English, Article, Journal or magazine article edition: Increased Exposure of China to Asymmetric External Shocks: Is Fiscal Federalism an Efficient Answer? Jean-François BRUN; Jean-Louis COMBES; Pascale COMBES MOTEL; ...

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Bookmark: http://trove.nla.gov.au/version/121571
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Increased Exposure of China to Asymmetric External Shocks: Is Fiscal Federalism an Efficient Answer?
Author
  • Jean-François BRUN
  • Jean-Louis COMBES
  • Pascale COMBES MOTEL
  • Mary-Françoise RENARD
Physical Description
  • preprint
Notes
  • RePEc:cdi:wpaper:636
  • 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.
  • China., Co-insurance, Fiscal Federalism, Regional Economics Risk Coping
  • RePEc:cdi:wpaper:182
Language
  • English
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