The Eighth International Annual Workshop on New Structural Economics (NSE) was successfully held online on December 13-14, 2021. The Workshop, hosted by the Institute of New Structural Economics (INSE) at Peking University, brought together worldwide scholars to exchange research ideas and findings on 5 main subjects including “Economic Growth”, “Spatial Distribution of Economic Activities”, “Theories and Empirics in Growth”, “Finance and Development” and “Industrialization and Economic Development”.
At the opening session on December 13, Professor Justin Yifu Lin, Dean of INSE at Peking University, gave a short opening remark, expressing sincere gratitude to the participants for their support during the epidemic. After retrospecting the process and dilemma of structural changes in developing countries, he pointed out that NSE offers new theoretical insights and welcomes more perspectives and discussions on it. Professor Yong Wang, Academy Deputy Dean of INSE at Peking University and Secretary-General of New Structural Economics Research Consortium, chaired the opening session.
Session A of the workshop, chaired by Lijun Zhu, Assistant Professor of INSE, focused on economic growth of developing countries. Three papers were discussed in this session.
Fabrizio Zilibotti, Professor at Yale University, started the session with a paper entitled "Service-Led or Service-Biased Growth? Equilibrium Development Accounting across Indian Districts". The paper estimates a spatial equilibrium model with non-homothetic preferences to determine whether growth is service led or service biased and conducts a quantitative assessment of both the aggregate welfare effects of sectoral productivity and its distributional consequences. Professor Zilibotti also provided insightful advices on India’s development. Danyang Xie, Chair Professor of Economics at Hong Kong University of Science and Technology discussed this paper.
Kiminori Matsuyama, Professor at Northwestern University and Member of the Academic Advisory Council of INSE at Peking University, presented a paper entitled “A Technology-Gap Model of Premature Deindustrialization”. This paper uses a model where the technology-gap among countries is variant across the sectors and discusses conditions under which “premature deindustrialization” would occur. Francisco Buera, Professor at Washington University in St. Louis discussed this paper.
Lijun Zhu, Assistant Professor of INSE at Peking University, presented a paper on “Unequal Transition: The Making of China’s Wealth Gap”. This paper provides a unified framework, which includes key features of the economic transition and reforms, to assess quantitatively the mechanism of dynamics in wealth inequality. Chaoran Chen, Assistant Professor at York University discussed this paper.
Session B, chaired by Wei You, Assistant Professor of INSE at Peking University, examined the spatial distribution of economic activities. Four papers were discussed in this session.
Kjetil Storesletten, Professor at University of Minnesota, started the session with a paper entitled "Business Cycle during Structural Change: Arthur Lewis' Theory from a Neoclassical Perspective". This paper proposes a neoclassical theory of growth and structural change where the economy is subject to stochastic productivity shocks, and shows that it accounts well for both the structural transformation and the business cycle fluctuations of China. Wenlan Luo, Associate Professor at Tsinghua University discussed this paper.
Remi Jedwab, Associate Professor at George Washington University, presented a paper on “Consumption Cities vs. Production Cities: New Considerations and Evidence”. Using census data of 65 countries, this paper provides evidence that the “origin” (industrialization, fuels export, agricultural export or deindustrialization) of a country’s urbanization process matters for the “type” (consumption or production) of cities that emerge in that country and their potential for productivity growth. Tommaso Porzio, Assistant Professor at Columbia University discussed this paper.
Costas Arkolakis, Professor at Yale University, presented a paper entitled “Aggregate Implications of Firm Heterogeneity: A Nonparametric Analysis of Monopolistic Competition Trade Models”. This paper measures the aggregate importance of firm heterogeneity by developing a foundation for a widely used class of monopolistic competition trade models of firm heterogeneity, without any parametric restrictions on the distribution of firm fundamentals. James Anderson, Professor at Boston College discussed this paper.
