Embedded Files
Culture and financial development: Evidence from discontinuities in bank expansions
with Dongmin Kong, Chen Lin, R&R in The Journal of Financial and Quantitative Analysis
This study investigates the effect of cultural differences on bank branch expansion. Despite China's unified official language, it hosts 17 dialect areas representing diverse cultures, providing a unique opportunity to identify the impact of cultural differences. By comparing bank expansions in adjacent neighboring counties across dialect boundaries, spatial regression discontinuity design reveals that cultural differences have hindered bank expansion over the past 20 years. Extensive bank recruitment postings and survey data demonstrate that dialect differences increase the cost of bank expansion by undermining trust. However, positive factors such as growth opportunities, digitization, and migration mobility help overcome multi-dialect barriers.
Manuscript available upon request
Greening through Trade
with Dongmin Kong and Wenxu Ye, R&R in Journal of Corporate Finance
This paper investigates how the global value chains shape pollution emissions via international trade. By exploiting the passage of Permanent Normal Trade Relations of the US that eliminates policy uncertainty of tariffs on Chinese exports to construct shift-share instruments, we examine whether and how the export destinations' environmental regulations affect Chinese exporters' pollution emissions at the firm level. We document that exporting to highly regulated markets reduces smoke, SO2, and waste gas emissions by 26.7%, 23.9%, and 2.6%, and water and coal usage by 18.5% and 24.2%, respectively. A plausible mechanism is that exporters cater to environmental requirements to engage in the global value chain. We also find that environmental quality improves in cities with more export to highly regulated markets. Overall, we enrich the literature on trade and environment by showing that trade enhances the environment through regulation transfer, which is opposite to the prediction of the pollution haven hypothesis.
Trade Liberalization and the Rise of Legal Services
with Xiaobo Zhang.
Previous studies on the role of legal institutions in economic development often lack practical guidance for institutional building. This paper fills the gap by testing the hypothesis that extensive and complex trade drive institutional development. We document how trade liberalization spurred the growth of China's legal services sector, namely, the substantive functioning and practical implementation of legal institutions. Exploiting WTO-induced reductions in tariff uncertainty as an instrument, we find that each million-dollar increase in export leads to approximately 224 litigation firms and 2,746 lawyers per million population, accounting for 34% and 19% of the total increases during the 2000s, respectively. Our firm-level survey reveals demand-driven mechanisms. Export expansion triggers formal contracts with overseas customers and creates spillovers in contracting to domestic suppliers, driving the growth of non-litigation law firms. Additionally, export expansion shifts firms toward formal litigation over informal dispute resolution, further boosting the development of litigation law firms.
Manuscript available upon request
Regulatory Centralization and Corporate Green Innovations: Evidence from Personnel Authority Reform in China
with Dongmin Kong, Ling Zhu.
This study links the institutional changes of personnel appointment authority in regulatory agencies with corporate green innovation. Our difference-in-differences design leverage staggered turnovers of local Environmental Protection Bureaus directors appointed under centralized institution as a plausible exogenous shock. The findings reveal that environmental authority centralization increased corporate green innovation by 4.3% and improve firm sustainability of green innovation by 33.3%. Three key mechanisms driving this green innovation are identified: (1) encouraging firms to allocate R&D resources to support green innovation and enhancing the productivity of specialized green inventors; (2) promoting firm efforts in environmental investments and governance projects; and (3) strengthening incentives for obtaining green subsidies and complying with regulatory standards. Additionally, female directors of centralized environmental authority and those with party-related education backgrounds are more effective in improving corporate green innovation efforts, while directors with local government ties or violation histories are less effective.
Typhoons and Housing Prices
with Dongmin Kong. (Currently Rest)
This paper investigates the impact of frequent climate disasters, typhoons, on the real estate market based on data of house transactions in a southeast coastal city, Shenzhen, China. We rely on variations of typhoon risk exposure of floor level to explore whether the price of high-rise houses with higher typhoon risk exposure is more affected relative to their low-rise counterparts. With the historical typhoon tracks issued with yellow or orange warnings that hit Shenzhen between 2013 and 2020, we find that the high-rise house price decrease by 0.8% to 1.2% over the low-rise. This suggests that a 100 square meter house will lose 42,000 RMB yuan (about 6,480 dollars) due to the impact of typhoons. Our event-study analysis further shows that the impact of typhoons on the high-rise house price vanishes after one month of the typhoon hit, which is more in line with the psychological effects of projection bias and salience. Overall, our study shed light on the psychological effect in quantifying the environmental amenities and climate risk with revealed-preference methods.
Bystander of Sandstorm: Psychological Effect of Public Opinion on Environmental Events
with Dongmin Kong, Ling Han, and Hengxing Yin. (Currently Rest)
This study examines the psychological effect of public opinion on extreme environmental events. Using the sandstorm that hit China in the spring of 2021 as a natural experiment, we measure public opinion based on daily microblogs related to the environment published on Sina Weibo and show that local air pollution has a significant effect on environmental public opinion in cities in sandstorm-affected and nonaffected areas. Focusing on the cities in the nonaffected area, we find that a 10-unit increase in local air pollution generates a 3.83% increase in bystander public opinion response to the sandstorm event. We consider a range of rational mechanisms, such as the learning effect, mutual influence, and inattention, but none can fully explain the effect. Moreover, we explore the psychological mechanism and find that our results are consistent with projection effects.
Conference Presentations:
2024 CUHK-PKU Workshop on Innovation and Entrepreneurship (CUHK)
2024 Chinese Economics Annual Conference (PKU)
2024 Applied Economics Seminar (CUFE)
2023 Chinese Economics Annual Conference (ZUEL)
2022 HCEO-IESR Summer School (U Chicago & JNU)
2022 NCER-CCER Conference on Chinese Economy (PKU & THU)
2021 JEEM-Edinburgh-Shanghai Climate and Development Conference (Edinburgh U & SUFE)
2021 Camphor Economist Circle and NTU joint Workshop (NTU)
2021 Camphor Economist Circle Annual Conference (SYSU)
Page updated
Google Sites
Report abuse