Research

Working Papers:

"Migration Costs, Sorting, and Agricultural Productivity Gap." (With Qingen Gai, Naijia Guo, Qinghua Shi, and Xiaodong Zhu), Econometrica, Revise and Resubmit. [This version: Jan 2024]  

• Online Technical Notes

We use a large panel dataset and the implementation of New Rural Pension Scheme in China as a policy experiment to estimate the average rural-to-urban migration cost for workers affected by the policy, and the average underlying sectoral productivity difference. Our estimates reveal significant migration costs and substantial underlying sectoral productivity differences, with sorting playing a minor role in accounting for sectoral labor income gaps. We construct and structurally estimate a general equilibrium household model with endogenous labor supply and migration, which aligns with the reduced form results and illustrates how the policy experiment influences migration, GDP, and welfare through reduction in within-household misallocation of labor. Counterfactual analysis based on the model shows that scaling up the rural pension scheme would have significant positive effects on labor allocation, GDP, and welfare. Additionally, relaxation of migration restrictions would reduce sectoral income gaps and substantially increase migration, aggregate productivity, and GDP.

"Regional Trade Integration and Input Sourcing Patterns of Multinational Enterprise Plants: Evidence from the ECFA." (With Yuting Huang)  [This version: May 2021]

This paper studies the impacts of regional trade integration on the input sourcing patterns  of firms engaging in multinational production. We examine the responses of Taiwanese MNC affiliates in mainland China around the time of a single event — the signing of the Economic Cooperation Framework Agreement (ECFA) between the Mainland and Taiwan in June 2010. Using data on firm-level ownership linkages in conjunction with transaction-level trade flows between 2006 and 2015, we find strong evidence that in response to input tariff reductions, firms increased imports not only from members but also from non-member trade partners. The scale effect through the demand response to lower input costs appears to dominate the direct substitution effect from the enhanced trade relation across the Strait, leading to a trade creation effect outside the integrated  bloc. Moreover, to a large extent, the trade created outside the bloc appears to be  contained within multinationals' organizational boundary. In particular, for contract-intensive products, firms mainly increased sourcing from related parties. The findings suggest that MNC production networks strengthen the trade creation effect of regional trade agreements by reducing contractual frictions and search frictions along input-output linkages.

Publications:

"Illuminating the Effects of the US-China Tariff War on China's Economy."  (With Davin Chor), Journal of International Economics, July 2024, 150:103926.

How much has the US-China tariff war impacted economic outcomes in China? We address this question using high-frequency night lights data, together with measures of the trade exposure of fine grid locations constructed from Chinese firms' geo-coordinates. Exploiting within-grid variation over time and controlling extensively for grid-specific contemporaneous trends, we find that each 1 percentage point increase in exposure to the US tariffs was associated with a 0.59% reduction in night-time luminosity. We combine these with structural elasticities that relate night lights to economic outcomes, motivated by the statistical framework of Henderson et al. (2012). The negative impact of the tariff war was highly skewed across locations: While grids with negligible direct exposure to the US tariffs accounted for up to 70% of China's population, we infer that the 2.5% of the population in grids with the largest US tariff shocks saw a 2.52% (1.62%) decrease in income per capita (manufacturing employment) relative to unaffected grids. By contrast, we do not find significant effects from China's retaliatory tariffs.

"The Political Economy Consequences of China's Export Slowdown." (With Filipe R. Campante and Davin Chor), Journal of the European Economic Association, October 2023, 21(5):1721-1771.

We study how adverse economic shocks influence political outcomes in strong authoritarian regimes, by examining the export slowdown in China during the mid-2010s. We first show that prefectures that experienced a more severe export slowdown witnessed a significant increase in incidents of labor strikes, using a shift-share instrumental variables strategy. The prefecture party secretary was subsequently more likely to be replaced by the central government, particularly if the rise in strikes was greater than in other prefectures that saw comparable export slowdowns. These patterns are consistent with a simple framework we develop, where the central government makes strategic use of a turnover decision to induce effort from and screen local officials for retention. In line with the framework's predictions, we find a heightened emphasis by local party secretaries -- particularly younger officials whose career concerns are stronger -- on upholding domestic stability following negative export shocks. This is evident in both words (from textual analysis of official speeches) and deeds (from expenditures on public security and social spending).

"Did U.S. Politicians Expect the China Shock?"  (With Matilde Bombardini and Francesco Trebbi),  American Economic Review, January 2023, 113(1):174-209.   

Information sets, expectations, and preferences of politicians are fundamental, but unobserved determinants of their policy choices. Employing repeated votes in the U.S. House of Representatives on China's Normal Trade Relations status during the two decades straddling China's WTO accession, we apply a moment inequality approach designed to deliver consistent estimates under weak informational assumptions on the information sets of members of Congress. This methodology offers a robust way to test hypotheses about what information politicians have at the time of their decision and to estimate the weight that constituents, ideology, and other factors have in policy making and voting.

"Migration, Transportation Infrastructure, and the Spatial Transmission of COVID-19 in China." (With Lin Ma), Journal of Urban Economics: Insights, January 2022, 127:103351.

This paper evaluates the impacts of migration flows and transportation infrastructure on the spatial transmission of COVID-19 in China. Prefectures with larger bilateral migration flows and shorter travel distances with Hubei, the epicenter of the outbreak, experienced a wider spread of COVID-19. In addition, richer prefectures with higher incomes were better able to contain the virus at the early stage of community transmission. Using a spatial general equilibrium model, we show that around 24% of the infections outside Hubei province can be explained by the rapid development in transportation infrastructure and the liberalization of migration restrictions in the past decade.