Partha Dasgupta, Professor at University of Cambridge and Member of the Academic Advisory Council of INSE at Peking University, gave a speech entitled “The Biosphere as an Overriding Structural Feature of Economics”, which mainly derived from his lately published works “The Economics of Biodiversity”. In this report, Professor Dasgupta proposed that as a stock of natural capital, biosphere is just as important as physical capital and human capital, and should be included in macroeconomic models. With careful consideration of biosphere as an overriding structural feature, we could better understand and achieve sustainable development. After the speech of Professor Dasgupta, participants had a lively discussion on how to better coordinate and cooperate between countries and better protect the ecological environment from this new perspective.
Session C "Growth theory and Empirical facts", chaired by Junjie Xia, Assistant Professor at Central University of Finance and Economics and Visiting Assistant Professor of INSE at Peking University, includes four papers.
Keun Lee, Professor at Seoul National University and Member of the Academic Advisory Council of INSE at Peking University, presented a report entitled “Variety of National Innovation Systems (NIS) around the World and in China”. This report combines professor Lee's latest papers and discusses five indicators of national innovation system to analyze and compare the characteristics of national innovation system in China, South Korea, India and other countries. Professor Jiwei Qian from the National University of Singapore discussed this paper.
Ping Wang, Professor at Washington University in St. Louis, presented a paper entitled "Spatial Misallocation in Chinese Housing and Land Markets". By constructing a dynamic spatial equilibrium model, this paper studies the impact of the spatial misallocation of China's housing and land markets on their price distribution. Professor Wang pointed out that the distortion of housing and land is an important factor affecting housing prices and urban-rural migration flows. The presentation was commented by Professor Ming Li from the Chinese University of Hong Kong-Shen Zhen.
Michele Boldrin, Professor at Washington University in St. Louis and Member of the Academic Advisory Council of INSE at Peking University presented a paper entitled "Overcoming Backwardness, the Problem of Primitive Accumulation". It constructs a model that includes entrepreneurs and workers, showing that late-developing countries need to adopt policies such as depressing wages instead of borrowing foreign debt to achieve the primitive accumulation of capital and technological upgrading in order to catch up with technological gaps. Professor Justin Yifu Lin held the discussion.
Joseph Kaboski, Professor at University of Notre Dame and Member of the Academic Advisory Council of INSE at Peking University, presented a paper entitled "The Stable Transformation Path". This paper puts forward the concept of stable transformation path to characterize the medium-term dynamics of transition economies and to analyze the investment and growth implications of structural transformation. The paper applies it to some important macro models and empirical facts. Professor Linyi Cao from Shanghai University of Finance and Economics discussed this paper.
The afternoon session of "Finance and Development" was chaired by Jiajun Xu, Assistant Professor and Executive Deputy Dean of INSE at Peking University and three papers were presented.
Professor Wei Xiong from Princeton University presented a paper titled "The Mandarin Model of Growth". It focuses on the agency problem between central and local governments. The economic tournament between local governments can lead to incentives to develop local economy. But it also induces short-termist behaviors which help explain unreliable economic statistics and overleverage through shadow banking. Yong Wang, Associate Professor of INSE at Peking University, discussed the paper.
Stephany Griffith-Jones, Professor at Columbia University and Member of the Academic Advisory Council of INSE at Peking University, gave a speech entitled "Matching Risks with Instruments in Development Banks". Professor Griffith-Jones explores appropriate financial instruments for different types of risks to maximize the development performance of development banks and reduce risks. Professor Matthias Thiemann from the European Centre for Scientific Research gave his comments.
Jiajun Xu, Assistant Professor of INSE at Peking University introduced her paper entitled "Development Banks and Green Bond Market Incubation". The project established the world's first database of development financing institution to systematically identify development banks among green bond issuers. The empirical analysis shows that development banks have a significant effect on promoting the incubation of green bond market through three channels. It was commented by Professor Hao Yu Gao from Renmin University of China.
In the evening, the session "Industrialization and Economic Development" was chaired by Jimmy Xu, Assistant Professor of INSE at Peking University and four articles were presented.
