Publications with Abstracts
Academic Journal Publications
26. Rangazas, Peter., Xiaobing Wang, Yuxiang Zou, 2022, “China’s Efficient Urban Bias”. Pacific Economic Review. 27(3): 223-253. https://doi.org/10.1111/1468-0106.12385
This paper develops a dynamic general equilibrium model with endogenous rural–urban migration to analyse the provision of rural and urban government services in China, with special emphasis on the role of the household registration (hukou) system in shaping its urbanization process. It argues that China's urban bias policy, which is enabled by the hukou system restricting rural–urban migration, did not necessarily reduce economic efficiency. Rather, it might have only raised urban welfare at the expense of rural residents. As the hukou system also ties people to particular geographical locations, this paper argues that China's continuous bias towards coastal and big cities has started to cause economic inefficiency as well as inequality. It suggests that progressive hukou reform reducing barriers to cross-region migration would improve economic efficiency and welfare.
25. Dong, Zhiqiang., Xiaobing Wang, Tianhua Zhang, Yuejun Zhong, 2022, “The Effects of Local Government Leadership Turnover on Entrepreneurial Behavior”. China Economic Review. 71 (101727): 1-17. https://doi.org/10.1016/j.chieco.2021.101727
The behavior of entrepreneurs is significantly affected by the rules of the game and the behaviors of government officials, because they can affect the relative payoffs to different entrepreneurial activities. Based on a representative survey data of private firms and the information of city government officials in China, this paper shows that the change of key local government officials affects the time allocation of the entrepreneurs, and subsequently the performance of firms. In order to maintain and develop the business-government relationship, entrepreneurs have to allocate less time on productive activities and more time on non-productive activities. This effect is particularly large if 1) entrepreneurs do not have political connections, 2) new officials lack local working experience, 3) private firms belong to special industries, 4) private firms have large number of employees. This paper provides micro-level evidence to Baumol’s entrepreneurship allocation theory and a mechanism to account for the observed negative effect of local government leadership turnover on local economic growth in China.
24. Zhan, Peng., Shi Li, Yangyang Shen, Xiaobing Wang, 2022, “When Poverty Reduction Meets Democracy: An Investigation into the Use of Different Evaluation Methods for Assessing the Effectiveness of a Social Programme”, Asian Economic Papers. 21(2):38-60. https://doi.org/10.1162/asep_a_00850
This paper evaluates the minimum living standard guarantee program (Dibao) in rural China using several methods including the income approach, the multidimensional poverty approach, and a proxy means test approach.We find that the targeting accuracy of the program appears greater the more comprehensive the evaluation method used—but all these methods find low levels of targeting accuracy. Because Dibao fund allocation is largely decided by the villagers,who take a more holistic view in selecting “poor” households than the various evaluation methods,we argue that the low targeting efficacy may be due to the lack of comprehensive evaluation method, as opposed to the low targeting of the program itself.This paper argues that the community-based targeting used by the Dibao program may be a better way to combat poverty in many developing countries, as it requires less administrative capacity and overcomes the difficulties of identifying poor households that qualify for assistance.
23. Kakwani, Nanak., Xiaobing Wang, Ning Xue, and Peng Zhan, 2022, “Growth and Common Prosperity in China”, China &World Economy. 30(1): 28–57. https://doi.org/10.1111/cwe.12401
This paper introduces a decomposition method that quantifies the contributions to common prosperity of labor market performance and social policies and extends the idea of shared prosperity to a new measure of inequity in opportunities. The resulting common prosperity indices and opportunity equality indices are then applied to five waves of the Chinese Household Income Project data from 1988 to 2018. This paper shows that the labor market performance and social policies have been improving over the last 30 years and have helped China move towards common prosperity for everyone. The indices developed in this paper allow us to quantify the extent of shared prosperity that a country has achieved and to carry out empirical studies on which policy is working and which is not. It can also help us identify the fundamental causes of inequality and aid us in achieving equality in opportunity among all members of society.
