ABSTRACT Growth remains the holy grail of economics. Although our understanding of long‐term growth dynamics has advanced considerably, the question of why some countries grow faster than others continues to be a critical area of empirical inquiry. This paper represents the first comprehensive attempt in literature to examine the relationship between hard power, soft power and economic growth across a broad panel of countries. Although previous research has explored the connection between military power and economic growth, the findings regarding this relationship remain inconclusive. Additionally, there is a notable gap in literature concerning the economic effects of soft power. To address this gap, we utilise the multidimensional Global Soft Power Index (GSPI) developed by Cevik and Padilha and apply a range of econometric methodologies to ensure a robust and granular analysis. Our findings indicate that soft power, as measured by the GSPI, exerts a statistically significant and positive impact on long‐term economic growth. In contrast, military spending appears to have no significant effect and is negatively correlated with growth. Importantly, the economic influence of soft power is more pronounced in developing countries than in advanced economies. Disaggregating the GSPI reveals that certain dimensions—Commercial Prowess, Culture, Digital Footprint and Global Reach—have a stronger effect on growth than others, such as Education and Institutions, likely reflecting the slower‐moving nature of the latter components. Overall, the results highlight the critical role of soft power in shaping growth trajectories, particularly in contexts where traditional growth drivers are less entrenched.

ABSTRACT We use nationally representative survey data to study income inequality in China from 1988 to 2018. Our findings show that the rising income inequality during this period has been driven by the considerable income growth experienced by the highest earners, rather than stagnation or decline in the incomes of those at the bottom. Even individuals at the very bottom of the income distribution have experienced remarkable absolute real income growth. We further show that the increase in top incomes was largely due to labour income, and government redistribution had only a minor effect in mitigating the worsening of income inequality.

ABSTRACT The evolution of institutions in selecting government officials in ancient China reflected efficiency considerations and increased power concentration in the hands of the ruler. Selecting government officials in ancient China became more rule‐based over time, and standardisation and centralisation were some key features of this process. In this dynamic model, a higher volume of transactions, shown as the number of candidates needed to be evaluated, leads to institutionalisation, which has a higher fixed cost but a lower marginal cost in processing each transaction. In the steady state, a ruler with a more encompassing interest chooses a higher level of institutionalisation. The impact of a change in the level of elite power on the level of institutionalisation is sensitive to the relative power of the state versus society.

ABSTRACTWe examine the sectoral impact of Western sanctions on Russian corporate performance from 2014 to 2021 using a panel of listed nonfinancial firms. Applying continuous‐time heterogeneous treatment models and difference‐in‐differences estimators, we document persistent divergence across sectors: The energy sector exhibits sustained underperformance, whereas materials and utilities display relative resilience. Notably, state or strategic designation does not consistently shield firms from adverse outcomes. Our findings conceptualise sanctions as structural stress tests that expose institutional asymmetries and adaptive capacities, offering new empirical insights into the long‐term economic consequences of geopolitical constraints.

ABSTRACTTo mitigate China's soaring public debt, we advocate for a carbon‐based public finance system centred around a carbon tax. CGE modelling shows that an origin‐based carbon tax can significantly alleviate debt pressure, a finding subsequently supported by empirical research using a generalised DiD method. We believe that generating public revenue from carbon emissions is highly sustainable. However, spillovers are worth noticing, and destination‐based carbon taxes warrant careful consideration. Apart from a carbon tax, the Chinese government should also advance an auction system for emission allowances in the carbon market, for the establishment of a comprehensive carbon‐based public finance system.

ABSTRACTThe dual role of foreign debt as both a stimulus for growth and a driver of fiscal fragility remains a critical challenge for developing economies. Although existing literature emphasises static debt‐to‐GDP thresholds, this study contributes to a paradigm shift by examining how institutional quality (IQ) and financial development (FD) dynamically moderate the debt–growth nexus across 32 developing Asian countries (1997–2022). Employing advanced second‐generation econometric techniques, system GMM, dynamic common correlated effects (DCCE) and dynamic panel threshold models (DPTM), we address the issues of endogeneity, cross‐sectional dependence and heterogeneity that have been pervasive in prior studies. Results reveal that foreign debt exerts a baseline adverse effect on economic growth, consistent with the debt overhang hypothesis. However, strong institutional structures and developed financial systems reduce these adverse effects, enabling debt to act as an impetus for growth beyond the identified thresholds. For the full sample, institutional quality and financial development thresholds are 0.93 (on a −2.5 to +2.5 scale) and 38.35% (on a 0 to 100 scale) of GDP, respectively. Disaggregated analyses show that lower‐middle‐income countries (LMICs) benefit at thresholds of 0.91 (IQ) and 37.33% (FD), whereas upper‐middle‐income countries (UMICs) require stricter thresholds of 0.85 (IQ) and 55.94% (FD) to leverage debt for innovation‐driven growth. These findings challenge the universality of debt‐to‐GDP ‘danger zones’, emphasising context‐dependent thresholds shaped by governance and financial maturity. This study underscores that institutional reforms—such as enhancing transparency, strengthening the rule of law, improving fiscal accountability, deepening financial systems and advancing credit allocation and risk intermediation—are essential prerequisites for the sustainable utilisation of external debt. By bridging institutional economics and debt sustainability frameworks, this work offers policymakers actionable benchmarks to navigate debt's dual role as a developmental tool and fiscal liability in emerging Asia.

