The Journal of World Economy 2023, No.3
Embracing the New Paradigm of Green Development: A Study of China Carbon Neutrality Policy Framework
Zhu Min; Nicholas Stern; Joseph E. Stiglitz; Liu Shijin; Zhang Yongsheng; Li Junfeng; Cameron Hepburn
Abstract：Transitioning to a carbon-neutral economy does not just mean switching away from fossil fuels. It is rather a paradigm shift in development, which will give rise to a new model of modernization that can benefit both China and the world and contribute to a green and prosperous future. This paper analyzes the fundamental unsustainability of the old development model dating back to the Industrial Revolution, and argues that carbon neutrality represents a profound shift in the old development narrative regarding both the purpose of development, and what and how to produce. This paper rethinks basic issues in economics in describing a new development strategy, focusing on theories of value, the definition and measurement of well-being and wealth, and analytical frameworks for individual and collective behaviour. It defines the actions required to reshape key productive sectors in China and takes into account the cross- cutting systems that are critical for achieving carbon neutrality, including regulatory and supervisory institutions, finance, technology, and innovation, as well as how a coordinated and balanced transition may be achieved. This paper also considers China’s role in leading and promoting global carbon neutrality governance mechanisms, and discusses opportunities for China and the world to collaborate in realizing a mutually advantageous, sustainable future.
Key words：carbon neutrality, paradigm shift, policy framework, economic development, international cooperation
JEL codes：Q01; A10; F5; H00
Foreign Exchange Policy Uncertainty and Corporate Credit Financing from the Foreign Currency Loan Perspective
Meng Wei; Jiang Guohua
Abstract：The adjustments of foreign exchange policy and uncertain expectations of micro entities on the policy implementation, both form Foreign Exchange Policy Uncertainty (FEPU). From the perspective of foreign currency loan, this paper explores the effect of FEPU on firm credit financing. The results show that compared to local currency debt, FEPU contributes to a significant increase in firm foreign currency loans. The relation still holds after controlling for favorable credit policy and exchange rate fluctuations during the same period. Besides, the positive effect is more obvious in the sample with higher financial or exchange risk and stronger perception of foreign exchange. The RMB depreciation expectation and interest rate differential between local and foreign currency loan respectively moderate the relation between FEPU and firm foreign currency loans negatively and positively. The results confirm the risk hedging and cost saving incentives of firm foreign currency loans. Additional tests show that FEPU has a significant restraining effect on firm interest-bearing debt or total leverage ratio, while borrowing foreign currency loans is more conducive to firm value enhancement. This paper has implications for firms to expand financing channels and deal with exchange rate risks under the background of open economy construction.
Key words：foreign exchange policy, uncertainty, foreign currency loan, risk hedging, carry trade
JEL codes：G32; G38; O24
Cross-Border E-Commerce and Producer Services Agglomeration
Liu Yurong; Yang Liu; Liu Zhibiao
Abstract：Cross-border e-commerce is an important driver in promoting the high-quality development of China’s foreign trade, as well as industrial transformation and upgrading. This paper uses panel data for 284 prefecture-level cities in China from between 2003 and 2019 based on the quasi- natural experiment of integrated pilot zones for cross-border e-commerce, employing the difference in differences (DID) method to investigate the impact of cross-border e-commerce on producer services agglomeration. The study finds that cross-border e-commerce significantly improves the specialised agglomeration level of producer services and promotes the optimisation and upgrading of regional industries, but inhibits diversified agglomeration. The heterogeneity analysis reveals that policy effects gradually strengthened during the pilot period. The policy has a significant impact on the high-end producer services represented by the information transmission, software and information technology (IT) service industries. The estimated policy effects in central and western cities, underdeveloped areas and small and medium-sized cities are also significant. Finally, the mechanism test results suggest that cross- border e-commerce can accelerate the construction of the regional informatisation level, expand the growth of imports and exports and stimulate urban innovation activities, which in turn promotes the specialised agglomeration of producer services and industrial optimisation and upgrading. This paper provides empirical evidence supporting the idea that cross-border e-commerce effectively promotes producer services agglomeration and the coordinated development of producer services across regions.
Key words：cross-border e-commerce, producer services, specialised agglomeration, diversified agglomeration, industrial upgrading
JEL codes：L52; L88; O14
Collaborative Innovation Network Effect of Pilot Free Trade Zones: A Study Based on Spatial Regression Discontinuity and Geographical Identification
Wang Mingyi; Chen Lin; Zhang Zhongyi; Yao Qingfang
Abstract：Pilot free trade zones (PFTZs) are an important part of China’s high-level opening-up and innovation-driven development strategy. Hence, experts wonder whether the establishment of pilot free trade zones can improve the collaborative innovation capacity of market players in the zones and form a collaborative innovation network. After manually collecting geospatial information from PFTZs, this paper uses the global positioning system (GPS) to identify and map the geographical boundaries of parks, matching patent data with longitude and latitude coordinates of market entities from 2010 to 2019, and using the spatial regression discontinuity design to investigate the collaborative innovation network effect of the PFTZ strategy. The results indicate that the establishment of PFTZs has significantly improved the level of collaborative innovation in the zones. Institutional innovation of PFTZs provides a high-quality institutional environment for market entities to develop collaborative innovation and improve the efficiency of the administrative review and approval, while the effective protection of intellectual property rights promotes the flow of key innovation factors, thereby enhancing the interoperability of market entities and the operational efficiency of the entire collaborative innovation network. This paper analyses the institutional dividends of the PFTZ strategy from a top-level design perspective that considers both openness and innovation.
