Long-Run PolDevelopment and Endogenous Institutions
Wang, Erik, and Clair Yang. The Political Economy of China’s Imperial Examination System. Cambridge University Press, forthcoming. Online Appendix.
Abstract: Just as councils and assemblies were key features of European political regimes for centuries, the Imperial Examination System (Keju) constituted the cornerstone of state institutions in the history of many East Asian monarchies. This book explores the implications of Keju for long-term political development. We document the origins of Keju in 6th to 7th century China utilizing data constructed from tome epitaphs. We trace the implicit selection criteria of the exam system over a millennium. At the cross-national level, with a panel of 112 historical states across Eurasia, we quantify the association of Keju with country-level political indicators against the backdrop of a worldwide convergence in political stability and divergence in institutions. This book makes two arguments regarding the link between Keju and long-run political development: (a) the adoption of Keju contributed to political stability, and (b) the emergence of Keju was a process, not a shock.
Huang, Yasheng, and Clair Yang. "A longevity mechanism of Chinese absolutism." The Journal of Politics (2022): 1165-1175. Here is a short article on Broadstreet Blog.
Abstract: A counterpart of what is known as “European exceptionalism”—political stability and institutional arrangement that enabled modern economic growth and political development—is a “Chinese anomaly.” This anomaly takes the form of a sharp contrast with pre-modern Europe: Chinese imperial rulers stayed in power longer than their European counterparts but this political stability was accompanied by a high level of institutional stasis. In this paper, we argue that a well-known Chinese institution, the civil service examination (CSE) system, contributed to China’s imperial longevity. We utilize detailed historical data on individual CSE performance to demonstrate the longevity-contributory mechanisms of CSE—constraining access to power by aristocrats and other wealth-holders. We argue that a key to unpacking the so-called “Chinese anomaly” is to understand the role of bureaucracy in political development in China and potentially in other regions.
Political Economy
“Rules for the Rulemakers: Asymmetric Information and the Political Economy of Benefit-Cost Analysis,” with David Besanko and Avner A. Kreps. Journal of Regulatory Economics (2024). Online Appendix.
Abstract: This paper presents a model of an executive administration that decides whether to mandate benefit-cost analysis (BCA) of newly proposed regulations. A regulator has private information about the social benefit of a new rule but may differ from the executive’s preferences for regulation. BCA, which provides a noisy signal of the rule’s social benefit, is most valuable when the executive is regulation-neutral. Extremely regulation-averse administrations may be harmed by BCA unless they can bias it. Our results are consistent with the use of BCA by U.S. presidential administrations since Reagan.
"Testing Firm-Level Data Quality in China against Benford's Law," with Yasheng Huang and Zhiyong Niu. Economics Letters (2020).
Abstract: The authenticity of China’s economic data has long been questioned. We use a new statistical method, Benford’s test, to evaluate the data quality of the Chinese Industrial Census (CIC). We show that the method is effective in uncovering data irregularities. Based on predicted industrial output by variables that are less manipulatable, such as employment and electricity, we further demonstrate that firms of different ownership types display different behaviors in terms of the direction of data manipulation. We find no conclusive evidence of data manipulation by state-owned enterprises (SOEs), whereas private firms tend to under-report performance.
Business and Politics
“The Surprising Breadth of Harbingers of Failure,” with Duncan Simester and Catherine Tucker. Journal of Marketing Research 56, no. 6 (2019): 1034-1049. Featured in Scientific American and New York Times.
Abstract: Previous research has shown that there exist “harbinger customers” who systematically purchase new products that fail (and are discontinued by retailers). This article extends this result in two ways. First, the findings document the existence of “harbinger zip codes.” If households in these zip codes adopt a new product, this is a signal that the new product will fail. Second, a series of comparisons reveal that households in harbinger zip codes make other decisions that differ from other households. The first comparison identifies harbinger zip codes using purchases from one retailer and then evaluates purchases at a different retailer. Households in harbinger zip codes purchase products from the second retailer that other households are less likely to purchase. The analysis next compares donations to congressional election candidates; households in harbinger zip codes donate to different candidates than households in neighboring zip codes, and they donate to candidates who are less likely to win. House prices in harbinger zip codes also increase at slower rates than in neighboring zip codes. Investigating households that change zip codes indicates that the harbinger zip code effect is more due to where customers choose to live, rather than households influencing their neighbors’ tendencies.
“Growing Pains: International Instability and Equity Market Returns”, with Zhuo Chen and Andrea Lu. Financial Management 46, no. 1 (2017): 59-87.
Abstract: We use the ratio of growth in global military expenditures to gross domestic product (GDP) to capture ex-ante expectations of political instability and explore the relation between this measure and returns. In a standard global asset pricing framework with 44 countries, this measure helps to explain cross-country return differences. Furthermore, emerging countries have greater exposure to international political instability risk than developed countries. This partially explains the higher returns observed in emerging countries.
Working paper
"A Theory of Political Divergence and Gradual Institutional Change." R&R at American Journal of Political Science.
“Alexander the Great and His Generals: Meritocracy as A Power-Sharing Institution in Authoritarian Regimes”, with Yasheng Huang and Zhaomin Li. R&R at the Journal of Politics.
"A Political Divergence," with Yasheng Huang. Book project under contract with Yale University Press.
"Retail fast payment systems as a catalyst for digital finance", with Giulio Cornelli, Jon Frost, Jonathan Warren, and Carolina Velasquez. BIS working paper.
"The Spatial Distribution of State Capacity: Wars and Public Goods in Historical China." Conditionally accepted at the Journal of Economic History.
"The Legacy of State-Led Industrialization." Working paper.
Work in progress
"Agricultural Technology and State Capacity: Evidence from New World Crops in Historical China," with Max Hao. Working paper.
"Elitist Bronze, Democratizing Iron, and State Formation in Antiquity," with Zhaomin Li.
Google Scholar page here.