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Channels of Interprovincial Consumption Risk Sharing in the People’s Republic of China

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  • Julan Du

    (Asian Development Bank Institute (ADBI))

  • Qing He
  • Oliver M. Rui

Abstract

This paper analyzes consumption risk sharing among provinces in the People’s Republic of China (PRC) during 1980–2007. The analysis finds that 9.4% of shocks to gross provincial product are smoothed by the interprovincial fiscal transfer system. This system also cushions a relatively large percentage of province-specific shocks in coastal areas. Using a variety of indicators, we explored nonfiscal channels of consumption risk sharing. We found that the migration of rural labor to urban areas and the remittance of migrant wages play an important role in promoting interprovincial consumption risk sharing in inland PRC provinces. In contrast, the extent of risk sharing through financial intermediation and capital markets is very limited. These factors have resulted in a low degree of risk sharing among provinces, especially during the last decade

Suggested Citation

  • Julan Du & Qing He & Oliver M. Rui, 2011. "Channels of Interprovincial Consumption Risk Sharing in the People’s Republic of China," Microeconomics Working Papers 23202, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:microe:23202
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    Cited by:

    1. Joseph DeJuan & Tony S. Wirjanto & Xinpeng Xu, 2016. "The Adjustment of Consumption to Income Changes Across Chinese Provinces," Annals of Economics and Finance, Society for AEF, pages 235-253.

    More about this item

    Keywords

    consumption risk sharing; the People’s Republic of China; fiscal transfer system; interprovincial;

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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