22. Cheng., Cheng, and Wang, Xiaobing. 2021, “Transportation Cost Reducing Technological Change and Wages Inequalities”, Structural Change and Economic Dynamics. 59: 600-611. https://doi.org/10.1016/j.strueco.2021.10.008
This paper provides a new theory that is able to explain both domestic and international wage inequalities. The main argument is that there are broadly two types of technological change: productivity enhancing technological change and transportation cost reducing technological changes. The former increases labour productivity in the country where it is generated from. The latter reduces transportation costs internationally, which lowers the price for imported goods and increases the demand for them. This paper incorporates these technological changes into an open trade economy, where, we assume, there are two countries (i.e. home and foreign) and each country has two types of labour (i.e. skilled and unskilled). The results show that the wage inequality within one country is determined by its own combination of the two different technological changes. Both skilled and unskilled international wage inequalities are determined by the combination of the two different technological changes in two countries simultaneously.
21. Villamil, Anne, Xiaobing Wang and Ning Xue, 2021, “A Political Foundation of Public Investment and Welfare Spending”. Journal of Public Economic Theory. 23(4): 660-690. https://doi.org/10.1111/jpet.12519
This paper develops a political economy model to examine the implications of political selection under an authoritarian regime. We formalize the fiscal policy choice of local governments, focusing on two political selection mechanisms and their implications for public investment and welfare spending. A growth‐oriented promotion system induces local officials to increase public investment, which may increase output but crowd out welfare transfers. This mimics the recent investment‐driven growth in China and relatively low effort to tackle high inequality. Under a broader incentive structure, we show that it is possible for an authoritarian regime to attain the social welfare of a democracy.
20. Lin, Justin Yifu., and Xiaobing Wang, 2022, “Dual Circulation: A New Structural Economics View of Development” Journal of Chinese Economic and Business Studies, 20(4): 303-322. https://doi.org/10.1080/14765284.2021.1929793
This paper provides a detailed account of China’s Dual Circulation Development Paradigm and examines its theoretical foundation from the perspective of the New Structural Economics approach. The purpose of this Paradigm is to shift the focus from foreign to domestic circulation as the major driving force for China’s sustainable development, and to emphasize the importance of a positive reciprocal relationship between domestic and international economic circulations. This paper argues that aim of the Paradigm is to facilitate a qualitative leap in industrial upgrading to achieve both a higher-quality domestic circulation and a higher-level of international circulation. By explaining the development thinking from the Chinese policy-makers’ perspective, this paper also casts light on growth and development issues facing other countries.
19. Shen, Yangyang., Shi Li, Xiaobing Wang, 2021, “The Impacts of Two Tax Reforms on Inequality and Welfare in China”, China and World Economy.29(3): 104-134. https://doi.org/10.1111/cwe.12377
This paper takes stock of the existing literature on taxation and presents a framework to evaluate the impacts of tax policy reforms from the perspectives of progressivity and social welfare. It applies this framework to examine two tax reforms in China and finds that (i) the abolition of the regressive agricultural tax in 2005 has significantly improved the social welfare of rural residents; (ii) the increase in the income tax thresholds in 2011 increased progressivity but reduced the overall income tax share of total taxation. When the majority of the taxpayers are in the lower tax bracket, progressivity has little real impact in improving income distribution.
18. Kakwani, Nanak., Xiaobing Wang, Jing Xu, Ximing Yue, 2021, “Assessing Social Welfare Effects of Government Transfer Programs: Some International Comparisons”, Review of Income and Wealth. 67(4): 1005-1028. https://doi.org/10.1111/roiw.12500
This paper offers a new way of assessing government transfer programs using a social welfare function framework. It demonstrates how one can use social welfare functions to measure such programs’ efficiency without requiring the specification of a poverty line or particular poverty measures. The paper introduces three alternative principles of targeting, which provide a basis for measuring program efficiency. By applying the methodology developed in this paper, we compare the targeting efficiencies of 44 countries, which include both middle and high-income countries.