"Processing Trade and Costs of Incomplete Liberalization: The Case of China." (With Loren Brandt and Peter M. Morrow), Journal of International Economics, July 2021, 131:103453

[Previous Titled "Is Processing Good?: Theory and Evidence from China."]

A major objective of policies promoting processing trade in developing countries is integration with global markets. A central feature of processing regimes is that firms do not have to pay tariffs on imported inputs as long as they are used exclusively in the production of goods for export. These firms are typically restricted from selling output using imported inputs on the domestic market. These restrictions can be viewed as a form of incomplete liberalization due to protectionist motives. Using data from China for 2000-2007 for 109 industries, we study the welfare effects of these measures. Counterfactual experiments imply total welfare losses of 2.2% for China due to the restriction on selling processing output domestically, and even larger losses of 5.7% for labor. Gains from only the tariff exemption for processing firms however are negligible.

"Grain Export and Causes of China's Great Famine: County-Level Evidence."  (With Hiroyuki Kasahara), Journal of Development Economics, September 2020, 146:102513

This study quantitatively evaluates the relative importance of different causes of China's Great Famine, especially for the importance of grain exports. We exploit county-level over-time variations in crop specialization patterns to construct  Bartik-style measures of export shocks. Using county-level panel data from 1955 to 1963, we regress death rates on the Bartik export measures with county and province-year fixed effects as well as time-varying effects of county-level observables. We use weather shocks to instrument for output and consumption. The regression results suggest that increases in grain exports substantially increase death rates. This effect is larger in counties that are further from railways and with fewer local Chinese Communist Party members. To examine the relative importance of different mechanisms, we also estimate the effects of the procurement policy, the determinants of grain output, and the relationship between death rates and county-level average caloric consumption during the famine period. The counterfactual experiments indicate that the fall in agriculture production, the increase in procurement partly driven by grain exports, and the increasingly progressive and inflexible procurement policy collectively increased the number of excess deaths, where no single factor dominates. In particular, grain exports explain 15 percent of excess deaths, which is one-fourth of the effect of the increase in procurement rates between 1957-1959.

"Trade, Pollution and Mortality in China."  (With Matilde Bombardini), Journal of International Economics, July 2020, 125:103321

Did the rapid expansion of Chinese exports between 1990 and 2010 contribute to the country's worsening environmental quality? We exploit variation in local industrial composition to gauge the effect on pollution and health outcomes of export expansion due to the decline in tariffs faced by Chinese exporters. In theory, rising exports can increase pollution and mortality due to increased output, but they may also raise local incomes, which can in turn promote better health and environmental quality. The paper teases out these competing effects by constructing two export shocks at the prefecture level: (i) the pollution content of export expansion; (ii) export expansion in dollars per worker. We find that the pollution content of exports affects pollution and mortality: a one standard deviation increase in the shock increases infant mortality by 4.1 deaths per thousand live births, which is about 23% of the standard deviation of infant mortality change during the period. The dollar value of export expansion reduces mortality by 1.2 deaths, but the effect is not statistically significant. We show that the channel through which exports affect mortality is pollution concentration. We find a negative, but insignificant effect on pollution of the dollar-value export shocks, a potential “technique” effect whereby higher income drives demand for clean environment. Finally, we find that only infant mortality related to cardio-respiratory conditions responds to exports shocks, while deaths due to accidents and other causes are not affected.

"Export Expansion, Skill Acquisition and Industry Specialization: Evidence from China."  Journal of International Economics, September 2018, 114:346-361.

This paper studies the impact of export expansion due to the decline in tariffs faced by exporters on human capital accumulation across China. Following a theoretically consistent approach, I construct regional measures of high- and low-skill export demand shocks using the variation in initial industry composition across regions and differential skill intensities across industries. Using a sub-national data over the period 1990 to 2005, the empirical analysis shows that high-skill export shocks raise both high school and college enrollments, while low-skill export shocks depress both. These relationships appear to be attributable to the association between skill premium and skill demand embodied in export shocks. The amplified differences in skill abundance across regions reinforce the initial industry specialization patterns. These findings suggest a mutually reinforcing relationship between regional industry specialization and skill formation.

"Does Population Control Lead to Better Child Quality? Evidence from China's One-Child Policy Enforcement." (With Hongliang Zhang), Journal of Comparative Economics, May 2017, 45(2):246-260. 

Scholarly evidence on the quantity-quality trade-off is mixed in part because of the identification challenge due to endogenous family size. This paper provides new evidence of the causal effect of child quantity on child quality by exploiting regional differences in the enforcement intensity of China’s one-child policy (OCP) as an exogenous source of variation in family size. Using the percentage of current mothers of primary childbearing age who gave a higher order birth in 1981, we construct a quantitative indicator of the extent of local violation of the OCP, referred to as the excess fertility rate (EFR). We then use regional differences in EFRs, net differences in pre-existing fertility preferences and socio-economic characteristics, to proxy for regional differences in OCP enforcement intensity. Using micro data from the Chinese Population Censuses, we find that prefectures with stricter enforcement of the OCP have experienced larger declines in family size and also greater improvements in children’s education. Despite the evident trade-off between family size and child quality in China, our quantitative estimates suggest that China’s OCP makes only a modest contribution to the development of its human capital.

Work in Progress:

"Import Competition and Innovation: Evidence from China." (With Matilde Bombardini and Ruoying Wang)