Understanding the Impact of Land Resource Misallocation on Carbon Emissions in China

In order to achieve growth in fiscal revenue and the regional economy under the Chinese decentralization system, the land resources misallocation (LRM) among different industries was promoted through the differentiated land supply strategy, which has a vital role in carbon emissions. This study theoretically analyzes the overall effect and the effect of the intermediate LRM mechanism on carbon emissions and empirically tests the impact of LRM on carbon emissions based on panel data collected from 30 provinces in China from 2005 to 2017 using the environmental Kuznets curve theory. The results show that (1) the local governments have monopolized the primary land market across the nation, leading to resource misallocation among industrial, commercial, and residential land. This inefficient and unsustainable allocation aggravated the release of carbon emissions. (2) The impact of LRM on carbon emissions has varied among different regions. LRM in the eastern and central regions significantly exacerbated carbon emissions. A greater impact on carbon emissions occurred in the eastern region, while the impact was insignificant in the western region. (3) There are two mechanisms through which LRM affects carbon emissions. One is the restraint of upgrading industrial structure, and the other is the restriction of technological innovations. In conclusion, speeding up the reform of the tax sharing system is suggested to reduce the excessive dependence of local governments on land resources. Meanwhile, in order to reduce carbon emissions, the land acquisition and transfer system should be reformed to gradually achieve the market-oriented allocation of land resources, and the benefits coordination mechanism of different land transfer modes should be established. Finally, we propose different carbon emission reduction policies for the heterogeneity of regional economic development.

Optimal Inflation Target in an Economy with Menu Costs and a Zero Lower Bound

I study the optimal inflation target in a quantitative menu cost model with a zero lower bound on interest rates. I find that the optimal inflation target is 3.5 percent, which is higher than in models commonly used for monetary policy analysis. Key to this result is that inflation has a small effect on resource misallocation when the model features firm-level shocks, which are necessary to match the empirical distribution of price changes. A higher inflation target decreases price flexibility at the zero lower bound, and through this mechanism, it reduces the severity of recessions when the monetary authority is constrained. (JEL E12, E31, E32, E42, E52)

Resource Misallocation and Energy-Related Pollution

Developing countries face the conflict between economic development and environmental protection. Resource misallocation will not only affect the effectiveness of economic development, but also have environmental impacts. Based on two large-scale enterprise databases in China, this paper measured the level of enterprise resource allocation, and further used empirical research methods to investigate the environmental impact of enterprise resource misallocation and specific mechanisms. The results show that the low efficiency of resource allocation will harm the quality of China’s environment. Further investigation, resource misallocation is accompanied by an increase in total energy input, a decrease in the labor-to-energy ratio and the capital-to-energy ratio, and a loss of energy efficiency, which in turn affects the environmental performance of enterprises. China is the largest developing country in the world, and research on China’s environmental and economic issues is important. The conclusions of this paper can provide experience and suggestions for other developing countries to improve environmental quality and promote sustainable development from the perspective of resource misallocation.

Recovery and exit of zombie firms in Portugal

The resources sunk in zombie firms have risen over the last two decades, hampering productivity growth in developed economies. In this paper, we examine the recovery and exit of zombie firms among small- and medium-sized enterprises (SME), as well as the determinants of these transitions. To our knowledge, this is the first study on the determinants of the probability of a zombie recovering or exiting in a European context. The study also contributes to the discussion of the definition of zombie firms. Based on a panel of Portuguese manufacturing and services firms covering the 2004–2017 period, we do find a widespread presence of zombies. As expected, they are relatively less productive than non-zombies, while the probability of transition into recovery and exit is relatively low, which we interpret as evidence in favour of the presence of high barriers to firm mobility. In turn, the regression results show that downsizing and restructuring, as well as debt restructuring, are crucial in enhancing recovery of zombie firms. These are non-trivial results from the perspective of managers and policy makers. We performed several exercises using alternative definitions of zombie firms and estimation techniques and found that our findings are robust.Plain English Summary A 1% decline in the share of highly indebted and unprofitable firms (i.e. zombies) is estimated to increase the average labour productivity by 3.1 percent. Recovery of zombies in particular can be enhanced by downsizing and restructuring. Based on a very large panel of Portuguese small- and medium-sized manufacturing and services firms, covering the 2004–2017 period, we do find a widespread presence of zombie firms. Moreover, the chance of these firms to recover or exit is relatively low, an evidence of the presence of high barriers to firm mobility and resource misallocation. Our results have important managerial and policy implications: (1) a coordinated and holistic restructuring strategy (technological, operational and debt-related) is crucial to increase the likelihood of recovery of weak companies; (2) governments should formulate an adequate institutional framework in order to strengthen the selection of zombie firms, namely by designing more reallocation-friendly insolvency regimes and discouraging creditors to refinance unviable firms.

Giffen goods, backward bending supply curves, price controls and praxeology; or, who’s afraid of the big bad boogie man of giffen goods and backward bending supply curves? Not us

What is the status of claims about the effects of minimum wage laws? Empirical or praxeological? We claim the latter. How can the effect of such legislation be best analyzed under the assumption of mis-behaving supply (backward bending) and demand (positively sloped, based on positing Giffen goods) curves? In the usual manner: resource misallocation still occurs. But this is only arguendo. More radically, such curves are themselves problematic. Even more radically, this, too, applies to «well behaved» supply and demand curves as well. Key words: Backward Bending Supply Curves, Price Controls, Praxeology, Giffen Goods, Logical Positivism. JEL Classification: D0. Resumen: ¿Cuál es el status del análisis sobre los efectos de las leyes de salario mínimo? ¿Empírico o praxeológico? Nosotros defendemos lo se gundo. ¿Pueden analizarse mejor los efectos de dichas leyes suponiendo curvas de oferta y demanda anómalas (como las de los bienes Giffen)? Como en el nálisis tradicional se produce una mala asignación de recursos. En todo caso, tanto tales curvas, como las tradicionales son muy problemáticas. Palabras clave: Control de precios, praxeología, bienes de Giffen, positivismo lógico. Clasificación JEL: D0.