17. Villamil, Anne., Xiaobing Wang, and Yuxiang Zou, 2020, “Growth and Development with Dual Labor Markets”. The Manchester School. 88(6): 801-826. https://doi.org/10.1111/manc.12341
This paper develops a formal growth model in an open economy environment that captures dual labour market characteristics. The mechanism involves economic growth driven by capital accumulation in a country with a Lewisian labour market leading to increasing labour participation at a near constant wage. The model shows that surplus labour plays a critical role in explaining different economic growth paths and structural changes in both developing and developed countries.
16. Wang, Xiaobing., 2019, “Regulation and corruption in transitional China” Journal of Chinese Economic and Business Studies, 17(1): 47-64. https://doi.org/10.1080/14765284.2019.1588594
This paper addresses the relationship between institutional change, regulation, and corruption by examining two possible positive effects of government discretion on growth in transitional economies, such as China. Firstly, economic reform depends on the support of those who have economic power. Allowing government departments and officials to divert resources and to be involved in private businesses make them a driving force for reform by giving up some of their power to the market. Secondly, because there existed large amounts of inefficient or out-of-date regulations in transitional economies, certain types of government discretion can actually circumvent inefficient policies and regulations and thus support growth. They enable people to break the status quo when regulations are lagging behind the reform. Although China had many laws and regulations which did not particularly promote growth, positive effects of government discretionary behaviour may have offset the negative effects of these laws and regulations on growth.
15. Kakwani, Nanak., Shi Li, Xiaobing Wang, Shanshan Wu, 2019, “Social Tensions in a Growing China” The Manchester School, 87(2): 228-258. https://doi.org/10.1111/manc.12250
In spite of fast growth and increasing average income levels, China’s development has been uneven across various sectors and regions. This uneven development has reduced the life satisfaction of many people and has caused social tensions. Using four rounds of the Chinese Household Income Project data, this paper investigates social tensions caused by inequality, poverty and polarization across rural and urban areas, and across the Eastern, Central and Western regions, and between the emerging super provinces/megacities and the rest. It shows that although tensions have been significantly alleviated by fast economic growth, the impact of growth imbalances is still very severe. China should focus on more balanced growth in addition to a high rate of growth.
14. Kakwani, Nanak., Shi Li, Xiaobing Wang, Mengbing Zhu, 2019, “Evaluating the Effectiveness of the Rural Minimum Living Standard Guarantee (Dibao) Program in China”. China Economic Review. 53:1-14. https://doi.org/10.1016/j.chieco.2018.07.010
China's Rural Minimum Living Standard Guarantee program (Dibao) is the largest social safety net program in the world. Given the scale and the popularity of Rural Dibao, it is necessary to rigorously evaluate it so that policymakers know the extent to which the program meets its intended objective of reducing poverty. This paper develops some new methods and uses data from the 2013 Chinese Household Income Project (CHIP2013) to examine the targeting performance of the rural Dibao program. The paper has found that the Rural Dibao program suffers from very low targeting accuracy, high exclusion error, and inclusion error, and yields a significant negative social rate of return. It discusses possible causes and argues that the fundamental mechanism has to be redesigned to increase the effectiveness of the program. The paper makes some recommendations to reform Dibao that will significantly improve targeting and reduce the cost of running the program. That will help China to achieve its goal of eradicating extreme poverty by 2020.
13. Rangazas, Peter., and Xiaobing Wang, 2019, “Internal Migration Restrictions and Labor Allocation in Developing Countries” The Singapore Economic Review, 64(2): 263-279. https://doi.org/10.1142/S0217590817470051
We develop a simple model with endogenous rural–urban migration to analyze the implications of migration restrictions for economic welfare. The model reveals that a combination of an efficient urban bias in public service provision and internal migration restrictions can raise social welfare. Our results suggest that migration restrictions should be carefully assessed as a policy choice rather than immediately dismissed as suboptimal. However, even when restrictions raise social welfare, they increase urban households’ welfare at the expense of rural households’ welfare, creating an equity tradeoff for policy-makers to consider.