Key words：pilot free trade zones (PFTZs), collaborative innovation network, spatial regression discontinuity, geographical identification of parks
JEL codes：F49; O31; P33
Trade Network, Market Access and Improved Business Productivity
Sun Puyang; Song Can
Abstract：Based on inter-firm transaction data disclosed in the annual reports of listed companies, this paper examines the influence and action mechanism of the trade network on corporate productivity, and the influence of market access on the effect of the trade network. The results indicate that the trade network has a significant direct effect and a network effect on improving corporate productivity, and its effect is continuously enhanced with improved market access. Among them, the purchasing network deepens the division of labour under corporate vertical specialisation, the sales network expands the distribution channels of firms and forms economies of scale, and market access is conducive to reducing the fixed costs that firms must overcome in the purchasing or selling process. The trade network formed by firms with geographical proximity and industrial complementarity also has a more significant impact on improving productivity. From the perspective of broader market access, it is further found that a reduction in upstream monopolistic barriers and information barriers generated by digital transformation leads to improving the marginal effect of the trade network on corporate productivity. The conclusions of this paper provide information about the policy for constructing the modern economic system networks and the formation of a regional economic structure with complementary advantages.
Key words：trade network, market access, division of labour under specialisation, corporate productivity
JEL codes：F50; F71
Data Transaction and Data Monopoly: A Study Based on the Perspective of Personalised Pricing
Cheng Hua; Wu Yufan; Li Sanxi
Abstract：By analysing the motivations and transaction effects of consumer data use between manufacturers under the vertically differentiated duopoly market structure, this paper examines the corporate data monopoly strategy and discusses whether companies with existing user data choose to sell the data and thereby give up the data monopoly. It is assumed that companies’use of big data allows them to extract consumer surplus to a maximised extent while attracting more consumers to buy through personalised prices, thus increasing profits. After solving the pricing strategy of manufacturers under different information structures and comparing their earnings, it is found that when a manufacturer owns consumer data it always chooses to sell part of the data use rights to its competitors so as to maximise its total revenue, thus giving up the data monopoly. Since the data asset has user heterogeneity, companies that own user data tend to sell their competitors data on consumers who prefer competing products. The sale of consumer data use rights by manufacturers also harms consumer surplus but improves social welfare compared to a situation where data is not sold. The theoretical model in this paper provides a motivational explanation and mechanism analysis of the data use rights transaction, along with economic solutions on how to address the data monopoly problem.
Key words：data monopoly, data transaction, personalised pricing, vertical differentiation
JEL codes：Q25; Q48; R58
Market Relation and Price Stickiness: Evidence from the Chinese Airline Market
Zhang Tao; Leng Yuting; Yang Jiani
Abstract：The volatility and stickiness of commodity prices reflect the supply-demand relationship and the allocation efficiency of the market. Spatial heterogeneity and the market relation between cities generate even more diversified price dynamics. We introduce the relationship between supply and demand in the structural gravity model estimation and analyze the influence channels of price stickiness: industry monopoly, market competition and administrative intervention. Using the 2020 epidemic shock in China as a quasi-natural experiment, we verify the impact of market relation on airline pricing dynamics. We find that reducing the industry monopoly and market entry cost can significantly result in effective price behavior. Market relation affects price stickiness through three channels: Industry monopoly leads to decreased capacity for price adjustment and reduced price sensitivity; market competition inhibits price stickiness, and the frequency of price adjustment increases as competition intensifies; administrative intervention effectively attenuates price stickiness.
Key words：price stickiness, market relation, pass-through effect
JEL codes：D21; D40; L10; R12
Refining Organisational Structure and Incentivising Intra- and Inter-Group Coordination to Improve the Coordination Dilemma
Yao Lan; He Jiali
Abstract：Efficient coordination in large groups is a fundamental issue of economic organisations. Here the organisational structure of a large group is refined into smaller team units. Unlike paying individuals based on the performance of a large group, organisations change their payment structure while providing incentives to both individuals and teams to facilitate intra- and inter-group coordination. This two-part payment mechanism can effectively internalise strategic uncertainty from large groups to small teams and reduce the individual risk of making significant efforts to achieve successful coordination. In accordance with the theoretical predictions of efficient action choice in a refined organisation structure, experimental results indicate that the two-part payment mechanism has a significant impact on overcoming the coordination dilemma. Compared to the coordination rate of 8% at baseline, the coordination success rate in the two-part payment treatment remains essentially stable at 41.7% and the proportion of subjects who choose to make an effort is significantly higher than that of the baseline treatment.
Key words：coordination game, payment structure, organisational size
JEL codes：C72; C92; D02; D70
Defining the City by Water: How to Eliminate Capital Mismatch in the Resource-Saving Evaluation Standard Contest
Yao Peng; Li Jinze
Abstract：In the important period of strengthening the ecological civilization construction and promoting high-quality development,“defining the city by water”has become a key measure to strengthen the constraint of water resources and build a water-saving society. By clarifying the institutional cause of the dual problems of overallocation of capital and overconsumption of water resources in water-intensive industries, this paper analyzes the mechanism of national selection of water-saving cities to promote optimal capital allocation. The study reveals that as a type of resource-saving evaluation standard contest, competition among the national water-saving cities promotes competition among local governments, drives water-intensive enterprises to enter and exit dynamically, eliminates overinvestment and backward production capacity and subsequently leads to optimal capital allocation. This paper provides empirical evidence on the effectiveness of the resource-saving evaluation standard contest policy and explains the policy implication of the construction of a water-saving society in the period of the 14th Five-year Plan.
Key words：resource-saving evaluation standard contest, capital mismatch, water saving and emission reduction
JEL codes：D24; R50; Q58