[CEAMeS DP13 ] “Structural change, rebalancing and the danger of a middle-income trap in China”

CEAMeS Discussion Paper No 13 | 2018

Helmut Wagner

China is currently experiencing a structural change toward tertiarization and an implied growth slowdown associated with it. The paper investigates whether this growth slowdown is merely cyclical or a negative trend, and further what China is doing or should do to avoid falling into a “middleincome trap,” a problem many emerging economies have experienced in recent decades. The pitfalls of the current “soft” rebalancing policy in China are analyzed in the context of this development.

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Prof. Helmut Wagner published paper in the BOFIT Policy Brief series

Prof. Helmut Wagner published his paper “Structural change, rebalancing, and the danger of a middle-income trap in China” in the BOFIT Policy Brief series (BOFIT Policy Brief 2018 No. 6). He presented a first version of this paper early this year, when he attended an ECB-Conference in Helsiniki, Finland as the Keynote-Speaker. You can find the paper and an abstract here.

The paper is also available as CEAMeS Discussion Paper No. 13 (you can find it here).

CEAMeS Researchers attend Conferences in China and Korea

With Linda Glawe, Antonia Reinecke and Michael Murach three CEAMeS-researchers will each attend a couple of conferences and workshops in the next weeks, to present their latest research results. Miss Glawe and Mister Murach will participate in the “2018 China Meeting of the Econometric Society” in Shanghai, China (June, 15-17) and Miss Reinecke and Miss Glawe are going to take part in the “2018 Asian Meeting of the Econometric Society” in Seoul, Korea (June 21-23). On the 23rd and 24th of June Michael Murach will attend the “4th HenU/ INFER Workshop on Applied Macroeconomics” hosted by the Henan University in Kaifeng, China.

[CEAMeS DP12] “The Deep Determinants of Economic Development in China – A Provincial Perspective”

CEAMeS Discussion Paper No 12 | 2018

Linda Glawe and Helmut Wagner

There is a significant body of literature arguing that institutional quality is the key for long run economic growth and development. While the majority of these studies are based on cross-country growth regression, in our paper, we focus on the institution-economic growth nexus within a particular country, namely China. China is often regarded as an exception by having achieved miraculous growth for more than three decades despite relatively low institutional quality. However, our key findings suggest that at the provincial level, institutional quality played in fact an important role for the economic success of a province in China, “trumping” geographical factors and integration which only have an indirect effect by influencing institutional quality. We employ instrumental variable estimation techniques to address the endogeneity problems regarding the institutions-development relationship.

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Second CEAMeS Workshop on East Asia Macroeconomic Studies in Xiamen has been successfully completed

The Second International Forum on East Asia Macroeconomic Studies organized by the Center for Macroeconomic Research (CMR) of Xiamen University, China and the Center for East Asia Macroeconomic Studies (CEAMeS) from the FernUniversität in Hagen, Germany took place in Xiamen last week. From the 9th May until the 11th over 40 international researchers from three different continents attended the three-day workshop. From the FernUniversität in Hagen Linda Glawe, Antonia Reinecke and Michael Murach presented their current research during the workshop. They were accompanied by Professor Helmut Wagner (Head of CEAMeS) and Professor Hans-Jörg Schmerer (Deputy-Head of CEAMeS), who participated actively in the discussions during the workshop. The forum included presentations by researchers from well-known institutions and universities such as Kobe University and Hitotsubashi University, Japan and CASS (Chinese Academy of Social Sciences), China. Prof. Wagner, who was invited to speak during the opening ceremony alongside Professor Wuyuan Chen (Director, Managing Department of Social Sciences, Xiamen University) and Professor Wenpu Li (Director of the Center of Macroeconomic Research of Xiamen University), was very satisfied with the second workshop. “I think the event was a great experience for all participants, and I want to thank the whole conference organizing committee for the smooth process during the workshop and our local hosts for their hospitality.” It was the second edition of the meeting, after the first workshop took place at the FernUniversität in Hagen one year ago.


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Soruce: Center for Macroeconomic Research (CMR) of Xiamen University, China)

From CEAMeS Linda Glawe gave a presentation on her latest paper “On the Deep Determinants of Economic Development in China – a Provincial Perspective”, and Antonia Reinecke gave a talk about ”Estimating the Local Effectiveness of Institutions: A Latent-Variable Approach”. Michael Murach presented his paper “Success Factors for Sustainable Catching up – Lessons from South Korea for China” (all papers will soon be published as CEAMeS discussion papers).

The three-day workshop was marked by a cordial atmosphere and mutual respect between the attendants. In his closing remarks, Porfessor Wenpu Li expressed his contentedness with the course of the workshop in cheerful words. Prof. Wagner announced that the third edition of the workshop will take place in Germany in 2019, and will again be organized by the Center for East Asia Macroeconomic Studies. Prof. Schmerer stated, “The workshop has become a nice tradition between our organisations and I’m really looking forward to deepen our connections.”


(Source: Center for Macroeconomic Research (CMR) of Xiamen University, China)

In the next days, we will upload a few pictures from the workshop on our website.

