Channels of Interprovincial Consumption Risk Sharing in the People’s Republic of China

41 Pages Posted: 21 Dec 2011

See all articles by Julan Du

Julan Du

The Chinese University of Hong Kong (CUHK) - Department of Economics

Qing He

School of Finance, Renmin University of China

Oliver M. Rui

China Europe International Business School (CEIBS)

Date Written: December 21, 2011

Abstract

This paper analyzes consumption risk sharing among provinces in the People’s Republic of China (PRC) during 1980–2007. The analysis finds that 9.4% of shocks to gross provincial product are smoothed by the interprovincial fiscal transfer system. This system also cushions a relatively large percentage of province-specific shocks in coastal areas. Using a variety of indicators, we explored non-fiscal channels of consumption risk sharing. We found that the migration of rural labor to urban areas and the remittance of migrant wages play an important role in promoting interprovincial consumption risk sharing in inland PRC provinces. In contrast, the extent of risk sharing through financial intermediation and capital markets is very limited. These factors have resulted in a low degree of risk sharing among provinces, especially during the last decade.

Keywords: prc provinces, interprovincial fiscal transfers, consumption risk sharing

JEL Classification: O16, O53, R11

Suggested Citation

Du, Julan and He, Qing and Rui, Oliver M., Channels of Interprovincial Consumption Risk Sharing in the People’s Republic of China (December 21, 2011). ADBI Working Paper No. 334, Available at SSRN: https://ssrn.com/abstract=1975222 or http://dx.doi.org/10.2139/ssrn.1975222

Julan Du (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

Shatin, N.T.
Hong Kong

Qing He

School of Finance, Renmin University of China ( email )

Minde Building
Renmin University of China
Beijing, Beijing 100872
China

Oliver M. Rui

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

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