ABSTRACTThis paper examines the impact of rural land reform on rural entrepreneurship, focusing on China's pilot programme for rural land mortgage loans (RLML), which enables rural households to use their land management rights as collateral for financing. Using a unique dataset of newly registered rural businesses from 2011 to 2018, we employ a difference‐in‐differences approach refined with a ‘selection on observables’ framework. Results show that the RLML pilot significantly increased rural business creation, with a 10% higher growth in pilot counties compared to nonpilot counties. These findings are robust to various checks. Mechanism analysis suggests that the pilot promotes entrepreneurship mainly by easing financial constraints and improving rural infrastructure. However, the effects are localised, with no spillovers to urban areas or migration destinations. The pilot mainly encourages small‐scale service businesses rather than large enterprises, reflecting land fragmentation constraints. Stronger rural financial systems, supportive policies and a more developed service sector further enhance the pilot's impact on rural entrepreneurship.

ABSTRACTFor a long time, selective industrial policy has been widely used by governments around the world as a key tool for economic intervention. But how do these policies affect corporate innovation efficiency? This paper examines the Ten Industry Revitalisation Plan (TIRP), an emergency policy response by the Chinese government to the global economic downturn of 2008, treating it as an exogenous shock. The empirical analysis shows that the TIRP significantly reduced innovation efficiency, with this effect proving persistent even after the policy period ended. Mechanism analysis reveals that the policy decreased treated firm innovation efficiency by increasing government subsidies, impairing investment efficiency and exacerbating capital misallocation. Further investigation indicates that the TIRP has a stronger pushing‐up effect on the innovative capital input of firms state‐owned and firms with low productivity and diverts innovation resources to less productive or innovative firms, yielding nonachievement of the expected innovation outcomes. This study concludes that selective industrial policy poses a significant barrier to improving innovation efficiency, offering valuable insights for enhancing economic innovation performance.

ABSTRACTWe provide new insights regarding the impact of IMF programme participation and imposed policy reforms on child mortality rates using a sample of developing countries from 2000 to 2013. To account for the selection bias related to both IMF participation and conditionality, we employ a recently developed compound instrumental variables methodology. Using annual data, we show that IMF programme participation and state‐owned enterprise (SOE) privatisation conditions improve recipient countries' child mortality rates, whereas all other conditions exert an adverse effect on child mortality rates. These novel findings highlight the heterogeneous effect of IMF conditionalities and document that mandated policy reforms aimed at alleviating mismanagement and inefficiencies in SOEs can actually lead to lower child mortality rates. More generally, our results suggest that the IMF's focus on specific structural reforms, rather than on widening the scope of conditionality, is likely to yield better public health outcomes.

ABSTRACTThis paper examines income convergence among the ten‐member Association of Southeast Asian Nations (ASEAN) for the period 1970–2019, spanning the establishment of the ASEAN Economic Community (AEC) in 2015. We employ the novel log t test developed by Phillips and Sul which is robust to heterogeneity and nonlinearity in the data. Our study uniquely analyses convergence using both per capita income and national GDP aggregates. We find evidence of an ongoing process of convergence in GDP per capita among ASEAN members, with convergence rates ranging from 0.003% to 0.22% annually. However, our analysis of national GDP aggregates reveals potential divergence and the emergence of a ‘two‐tier ASEAN’. We attribute the slow convergence to insufficient capital accumulation and technological progress across member states. Our findings highlight the complex dynamics of economic integration in ASEAN and underscore the need for targeted policies to promote inclusive growth and prevent the formation of a two‐tier economic structure within the bloc. This research contributes to the literature on regional economic integration and provides valuable insights for policymakers in ASEAN and other regional economic communities.