At the beginning, Cesar A. Hidalgo, Professor at University of Toulouse, reported a paper titled "A Decade of Economic Complexity". This report systematically introduced the latest developments in the measure of relevance and complexity of economic activities with cutting-edge methods, as well as the new applications of economic complexity in theoretical and empirical studies in the past decade.
The paper "Social Protection as Anti-Structural Change Policy in Latin America" was presented by Dr. Santiago Levy from Inter-American Development Bank, who is also a Member of the Academic Advisory Council of INSE at Peking University. It describes the impact of social protection policies in Latin America on protecting families from risk, reducing poverty and inequality, and on productivity and long-term growth. It also points out that the protection is incomplete and unstable, which is also not conducive to inclusive growth. Richard Rogerson, Professor at Princeton University and Member of the Academic Advisory Council of INSE at Peking University discussed this paper.
Dani Rodrik, Professor at Harvard University and Member of the Academic Advisory Council of INSE at Peking University, presented "Africa's Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms", commented by Celestin Monga, Visiting Professor at Harvard University and Member of the Academic Advisory Council of INSE at Peking University. Using enterprise data from Ethiopia and Tanzania, the paper finds a huge difference between big and small firms. Big companies with superior productivity performance do not expand employment, while small enterprises absorb employment but do not have much productivity growth. It helps to explain the phenomenon that African agricultural productivity and agricultural labor population are declining, while productivity of manufacturing and other modern sectors continues to decline as well.
Yong Wang, Associate Professor of INSE at Peking University, presented the last paper entitled "Endowment Structure and Role of State in Industrialization". Gerard Roland at the University of California, Berkeley and Member of the Academic Advisory Council of INSE at Peking University held the discussion. Based on the perspective of new structural economics, this paper establishes a model to discuss the role of government and endowment structure in industrialization, and provides explanations for the failure or success in the process of industrialization.
Professor Justin Yifu Lin thanked all participants for a fruitful workshop in his concluding remarks, while he keenly looked forward to collaborating with fellow researchers in the coming years on further research on economic structure and structural transformation.
The Fourth Academic Advisory Council Meeting
INSE held its fourth Academic Advisory Council Meeting on December 15th. Yong Wang, Academic Deputy Dean of INSE at Peking University and Secretary-General of New Structural Economics Research Consortium, chaired the meeting. After a brief welcome remark by Professor Justin Yifu Lin, Professor Wang retrospected the accomplishments of INSE in the past year. Members of the Academic Advisory Council then offered insightful suggestions for the future development of INSE.
The Academic Advisory Council of INSE, composed of internationally-renowned scholars and experts, meets annually and provides advice on INSE's research activities. Attendees this year included Tim Besley, School Professor of Economics of Political Science and W. Arthur Lewis Professor of Development Economics in the Department of Economics at LSE; Ha-Joon Chang, University Reader at University of Cambridge; Gene M. Grossman, Jacob Viner Professor of International Economics at Princeton University; Stephany Griffith-Jones, Executive Director of the Initiative for Policy Dialogue at Columbia University; Ann E. Harrison, Dean of the Haas School of Business at University of California, Berkeley; Joseph Kaboski, David F. and Erin M. Seng Foundation Professor at University of Notre Dame; Keun Lee, Professor of Economics at the Seoul National University; Santiago Levy, President of Latin American and Caribbean Economic Association; Celestin Monga, Visiting Professor at Harvard University; Kiminori Matsuyama, Professor of Economics at Northwestern University; Gérard Roland, E. Morris Cox Professor of Economics at University of California, Berkeley; Edmund Phelps, Nobel Prize Laureate and Director of the Center on Capitalism and Society at Columbia University; Michael Spence, Nobel Prize Laureate and Professor of Economics and Dean of the Stanford Business School at Stanford University; Finn Tarp, Danish Professor of Development Economics at the University of Copenhagen and Ping Wang, Seigle Family Professor at Washington University in St. Louis.
Written by Si Chen and Shenghao Yu