"Intergenerational Contracts and Female Labor Supply," Current version: October 2016, Job Market Paper.Appendix Abstract: This article studies how intergenerational relationships between parents and grandparents affect females' labor supply. To help sustain such relationships in the face of long-term incentive problems, I develop a non-altruistic dynamic contract model using economic benefits such as a bequest, coinsurance, and cheaper care service. I then estimate the parameters of the model using Chinese household survey data. I evaluate the labor and income reallocation effect throughout the relationships. I find that intergenerational relationships in China increase the labor supply of younger females by 32%, but reduce the labor supply of older females by 21%, while increasing older females' household savings by 13%. My policy experiments produce the following predictions: delaying retirement age reduces the labor supply of younger females; raising inheritance taxes increases the labor supply of young females and the savings of both parents and grandparents; child care subsidies increase the labor supply of both households. I conclude that public policies are not only affecting the target group by also the households attached to the target group through intergenerational relationships.
Abstract: I estimate the impact of online piracy on movies' box office performances in China from 2006 to 2013 using a unique dataset that reports the pirating data for 1,039 wide-release movies from several file-sharing websites. Using these piracy-level proxies and Chinese box office data, I estimate that movie piracy caused substantial box office losses, that the substitution elasticity of the consumption of pirated movies on consumption in theaters was small, and that government anti-piracy policies reduced box office losses, but only in the short term. I estimate that the average revenue loss caused by piracy was about 30 percent.
Abstract: We aim to quantify the role of social networks in job-related migration. With over 130 million rural labors migrating to the city each year, China is experiencing the largest internal migration in the human history. Using instrumental variables in the 2006 China Agricultural Census, we find that a 10-percentage-point increase in the migration rate of co-villagers raises one's migration probability by 7.27 percent points, an effect comparable to an increase of education by 7-8 years. Evidence suggests that most of this effect is driven by co-villagers helping each other in moving cost and job search at the destination.
Abstract: This study investigates households' education investment responses to Affirmative Action (AA). The admission system of National College Entrance Examination (NCEE) in China is a kind of AA, that allocates college seats by regions. This article uses the college expansion in China after 1997 as a natural experiment to study the education investment responses of households to education chance change.Using Chinese household surveys and a college enrollment data, I examine the competitions among households with heterogeneous talents and endowments for college seats. I find that on average, higher enrollment ratios encourage households to invest more in education. The effect of encouragement is greater for the households with better education level and higher income. I conclude that AA and the college expansion widen the education and income disparity within each region.
Abstract: This paper studies policy competition for a foreign-owned multiproduct monopolist firm producing two products that are horizontally differentiated between two countries of different size. We show that the equilibrium outcome of FDI competition is determined by the interaction between the market size effect and the cannibalization effect, and countries subsidy policies. Welfare e§ects of competition for FDI are derived; in particular, we show that the competing countries may Pareto strictly gain from or Pareto strictly lose from FDI competition.
Abstract: This paper studies the bidding war to attract a foreign-owned monopolist firm, which produces two vertically differentiated products, between two countries of different size. We show that the equilibrium outcome of competition for foreign direct investment (FDI) is determined by the interaction between the market size effect and the cannibalization effect, and two countries (strictly positive) willingness-to-pay to attract FDI due to the import substitution effect. Welfare effects of competition for FDI are fully characterized.
“Land Misallocation and Firm Productivity Distribution,” with Guang Shi, Current version: August 2016, working paper.
Abstract: We estimate the effect of market-oriented land allocation reform on the firm productivity distribution in China. The non-market-oriented land allocation rules caused the misallocation of land of firms. Chinese government introduced an auction system of land market nationwide around 2002. The establishment of the auction system is a natural experiment to estimate the impact of eliminating land misallocation. We estimate policy effects on the firm productivity distribution change brought about by the policy. We find following results. (1) the land auction policy increased the average total factor productivity by 23%. (2) the land auction policy increased the average land price by 19%. (3) for 36% of the productivity change is attributable to the price increase. (4) About 54% of the productivity change are explained by the new policy gives private firms opportunities to enter the market.
"Value-added Tax Reform and Primary Income Distribution in China," with Guang Shi, Current version: June 2016. Chinese version published inStudy in Labor Economics, 2016, 4(1):65-88. Abstract:We use the taxation reform in China to evaluate the effect of taxation on income distribution. It adapts the Difference in Difference in Difference methodology to investigate the causal effect of the value-added tax reform on income distribution in the Northeastern region since 2004. The reform significantly reduced the labor share by a magnitude of four percent, with the peak occurring in 2005. The labor share of the foreign sector and the state-owned sector dropped the most. Declining employment and wages are the major manifestations of the negative effect. Recommendations from the study include the government reforming the individual income tax and property tax to offset the adverse effect of the consumption-type value-added tax on primary income distribution.