12. Lin, Justin Yifu., and Xiaobing Wang, 2017, “The Facilitating State and Economic Development: The Role of the State in New Structural Economics”, Man and the Economy, 4 (2):1-19. Reprinted in Lin and Nowak (edit), 2018, New Structural Policy in an Open Market Economy, University of Warsaw Faculty of Management Press, in both English and Polish. The book is forwarded by the Polish Prime Minister Mateusz Morawiecki. https://doi.org/10.1515/me-2017-0013
This paper explores the ideas of development and the role of the state in economic development and institutional change from the New Structural Economics perspective. We argue that economic structures – including the structure of technology and industry, and hard and soft infrastructure – are endogenous to the endowment structure, which is given at any specific time and changeable over time. We advocate a state to facilitate structural change by using industrial policy to overcome market failures in order to help industries with latent comparative advantages to become competitive in the market and the state should pragmatically prioritize the use of its limited resources and implementation capability to create enclaves with favourable infrastructure and institution to jump start a dynamic growth in a country beset with poor infrastructure and institution.
11. Wang, Xiaobing., Jenifer Piesse, and Zhengmao Ye, 2016 “Labour Markets in China: A Study of Structure and Evolution of Wages”. Frontier of Economics in China. 11(2): 265–301. https://doi.org/10.3868/s060-005-016-0016-7
This paper examines the development of labour markets and the evolution of a structure of wages in China, using household surveys for 1988, 1995, 2002 and 2007. It finds evidence of both provincial and sectoral segmentation in labour markets, with eastern regions and the state-controlled sector enjoying high wage premiums in the early reform period. During the reform, China has progressed slowly towards an integrated labour market with convergence in incomes between the rural non-agriculture sector and the urban market-based sector by 1995, when industry flourished in the rural areas. The wage gap between the rural non-agriculture sector and other sectors increased and the urban state-controlled sector remained segmented with respect to all other sectors up to 2002. However, the data from 2007 show there has been increasing sectoral and spatial integration.
10. Wang, Xiaobing., Adam Ozanne and Xin Hao, 2014, “The West’s Aid Dilemma and the Chinese Solution?” Journal of Chinese Economic and Business Studies,12(1):47-61. https://doi.org/10.1080/14765284.2013.875287
There are currently two contrasting approaches towards aid policy in Africa: that followed by the West is well known for its conditionality and selectivity and focus on direct financial support, while the approach adopted by China eschews conditionality and concentrates on infrastructure building. The Chinese approach has been criticized for its failure to create direct employment and because, it is argued, its unconditionality hampers good governance in Africa. However, this paper argues that the West faces a dilemma in that governance and its improvements are endogenous to the economic development of a country. Making aid conditional upon governance therefore unduly penalizes countries at the bottom. The Chinese approach, in contrast, avoids this dilemma by directly targeting constraints to development; it may therefore be more effective in generating long-run growth, which may in turn foster good governance.
9. Wang, Xiaobing., and Bernard Walters, 2013. “The Real Origin of Global Financial Imbalances”, Journal of International Development, 25(8):1050-1060. https://doi.org/10.1002/jid.2974
There is an evident global imbalance puzzle: debt levels in developed countries are continuing to expand despite their huge size whereas the size of foreign exchange reserves held by developing countries continues to grow. This paper argues that this pattern of global imbalances is a consequence of an asymmetric international system, the roots of which lie in the differences in labour structures between the developed and developing countries. It suggests that this global imbalance is likely to continue and is beneficial for both developed and developing countries.
8. Wang, Xiaobing., Jenifer Piesse and Nick Weaver, 2013, “Mind the Gaps: A Political Economy of the Multiple Dimensions of China’s Rural-Urban Divide”. Asian Pacific Economic Literature. 27(2):52-67. https://doi.org/10.1111/apel.12026
China’s impressive growth has been accompanied by high inequality and a wide rural–urban divide. This paper identifies and examines some of the major dimensions of this divide: income, consumption, education, employment, health care, pensions, access to public services, and the environment. The paper attributes the main causes of the divide to China’s urban-biased development strategies and the resulting lack of social provision of public goods in rural areas. It also highlights the severe and multidimensional constraints on the Chinese peasantry and argues that increased equality and efficiency can now be pursued simultaneously.
