Kai Liu
Faculty of Economics
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CERF Fellow of Cohort 2024 - 2026
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Intrafamily Altruism and Inter-Vivo Financial Transfers
This project examines how bidirectional inter-vivos financial transfers (IVFT) influence older adults; labor supply decisions and retirement security. In countries with well-established public old-age insurance systems, IVFT typically flows from parents to children. In contrast, in many developing countries, financial support often flows in the opposite direction—from children to parents. Given that older individuals’ labor force participation is often driven by the need to support their children or to receive financial help from them, understanding the interaction between work, retirement, and IVFT is crucial.
Capital market imperfections, skill accumulation, and inequality over the lifecycle
Capital market imperfections, skill accumulation, and inequality over the lifecycle
This project will formally develop and estimate a dynamic life-cycle model to investigate the relative importance of parental transfers, liquidity constraints and initial skills in shaping individuals' career choices and wage progression. In the model, skills are multidimensional and task based (e.g., cognitive and manual skills) and evolve over the life cycle, subject to individuals’ choices of college education, occupations (differentiated by their task contents), and jobs (differentiated by worker-job match quality) as well as unexpected shocks. Skills evolve over time as an autoregressive process (where today’s skillis correlated with yesterday’s skill) and vary according to the inputs of each of the above factors in eachtime period. Different occupations affect the skill accumulation process differently; for instance, working in a routine-intensive occupation mainly develops manual skills but not cognitive skills. Parental transfer is determined as Markov subgame perfect equilibrium in a sequential game between the parents and their children.
Roscas and formal credit markets: theory and evidence
Roscas and formal credit markets: theory and evidence
Rotating savings and credit associations (Roscas) have been the most prominent informal financial arrangements in developing countries despite the recent expansion and development of financial systems. Using a large microcredit reform which improves access to formal credits for rural households, we provide the first empirical evidence on how Roscas interact with the development of formal credit markets. An economic behavioral model is used to understand the economic incentives underlying participation in Roscas. From the model we can evaluate the value of a micro-finance program under different informal financial arrangements and inform policy makers of the optimal design of micro-finance programs.
Key Research Findings to date: Our preliminary empirical results reveal that the effects of Village Fund credit provision on roscas are positive across all the outcomes considered both in the short and over the long run.The effects on whether household participated in rosca and the payments made by households into roscas are statistically significant with the long-run effects sizing slightly larger. These are robust to the addition of household-level controls and fixed effects. All the outcomes are conditional on households ever engaged in rosca over the estimation period and hence can be thought of as an intensive margin of rosca participation.
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