John Whalley

The 2008 financial crisis did not precipitate global retaliatory trade intervention, in seeming contrast to the Great Depression in 1930s. This article discusses the influence of model structure in optimal tariff (OT) calculations in explaining this puzzle. We emphasize how earlier literature reports high OTs in numerical calculation (of a hundred percent) but only uses simple trade models. We use numerical general equilibrium (GE) calibration and simulation methodology to calculate OTs both with and without retaliation in a series of observationally equivalent models and explore the influence of model structures on OT levels. We gradually add more realistic features into the basic GE model, and show sharply declined OTs, which suggests that trade retaliation incentives effectively disappear with the deepening of globalization in 2008 compared to 1930. (JEL codes: F11, C63, F13).

This paper discusses how joint cross country indirect tax initiatives can be used to achieve global rebalancing. We suggest that if China and Germany (as major surplus countries) switch their present VAT systems from a destination principle to an origin principle, and the US (as the major deficit country) adopts a VAT on a destination principle VAT, jointly these actions can significantly reduce the three countries’ joint imbalances and so contribute to global rebalancing. We use a numerical general equilibrium model with a monetary structure incorporating inside money to capture endogeneity of trade imbalances, and to also investigate the potential impacts of such initiatives. These confirm that VAT structures are not only good for global rebalancing but also the changes we consider are beneficial for welfare and revenue collection. Our research is aimed to inject new ideas to the present global rebalancing debate. (JEL codes: F17; H21; C68)

Résumé: En Chine, l'impact des inégalités de revenu urbaines sur les inégalités d'ensemble s'accroît. En utilisant des enquêtes auprès des ménages réalisées en 1995, 2002 et 2007, les auteurs analysent l'effet de la réforme du régime de propriété des entreprises – trait marquant de la transition économique chinoise – sur les inégalités salariales des urbains. Ils constatent que, entre 1995 et 2007, la dispersion des salaires est inférieure dans les entreprises d'État, où elle s'accroît plus vite cependant, en raison, pour près de 50 pour cent, d'un transfert de travailleurs vers le secteur privé. Si ce redéploiement se poursuit, les inégalités salariales entre urbains pourraient continuer de se creuser.

Resumen: La desigualdad de ingresos en las ciudades representa un porcentaje creciente de la desigualdad total en China. Con datos de la encuesta de hogares urbanos de 1995, 2002 y 2007, los autores examinan la influencia en la desigualdad salarial urbana del proceso de privatización empresarial, característica primordial de la transición económica china. La dispersión salarial fue mayor en el sector privado en 1995–2007, pero aumentó más rápido en el público. Sin embargo, más del 50 por ciento del aumento de la desigualdad urbana está asociado a la transferencia de trabajadores del sector público al privado. De continuar esta tendencia, la desigualdad salarial urbana seguirá creciendo.

Urban income inequality is an increasingly important driver of China's overall income inequality. Using three urban household surveys for 1995, 2002 and 2007, the authors examine how change in enterprise ownership structure – one of the major features of China's economic transition – has contributed to widening urban wage inequality. While wage dispersion was higher in the private sector over the period 1995–2007, it increased faster in the public sector. However, over 50 per cent of the increase in urban wage inequality is associated with labour reallocation from the public to the private sector. Urban wage inequality may thus widen further if more labour is reallocated to the private sector.

In this paper, we present evidence as to the effects of the China (Shanghai) Pilot Free Trade Zone on China's capital controls which was initiated in September, 2013. It was a trial to introduce a combination of floating exchange rate and capital account liberalization into China's macro policy mix. We employ three methods to test the China (Shanghai) Pilot Free Trade Zone's impact on capital controls: price spread tests between Chinese Yuan in Hong Kong and Chinese Yuan, Renminbi yield gaps between onshore and offshore Renminbi markets, and Granger causalities in China's money supply and foreign interest rates. All these tests give consistent results suggesting that the impact of China's capital controls is weaker since the China (Shanghai) Pilot Free Trade Zone.

This study uses two different datasets to explore the stylized facts of interprovincial trade in China during the recent two decades. One dataset provides the magnitude of bilateral interprovincial goods trade calculated using firms' value‐added tax invoices. The other supplies estimates of interprovincial trade using provincial input–output tables. We find that China has both a large value and a high growth rate of interprovincial trade, but there still exists a home bias in internal trade for most provinces. In addition, disaggregation by product shows that the manufacturing sector has the largest share of interprovincial trade and this share continues to grow. Finally, the spatial distribution of trade suggests that all provinces can be clustered into a smaller number of trade areas with large intra‐cluster trade. Therefore, China's central government should make more effort to reduce local protection, stimulate domestic demand and coordinate interregional trade among local jurisdictions.

Recent economic geography research has identified the round‐tripping of capital from emerging economies to offshore financial centers (OFCs) and back as foreign direct investment (FDI) as a central element of the global offshore FDI network. However, the factors behind this phenomenon are not yet fully understood. Our study develops a general framework that conceptualizes the phenomenon of round‐trip investment. In particular, we argue that secrecy arbitrage, defined as interplay of onshore corruption and offshore secrecy, largely explains round‐trip investment between onshore jurisdictions and OFCs. First, we argue that part of the round‐trip FDI consists of proceeds from corruption, which is laundered in OFCs and reinvested back to the location of origin. Second, we maintain that the secrecy dimension of the OFC also motivates the round‐tripping of licit capital, as businesses use the secrecy provided by OFCs to hide their true identities from corrupt authorities in the home location. To test the validity of our argument about onshore corruption as a driver for round‐trip investment, we empirically analyze firm‐level data on the distribution of offshore FDI (which, we argue, is largely round‐trip) across Russian regions. Our empirical findings confirm that FDI from OFCs is positively associated with host region corruption, and this relationship is stronger for OFCs with a higher secrecy score. Hence, we conclude that round‐trip FDI is strongly motivated by the interplay between onshore corruption and offshore secrecy.