7. Wang, Xiaobing., and Nick Weaver, 2013, “Surplus Labour and Urbanization in China”. Eurasia Economic Review. 3(1):84-97. https://doi.org/10.14208/BF03353842
This paper distinguish two types of urbanization and argues that urbanization without sufficient employment creation in the urban sector might have no economic benefit as it only involves surplus labour in the rural areas becoming urban surplus labour. It argues that China’s Hukou system that has restricted rural-urban migration did not necessarily reduce economic efficiency rather it might have raised urban welfare at the expense of rural welfare. An under-discussed feature of the Hukou system is that it ties people not to just either rural or urban areas but to particular geographical locations. This paper argues that many of the recent “rural land for urban Hukou” programs, in the name of reducing the rural-urban income gap, do little to address the geographic specificity of the Hukou restrictions but may in effect amount to a land appropriation by local governments. This paper suggests that to improve economic efficiency and welfare, a “real” reform of the Hukou system should reduce barriers for cross regional migration.
6. Wang, Xiaobing., and Nick Weaver, 2013, “Surplus Labour and Lewis Turning Points in China”. Journal of Chinese Economic and Business Studies. 11(1): 1-12. https://doi.org/10.1080/14765284.2012.755303
It has been widely recognised that China has had a large pool of surplus labour. However, despite its significant implications for wage levels and the Chinese economy, the current debates yield conflicting results as to whether a Lewis turning point has been reached. This paper clarifies a theoretical issue about the mechanisms of surplus labour absorption, subsequently indentifies two Lewis turning points and examines the factors that affect the reaching of these two points. It then applies the framework to China to study the labour absorption process and examines some of the likely implications of the removal of the Hukou system in terms of welfare and economic performance.
5. Wang, Xiaobing., Nick Weaver and Jing You, 2013, “The Social Security Function of Agriculture in China”, Journal of International Development. 25 (1): 1–10. https://doi.org/10.1002/jid.2827
On the basis of the Lewis model, this paper addresses the theoretical foundations of the social security function of the agricultural sector and investigates the impact of this function on Chinese development. We argue that the agricultural sector and secure agricultural land holdings are important means, in the absence of comprehensive government provision of social security, in insuring rural residents and rural–urban migrants against risks and uncertainties. Given a large rural population and massive rural–urban migration, secure access to land for both rural and migrant populations in China has helped the economy avoid systemic risk and helped to maintain social stability.
4. Wang, Xiaobing., and Jenifer Piesse, 2013 “The Micro foundations of Dual Economy Models”, The Manchester School. 81(1): 80–101. https://doi.org/10.1111/j.1467-9957.2011.02263.x
This paper provides microfoundations for dual economy models. First, the patterns of production and population growth in the traditional agricultural sector are examined. This shows the connection between long-run per capita income and subsistence wages. Second, it proves the existence of surplus labour and defines two types of surplus labour. Third, it considers two wage determination mechanisms in the modern sector and their relationships with the requirement for labour market restrictions. Fourth, the labour market is linked to food supply. Fifth, the dynamics of surplus labour and labour transfer are considered and two types of turning point are defined.
3. Li, Na., Wei-Hsin Lin and Xiaobing Wang, 2012, “From Rural Poverty to Urban Deprivation? The Plight of Chinese Rural-Urban Migrants through the Lens of Last Train Home”, East Asia: An International Quarterly. 29 (2): 173-186. https://doi.org/10.1007/s12140-012-9175-2
China’s impressive growth has been accompanied by huge rural-urban divide and social sacrifice of many including rural-urban migrants. Reflecting on the documentary Last Train Home (2009) by Lixin Fan, this paper identifies and examines the life of rural-urban migrants in China in terms of poverty-reduction, child-care, education and equal opportunities for a better life. By comparing the seemingly difficult and tragic life of the Zhang family against statistical facts, it shows that their suffering and struggles are common to most migrants. In essence, by creating an interactive dialogue between the film and the economic reality in China, this paper highlights the severe constraints on the Chinese peasantry and discusses the implications of limited choices and social injustice towards rural-urban migrants. It argues that the inequality in opportunities and the lack of social care for migrants has created huge social cleavage that not only reduces social welfare but may also impede further development.