Abstract: What determines mass migration within countries? Examining data from China – the biggest internal migration experience in human history – this column finds that migrants from the same village tend to cluster at the same destination for the same occupation. This pattern is driven by social networks within villages that reduce the moving costs for future migrants, such as the risk of not finding a job.
Working in Progress
"Intergenerational Relationships and Education Investment"
Intergenerational relationships affect the education investment decisions of households. Parents gain economic benefits from the education investment on their children through intergenerational relationships. Adult children with higher education can give parents better elderly care and coinsurance. Parents may invest on education investments more than the optimal level for their children. It may not maximize the income of their children over the life cycle. A higher income causes lower incentives for children to use elderly support to exchange the bequests. Resultantly, parents invest more on schooling than the optimal education level for their children. I will add the variable of education investment into the framework of “Intergenerational Contracts”. It enables the estimation of the effects of intergenerational relations on education investment. The study claims the economic gains, rather than cultural factors, as the cause of over investment on education some nations.
This project is based on observations on film distribution. Hollywood blockbusters not only announce their releasing date much earlier than other movies, but also occupy the best seasons such as summer and Christmas. The optimal releasing strategy depends on film quality, the strategic moves of competitors, as well as the seasonal demand. Distributors of blockbusters choose to announce the release date early to get the best seasons. This study is an examination of the optimal releasing strategy of films with different qualities. First, we build a sequential moving game to study the competition during a defined good season. In the game, a film distributor chooses both the date to announce the release date and the release date. An early announcement raises the uncertainty of quality and demand, but it can help the film to occupy a good season. Then, we use a structural estimation to get the model parameters. Simulation is conducted to experiment on policy or releasing strategy. First, It is difficult to accomplish because the best movies always occupy the best season. The endogenous problem of supply and demand can be dealt with the use of the releasing delay caused by censorship in China. We estimate seasonal demand. Second, we identify the competitors and their effect on the box office revenue of a movie. Third, the predicted box office revenue from the optimal strategy is derived by using the parameters above. Welfare implications of protectionism and censorship, are found by observing the above-mentioned process.
"The Effects of Intellectual Property Protection on Film Industry," with Yung-Ling Chi
The paper study the long-term effect of online piracy on movie supply. Chinese government started to enforce intellectual property (IP) protection on movie industry in 2009. After shutting down thousands of piracy websites, the film industry experienced an explosive growth. However, same legal enforcement on music, software, and books did not start until 2016. I use firms, employees, and employers of the film industry as the treatment group. We use the counterparts in music, software, and other media industries as a control group. We estimate the effects the effect of IP protection on the income, product quality and quantity using the natural experiment.
"Migration and Public Health Insurance" This project is designed to identify the effects of public health insurance on migration. In the 2000s, China began to establish the public health insurance system. Public insurance reduces medical cost and improves the health condition of labor. Insurance led to better health conditions of family members, which decreased the financial pressure to migrate. Insurance also has lockup effects, because coverage cannot be used across provinces. These programs can either encourage or discourage migration as they vary considerably on deductibles, premiums, and coverage across counties. I use the variations to identify the overall effects of public health insurance on migration decisions.
"Migration and Intergenerational Relationships"
Intergenerational relationships affect the migration decisions of households. I observed two cases in the migrant survey data from the National Bureau of Statistics. First, some migrants take their children to their work location. These people can break the relationships with their parents. They can also leave their children to parents and pay remittances to grandparents. This decision determines whether the households choose permanent or temporary migration. I incorporate the iceberg cost of transfer and support caused by migration to the Intergenerational Contract framework. I will estimate the effects of intergenerational relations and migration on each other.
"Policy Competition for FDI on the Provision of Industry-Specific Public Goods," with Jie Ma
This study is aimed at explaining FDI competition on different industries in need of industry-specific public goods. The government builds industrial zones by investing on industry-specific infrastructure and other public goods to compete for the investment of targeted industries. When the government competes for investment on the provision of industry-specific public goods, each industry will fall in a cluster in one region, and each region will be identified by these industries. The paper will show the welfare implications of industrial zone policy on industrial clustering.
"Air Quality Index of U.S. Embassy and Public Health in Beijing"
This study uses the air pollution index (AQI) of the US embassy in Beijing in a natural experiment to examine the effects of air pollution and air pollution forecast on public health. In 2011, the US embassy in Beijing began to report their own AQI publicly, which showed that China EPA under reported air pollution in Beijing. The Chinese government changed the AQI criteria in response. This study uses a dataset with information from hospitals in different cities, and the AQI from US embassies and local EPAs. The cities with US embassies were used as the treatment group, and the cities without a US embassy were assigned to the control group. The study aims to review the influence of AQI reports of US embassies on the AQI reports of the EPA, as well as on the public health conditions.