IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article

Consumption Fluctuations and Welfare: Evidence from China

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

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.

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/pii/S0305-750X(10)00086-0
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.

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

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. 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.
  2. Ricardo Reis, 2005. "The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuation," NBER Working Papers 11297, National Bureau of Economic Research, Inc.
  3. Tochkov, Kiril, 2007. "Interregional transfers and the smoothing of provincial expenditure in China," China Economic Review, Elsevier, vol. 18(1), pages 54-65.
  4. 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.
  5. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
  6. Banerjee, Anindya & Massimiliano Marcellino & Chiara Osbat, 2002. "Testing for PPP: Should We Use Panel Methods?," Royal Economic Society Annual Conference 2002 13, Royal Economic Society.
  7. 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.
  8. Ravallion, Martin & Chen, Shaohua, 2007. "China's (uneven) progress against poverty," Journal of Development Economics, Elsevier, vol. 82(1), pages 1-42, January.
  9. Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Econometric Society World Congress 2000 Contributed Papers 1504, Econometric Society.
  10. Gregory Chow, 2006. "Are Chinese Official Statistics Reliable?," CESifo Economic Studies, CESifo, vol. 52(2), pages 396-414, June.
  11. Maurice Obstfeld, 1993. "Are Industrial-Country Consumption Risks Globally Diversified?," NBER Working Papers 4308, National Bureau of Economic Research, Inc.
  12. 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.
  13. 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.
  14. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
  15. Acemoglu, Daron & Zilibotti, Fabrizio, 1996. "Was Prometheus Unbound by Chance? Risk, Diversification and Growth," CEPR Discussion Papers 1426, C.E.P.R. Discussion Papers.
  16. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  17. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1091-1135.
  18. Hess, Gregory D. & Shin, Kwanho, 1998. "Intranational business cycles in the United States," Journal of International Economics, Elsevier, vol. 44(2), pages 289-313, April.
  19. Xinpeng Xu, 2008. "Consumption Risk-Sharing in China," Economica, London School of Economics and Political Science, vol. 75(298), pages 326-341, 05.
  20. 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.
  21. 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.
  22. Wincoop, Eric van, 1994. "Welfare gains from international risksharing," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 175-200, October.
  23. 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.
  24. 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.
  25. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  26. 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.
  27. Raddatz, Claudio, 2005. "Are external shocks responsible for the instability of output in low income countries?," Policy Research Working Paper Series 3680, The World Bank.
  28. 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.
  29. Holz, Carsten A., 2004. "Deconstructing China's GDP statistics," China Economic Review, Elsevier, vol. 15(2), pages 164-202.
  30. 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.
  31. Pierfederico Asdrubali & Bent E. Sørensen & Oved Yosha, 1996. "Channels of Interstate Risk Sharing: United States 1963–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1081-1110.
Full references (including those not matched with items on IDEAS)

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

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.