UCLA Asia Institute

Why did China's national authority (the center) allow some provinces to adopt deeper urban reforms than others? This paper evaluates alternative answers found in political-economic literature. My data analyses suggest that the center, in implementing urban reforms in the provinces, primarily tried to increase revenue income. The center also attempted to garner political support from the rural consumers and surplus labor, and generate higher returns from material inputs in the provinces. Interest groups appear to be irrelevant. This conclusion is reached by testing the growth, revenue, political-support, and interest-group explanations for different extents of provincial involvement in urban reforms.

Numerate empirical studies have documented a positive correlation between trade, or the "openness," of an economy and its economic growth. The exceptional performance of some developing economies in the past decades seems to have convinced economists as well as government policy makers that developing countries will benefit from opening up their economies. The traditional concerns over the foreign dominance in domestic economies and the loss of non-renewable resources have slowly subsided. China, like many developing economies have begun pursuing a more open trade framework. Despite the many difficulties China is still facing today, the economic reform started two decades ago has not only transformed the once centrally planned economy to a market-oriented economy, but brought impressive economic growth over a fairly long period of time as well. During this transition, foreign investment and other forms of foreign participation in the economy have played a crucial role. China’s experience is a unique opportunity for us to examine the relationship between the "openness" and the performance of an economy.

Various efforts have been made to analyze the role of trade in economic development. Many suggest that technology transfer associated with trade and foreign investment has a positive impact on the growth and, in particular, the export of local firms. However, few have explicitly studied the role of foreign technology. The present study, using survey based firm data, is an effort to investigate the effects of FDI and technology transfer separately and explicitly. The knowledge flow in this case is whether a firm receives foreign knowledge according to the firm’s managers. The approach has the advantage of encompassing different forms of knowledge inflow. The disadvantage is that the answer could be somewhat objective. In this study, I am most interested in the impact of foreign investment and technology transfer on local firms’ export activities. Furthermore, I also seek to identify factors that might contribute to attract foreign knowledge inflow.

Nee's market transition theory claims that redistributive power will decline and returns to human capital will increase as state socialist economies are transformed into market economies. However, many other scholars have discovered that either the influence of redistributive power persists or returns to human capital decline. In this paper, I analyze the effect of marketization on individuals= income inequality in urban China as mediated by work units, which are classified into three types: Low Profit State Firms (LPFs), High Profit State Firms (HPFs), and Market Firm (MFs). LPFs are farthest from the market, HPFs are closer to the market and MFs have to be completely exposed to market conditions. Results based on two urban survey data sets show that while the influence of redistributive power declines, returns to human capital do not monotonically increase, as market transition theory predicts. Although returns to human capital are higher in the market sector than in the state sector, the effects of education on earnings are weaker in HPFs than LPFs within the state sector. The inconsistency is attributed to the effects of bonuses that are equally distributed among employees in HPFs.