Local government debt and labor income share: Evidence from China.

This study employs a CES production function to construct a theoretical model of labor income share and uses a two-way fixed effects model to test the causal effects of local government debt (LGD) on the labor income share of enterprises. Local government debt governance policies are utilized as exogenous shocks, and a DID (Difference-in-Differences) model is applied for endogeneity testing. The results have passed a series of robustness checks. The findings suggest that LGD decreases the share of firms' labor income. The mechanism analysis suggests that LGD lowers the labor remuneration of residents, the employment of labor in enterprises, and the size of bank loans mainly; while raising the cost of using funds in enterprises. Moreover, this negative effect is more apparent in non-state-owned enterprises, small and medium-sized enterprises, and enterprises with high financing constraints. This study presents new evidence on how the labor income share of enterprises is affected from the perspective by local governments in China. It has important implications for further deepening local government debt governance and achieving common prosperity.

Multi-Tasking Policy Coordination and Corporate Environmental Performance: Evidence from China.

This paper investigates how local governments coordinate the relationship between economic growth targets (EGT) and environmental protection targets (EPT) and the impact of such coordination on firm's environmental performance. Using the pollution emission data of China's industrial firms covering 2003 to 2013, we show that firms in the cities where officials are setting overweighted economic growth targets have more sulfur dioxide intensity, while the central government's hard constraints on EPT included in the official performance evaluation system could partially mitigate the environmental externality of the economic growth target. Further, we find that overweighted EGT significantly decreases firms' desulfurization facilities, capacity, and ratio, while the hard constraint of EPT helps mitigate this negative relationship. We also find that the positive relationship between overweight EGT and firm emissions is more pronounced in the dirty industry, while the hard constraint of EPT helps to mitigate this relationship. The above results help to identify an underlying mechanism of environmental regulation. Finally, we show that converting the hard constraints of environmental protection targets to self-constraint by local government officials could reverse the environmental externality of the economic growth target.

Information flows in the market: An evolutionary game approach.

Information influences the decisions that investors make in the markets. Whether this information is true or false can be quantified and distinguished by markets. To study how information propagates through markets, we propose an information flow game based on an evolutionary game approach. In reality, investors transmit profits or losses when they transmit information, because there are values associated with information in the market. In the information flow game, information is represented by its value. Investors in the game can choose to be sharers or silencers. Sharers share their information with their neighbors according to a sharing rate α, which is a key quantity in the model. In the evolutionary process, we show that more sharers emerge when the market is full of rumors, especially as the sharing rate increases. Higher values of the sharing rate reduce the standard deviation of the information value in such markets, whereas the opposite occurs in markets that largely consist of true information. The reactions of the investors are asymmetric, which indicates that investors are more sensitive to losses than to profits. Furthermore, as the network becomes more random, a higher sharing rate becomes more beneficial for the stability of the emergence of sharers if information is generally false, whereas a lower sharing rate is helpful for the stability of the emergence of sharers if information is generally true.