2nd CEAMeS Workshop on East Asia Macroeconomic Studies will take place soon

Next week (9th – 11th of May) the 2nd CEAMeS Workshop is about to start. After the successful debut last year, when the workshop took place at the FernUniversität in Hagen, the Center for Macroeconomic Research at Xiamen University in China (XMU) will host the second event. Like last year, the workshop will again deal with current challenges concerning East Asian economies and especially China.

Prof. Wagner and Prof Schmerer are going to guide the delegation from the FernUniversität in Hagen which includes Linda Glawe, Antonia Reinecke and Michael Murach. The researchers will present their current research activities within the three-day workshop.

The workshop includes over twenty presentations by authors from five different countries. Prof. Wagner has the honor to speak, together with Prof. Wuyuan Chen and Prof. Wenpu Li (both XMU), at the opening ceremony. You can download the program as a PDF-file following this link [PDF].

“Financial frictions and foreign direct investment: Evidence from Japanese microdata”

“Financial frictions and foreign direct investment: Evidence from Japanese microdata”

Horst Raff, Michael Ryan and Frank Stähler

In: Journal of International Economics, Vol. 112, pp 109 – 122

Using Japanese microdata for the period 1980 to 2000 Raff et al. find evidence for two transmission channels from financial shocks to foreign direct investment: a collateral channel, whereby changes in the value of investors’ landholdings affect their borrowing ability; and a lending channel, whereby changes in bank health affect banks’ lending ability.

“Government Credit, a Double‐Edged Sword: Evidence from the China Development Bank”

“Government Credit, a Double‐Edged Sword: Evidence from the China Development Bank”

Hong Ru

In: The Journal of Finance, Vol. 73, No. 1, pp 275 – 316

Using proprietary data from the China Development Bank (CDB), this paper examines the effects of government credit on firm activities. Tracing the effects of government credit across different levels of the supply chain, Ru finds that CDB industrial loans to state‐owned enterprises (SOEs) crowd out private firms in the same industry, but crowd in private firms in downstream industries.

“The effects of ownership change on bank performance and risk exposure: Evidence from indonesia”

“The effects of ownership change on bank performance and risk exposure: Evidence from Indonesia”

Mohamed Shaban and Gregory A. James

In: Journal of Banking & Finance, Vol. 88, pp 483 – 497

Shaban and James investigate the effects of an ownership change on the performance and exposure to risk of 60 Indonesian commercial banks over the period 2005-2012. They can show, that state-owned banks tend to be less profitable and more exposed to risk than private and/or foreign banks.

CEAMeS published two new Discussion Papers

You can find two new Discussion Papers by Linda Glawe and Prof. Helmut Wagner on our website. The CEAMeS Discussion Paper No. 10: “The Deep Determinants of the Middle-Income Trap” is available here; and the CEAMeS Discussion Paper No. 11: “The Deep Determinants at More Subtle Stages of Development – The Example of the Middle-Income Trap Phenomenon” is available here.

[CEAMeS DP11] – “The Deep Determinants at More Subtle Stages of Development – The Example of the Middle-Income Trap Phenomenon”

CEAMeS Discussion Paper No11 | 2017

Linda Glawe and Helmut Wagner

The so-called ‘deep determinants’ of economic growth and development (namely, geography, institutions, and integration) have been found to be decisive for the break out of stagnation and for explaining cross-country income differences by many empirical studies. However, so far, very little has been done to examine to which extent they are also crucial at more subtle stages of economic development. Our paper aims to close this gap by focusing on the phenomenon of the middle-income trap (MIT) which has reached increasing attention in the last 15 years. In particular, we test whether the results of the empirical studies conducted by Acemoglu et al. (2001), Rodrik et al. (2004), and Easterly and Levine (2016) also remain valid when analyzing the MIT. We are the first to analyze the relationship between the deep determinants and the MIT, especially regarding the causal effect of institutional quality on the probability of experiencing a growth slowdown at the middle-income range. Our analysis reveals that while, in general, the deep determinants also seem to play an important role for the middle-income transition (and the question of whether a country falls into an MIT), some differences compared to the results of the standard literature become apparent.

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[CEAMeS DP10] – “The Deep Determinants of the Middle-Income Trap”

CEAMeS Discussion Paper No 10 | 2017

Linda Glawe and Helmut Wagner

The fundamental, underlying factors of development are often neglected when analyzing the question why countries experience a growth slowdown at the middle-income range. Although these so-called ‘deep determinants’ such as geography and institutions have been found to be decisive for the break out of stagnation and for explaining cross-country income differences by many empirical studies, so far, very little has been done to examine to which extent they are also crucial at more subtle stages of economic development. Our paper aims to contribute to close this gap by focusing on the phenomenon of the middle-income trap (MIT) which has reached increasing attention in the last 15 years. In particular, we are interested in whether the deep determinants have positive or negative impacts on the possibility of a country to experience a prolonged stay within the middle-income range. We focus especially on exogenous variables to avoid endogeneity/reverse causality problems. By using simple statistical hypothesis testing, we show that not all findings of the deep determinants literature can be easily transferred to the MIT phenomenon, especially regarding institutional variables. This may raise the question whether we need new deep determinants of growth for the MIT or at least a modified version taking into account the specific circumstances and characteristics of middle-income countries.

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