p:1315-1327

Contact details of provider:
Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: consumption fluctuations risk sharing smoothing welfare;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, . "Testing for PPP: Should We Use Panel Methods?," Working Papers 186, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  3. Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," NBER Working Papers 12755, National Bureau of Economic Research, Inc.
  4. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  5. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
  6. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  7. Ravallion, Martin & Shaohua Chen, 2004. "China's (uneven) progress against poverty," Policy Research Working Paper Series 3408, The World Bank.
  8. Reis, Ricardo, 2005. "The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuations," CEPR Discussion Papers 5054, C.E.P.R. Discussion Papers.
  9. Jushan Bai & Serena Ng, 2001. "A PANIC Attack on Unit Roots and Cointegration," Boston College Working Papers in Economics 519, Boston College Department of Economics.
  10. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, vol. 84(1), pages 155-187, September.
  11. Boyreau-Debray, Genevieve & Wei, Shang-Jin, 2004. "Pitfalls of a State-Dominated Financial System: The Case of China," CEPR Discussion Papers 4471, C.E.P.R. Discussion Papers.
  12. Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Boston College Working Papers in Economics 440, Boston College Department of Economics.
  13. Maurice Obstfeld, 1994. "Are Industrial-Country Consumption Risks Globally Diversified?," NBER Working Papers 4308, National Bureau of Economic Research, Inc.
  14. Gregory D. Hess & Kwanho Shin, 1995. "Intranational business cycles in the United States," Research Working Paper 95-07, Federal Reserve Bank of Kansas City.
  15. Kim, Soyoung & Kim, Sunghyun H. & Wang, Yunjong, 2006. "Financial integration and consumption risk sharing in East Asia," Japan and the World Economy, Elsevier, vol. 18(2), pages 143-157, March.
  16. Chong-En Bai & Yingjuan Du & Zhigang Tao & Sarah Y. Tong, 2003. "Local Protectionism and Regional Specialization: Evidence from China’s Industries," William Davidson Institute Working Papers Series 2003-565, William Davidson Institute at the University of Michigan.
  17. Gregory Chow, 2006. "Are Chinese Official Statistics Reliable?," CESifo Economic Studies, CESifo, vol. 52(2), pages 396-414, June.
  18. Wincoop, Eric van, 1994. "Welfare gains from international risksharing," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 175-200, October.
  19. Holz, Carsten A., 2004. "Deconstructing China's GDP statistics," China Economic Review, Elsevier, vol. 15(2), pages 164-202.
  20. Xinpeng Xu, 2008. "Consumption Risk-Sharing in China," Economica, London School of Economics and Political Science, vol. 75(298), pages 326-341, 05.
  21. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  22. Sandra Poncet, 2005. "A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 409-430, 08.
  23. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
  24. Stefano G. Athanasoulis & Eric van Wincoop, 2001. "Risk Sharing Within The United States: What Do Financial Markets And Fiscal Federalism Accomplish?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 688-698, November.
  25. Mario J. Crucini, 1999. "On International and National Dimensions of Risk Sharing," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 73-84, February.
  26. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  27. Tochkov, Kiril, 2007. "Interregional transfers and the smoothing of provincial expenditure in China," China Economic Review, Elsevier, vol. 18(1), pages 54-65.
  28. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," NBER Working Papers 7828, National Bureau of Economic Research, Inc.
  29. Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1081-1110, November.
  30. Alwyn Young, 2000. "The Razor'S Edge: Distortions And Incremental Reform In The People'S Republic Of China," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1091-1135, November.
  31. Kalemli-Ozcan, Sebnem & Sorensen, Bent E. & Yosha, Oved, 2001. "Economic integration, industrial specialization, and the asymmetry of macroeconomic fluctuations," Journal of International Economics, Elsevier, vol. 55(1), pages 107-137, October.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:38:y:2010:i:9:p:1315-1327. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.