2. Imai, Katsushi., Xiaobing Wang and Woojin Kang, 2010, “Poverty and Vulnerability in Rural China: Effects of Taxation”, Journal of Chinese Economic and Business Studies. 8(4): 399-425. https://doi.org/10.1080/14765284.2010.513177
This paper studies the impact of taxation on poverty and ex ante vulnerability of households in rural China based on national household survey data in 1988, 1995 and 2002. It has been confirmed that (i) poverty and vulnerability have reduced significantly with a great deal of geographical disparity; (ii) education, land, and access to infrastructure and irrigation facilities are the key factors to reduce vulnerability; and (iii) the highly regressive tax system increased farmers’ poverty and vulnerability. The abolishment of rural tax since 2006 would thus have a significant negative impact on both poverty and vulnerability of rural households.
1. Wang, Xiaobing., and Jenifer Piesse, 2010, “Inequality and the Urban-rural Divide in China: Effects of Regressive Taxation”, China and World Economy. 18(6): 36-55. https://doi.org/10.1111/j.1749-124X.2010.01219.x
Using three comparable national representative household surveys for China in 1988, 1995 and 2002, the present paper reveals the regressivity and urban bias of China’s direct tax and welfare system in this period. It shows that a regressive taxation system and skewed allocation of subsidies increases the urban–rural income gap and enhances overall inequality. Modeling these relationships indicates that the relatively poorer rural population has a net tax liability, whereas those in the richer urban areas receive net subsidies. This pattern is common in China, although the extent of the bias varies. This skewed system of tax and welfare payments is a major cause of the persisting urban–rural income gap and contributes to the overall income inequality in China. The abolishment of the agriculture tax in 2006 has had a positive impact on rural people’s livelihoods.
Books
1. Peach, Terry., and Xiaobing Wang, (eds.) 2024, The Economics of New China, London: Routledge. Forthcoming.
This book is an edited volume of research on various aspects of the history of thought and practices in New China since 1949. It covers a wide range of topics including the evolution of China’s thoughts on economic growth and the construction of an academic discourse system in the New Era, the thought and practice in the areas of sovereign debt, poverty reduction, industrialization and urbanization.
Book chapters
1. Zhu, Mengbing., Kakwani, Nanak., Shi Li, Xiaobing Wang, 2023, “Social Opportunity Function and Equity in Opportunity in China”, in Yaojun Li and Yanjie Bian and (Eds.), Social Inequality in China (pp. 209-233). World Scientific Publishing, London. https://doi.org/10.1142/9781800612143_0009
This chapter uses a social opportunity function to analyze equity in opportunity in China. It traces the inequity of opportunity in education, especially the role circumstances play in educational attainment. We find a narrowing inequity in compulsory education between urban and rural areas; however, inequity in education in the high school age group still exists and remains large, especially in rural western areas. The results shed light on the importance of the regional circumstances in inequality in opportunity and suggest that more public investment in human capital will be needed in rural areas, especially Western China.
Editorials
3. Peach, Terry., and Xiaobing Wang, “Introduction to The Economics of New China: Thought and Practice”, London: Routledge. Forthcoming.
2. Wang, Xiaobing., Nick Weaver, and Ning Xue, 2019, (Editorial) “Challenges for the Chinese economy in the new era of development” Journal of Chinese Economic and Business Studies, 17(1): 1-7.
1. Wang, Xiaobing., and Terry Peach, 2019, (Editorial) “Understanding China’s Economic Development: Retrospect and Prospect”, The Manchester School, 87(2): 135-137.