IDEAS home Printed from https://ideas.repec.org/p/cdi/wpaper/636.html
   My bibliography  Save this paper

Increased Exposure of China to Asymmetric External Shocks: Is Fiscal Federalism an Efficient Answer?

Author

Listed:
  • Jean-François BRUN

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Jean-Louis COMBES

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Pascale COMBES MOTEL

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Mary-Françoise RENARD

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

Abstract

The aim of this paper is to examine whether there is a co-insurance mechanism against provincial aggregate income fluctuations between the Chinese provinces. Our theoretical argument relies on the existence of an efficient allocation of risk between the Chinese provinces. According to this analysis, an institutional arrangement between the provinces allows the perfect smoothing of provincial private consumption. In this case, changes in provincial private consumption depend rather on changes in aggregate Chinese income than on asymmetric changes in provincial income. We test this hypothesis on the 1989-2000 period for 30 Chinese provinces using the GMM estimator. Econometric evidence highlights the weakness of co-insurance mechanisms between the Chinese provinces. First, we reject the hypothesis of perfect insurance. Second, there does not seem to exist a significant, though imperfect, insurance mechanism. Indeed, the provinces’ private consumption reactions are the same either after a shock affecting all the provinces or after an asymmetric shock.

Suggested Citation

  • Jean-François BRUN & Jean-Louis COMBES & Pascale COMBES MOTEL & Mary-Françoise RENARD, 2004. "Increased Exposure of China to Asymmetric External Shocks: Is Fiscal Federalism an Efficient Answer?," Working Papers 200425, CERDI.
  • Handle: RePEc:cdi:wpaper:636
    as

    Download full text from publisher

    File URL: http://publi.cerdi.org/ed/2004/2004.25.pdf
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mary-Françoise RENARD, 2004. "La montée en puissance de la Chine dans le commerce mondial : une réussite spectaculaire pour une economie fragile," Working Papers 200427, CERDI.
    2. Mary-Françoise Renard, 2004. "La montée en puissance de la Chine dans le commerce mondial : une réussite spectaculaire pour une économie fragile," Revue d'Économie Financière, Programme National Persée, vol. 77(4), pages 43-61.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdi:wpaper:636. 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: (Vincent Mazenod). General contact details of provider: http://edirc.repec.org/data/ceauvfr.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.