Liang Bai

Research Papers

1. "Estimating US Consumer Gains from Chinese Imports", with Sebastian Stumpner  

American Economic Review: Insights, Vol.1(2), 2019. (paper)

We estimate the size of US consumer gains from Chinese imports during 2004-15. Using barcode-level price and expenditure data, we construct inflation rates under CES preferences, and use Chinese exports to Europe as an instrument. We find significant negative effects of Chinese imports on US prices. The effect is driven by both changes in the prices of existing goods and the entry of new goods. It is similar across consumer groups by income or region. Comparing a product category with median China trade shock to one with no change, prices in the median category grew by 0.17 percentage points less per year. A simple benchmarking exercise suggests that Chinese imports led to a 0.19 percentage point annual reduction in the price index for consumer tradables.

2. "Political Movement and Trust Formation: Evidence from the Cultural Revolution (1966-76)", with Lingwei Wu  

European Economic Review, Vol. 122, 2020. (paper)

This paper examines the effect of political movement on trust formation, in the context of China's Cultural Revolution (1966-76), an episode that involved conflicts and non-cooperative behavior under moral dilemmas. Combining both county-level variation in revolutionary intensity and cohort-level variation in trust formation ages, we construct individual exposure to the revolution using a difference-in-differences strategy. Our findings indicate that individuals in counties with higher revolutionary intensity and of trust formation cohorts report significantly lower levels of trust more than three decades later. This effect is more pronounced for those more likely to have been targeted during the revolution as well as those with greater exposure to its early years (1966-71). 

3. "Self-Control and Demand for Preventive Health: Evidence from Hypertension in India", with Ben Handel, Edward Miguel and Gautam Rao   

Review of Economics and Statistics, Vol.103(5), 2021. (paper)

Self-control problems constitute a potential explanation for the under-investment in preventive health. Behavioral economics offers a tool to solve such problems: commitment devices. We conduct a field experiment to evaluate the effectiveness of different types of theoretically-motivated commitment contracts in increasing preventive doctor visits by hypertensive patients in India. Despite achieving high take-up of some contracts, we find no effects on actual doctor visits or health outcomes. A substantial number of individuals pay for commitment, but fail to follow through, losing money without experiencing any health benefit. We develop and structurally estimate a model of consumer behavior under present bias with varying degrees of naivete. The results are consistent with a large share of individuals being partially naive: sophisticated enough to demand some commitment, but overly optimistic about whether a given level of commitment is sufficiently strong to be effective. 

4. "Political Conflict and Development Dynamics: Economic Legacies of the Cultural Revolution" with Lingwei Wu  

Journal of Economic History, Vol. 83(4), 2023. (paper)

As one of the most influential political movements in 20th-century China, the Cultural Revolution (1966-1976) resulted in widespread conflict and social upheaval. This paper investigates its economic legacies, exploiting geographic variation in revolutionary intensity, measured by the number of resulting deaths. Using a newly-assembled county-level panel dataset over five decades, we find worse-affected areas performed slightly better at baseline, but were slower to industrialize. These effects are large in the early 1980s, but disappear by 2000. Using individual-level census data, we find more-exposed cohorts are less likely to obtain higher education degrees, and to work in professional and entrepreneurial occupations.

5. "The Production Effects of New Banking Infrastructure: Evidence from Rural India", with Camille Boudot-Reddy, Andre Butler, and Johannes Eigner (paper) Submitted.

We study the production effects of one of the largest bank branch expansion programs in history, implemented by the government of India during the 1980s. Combining policy-driven variation with newly-digitized data on bank lending and crop prices at the district-year level, we do not find evidence for a significant shift in agricultural output and inputs on average. Greater bank presence does promote resilience to climate risk, however, by attenuating the effect of lagged rainfall shocks on output. This effect operates via changes in the incidence of cropping during the dry winter season, which makes use of costly irrigation resources.