摘要
Although championed by academia and policy-makers, the theory of ＂wave phenomenon＂ is a questionable explanation for overcapacity. First, enterprises do not necessarily share the same expectation for future demand of a promising industry. Second, in its model, overcapacity is explained as a deviation from equilibrium under the incomplete information hypothesis, which is in fact nothing but normal in a market economy. The prime reason for overcapacity resides in the fact that local governments are engaged in a subsidy competition to attract investment. We endeavor to illustrate the following via modeling： the subsidy effect produced by local government＇s offering of cheaper land and matching loans results in less investment from companies. Under this circumstance, enterprises channel a disproportionate amount of funding to building production capacity, which overloads the entire industry. To address the problem, reforms are needed in land property, environmental protection policies, and financial and fiscal systems.
基金
This paper is sponsored by the Chinese National Social Science Foundation Project Industrial Overcapacity, Redundant Construction in the Transitioning China： Formation and Management （grant 09AZD017）, the Chinese National Social Science Foundation Project ＂Overcapacity Management and Reform of the Financing System （grant 09AJY002）, the Chinese National Social Science Foundation Project ＂Restructuring and Revitalization Planning of Key Industries in China＂ （grant 10zd＆026）, the Chinese National Social Science Foundation Project ＂A New Industrialized Path： Industrial Restructuring and Upgrading （grant 06＆ZD002）, MOE Project of Key Research Institute of Humanities and Social Sciences in Universities Financial Innovation, Capital Market and Regional Economic Growth （grant 10JJD790027）
Nanjing University ＂985＂ Project of Humanities and Social Sciences ＂Improving indigenous innovation capability in China＂ （grant NJU985FW01 ）
