JOB MARKET PAPER
A_Population_20240626.pdfAbstract How would governments allocate land usage when given the authority to, and how would it affect a country’s demographic distributions across time and space? I explore the allocation behavior in China’s land market, where institutionally all urban land is state-owned, and local governments afford discretion in allocating the usage. I develop a spatial-OLG framework to capture the interplay of governments’ land allocation, population controls, and public education expenditures on household family planning decisions. Model estimation indicates that cities with higher productivities and amenities tend to disproportionately allocate more land to industrial use instead of residential use, which explains the dramatic population decline observed in China in recent years. Compared with a free land market equilibrium, local governments tend to prioritize industrial land usage, aiming at a higher industrial out- put, while at the expense of lower fertility rates and real income. Notably, under the One Child Policy, the realized fertility rate is significantly below the fertility rate needed for natural population replacement, but shifting to a free land market could potentially help China address this fertility rate gap from replacement level by 16.33%.
China_Retaliatory Tariffs (4).pdfChina's Retaliatory Tariffs Against the Us:Firm Import-Export Linkage Along Global Production Line, with Miaojie Yu and Wei Tian, Under Review.
Abstract This paper investigates the impact of China’s retaliatory tariffs against American products at the firm level during 2016-2019. We document two novel empirical findings: First, Chinese firms adjust their import baskets in response to rising tariffs. Second, firm’s likely export diversion to other countries is not evident. These imply the magnification dampening effects of import tariffs on firm exports via firm's import-export linkage. Particularly, the dampening effect of upstream import tariffs in downstream exports is accumulated and more pronounced with the length of global supply chains. Furthermore, the increasing sourcing costs in either upstream or downstream sectors fall firm exports.
OTHER WORKING PAPERS
Bidding.pdfBidding for Firms or Bidding for People: Local Urban Land Allocation Competitions in China, with Qiaohairuo Lin (Vanderbilt University), Job Market Paper.
Abstract This paper studies the causes and effects of a policy by local governments in China involving the manipulation of urban land allocation, specifically the decisions on the share of industrial and residential land given the limited total urban land area. Analyzing data from land parcel transactions and the total land area all cities, we find a general oversupply of industrial land and a positive correlation between this oversupply and local economic development. To explain these findings, we build up a spatial general-equilibrium model that features endogenous land allocations driven by local governments aiming to maximize industrial output. We find that, first, local governments in areas with higher productivity tends to allocate a larger proportion of land to industrial use, supporting our empirical observation that industrial land discounts are more pronounced in more developed regions. Second, the elasticity of labor mobility across cities is crucial in determining the extent to which local governments can prioritize industrial outputs over worker welfare. Further quantitative estimations and counterfactual analyses suggest that removing migration barriers or harmonizing land allocations with inter-regional transfers could enhance both social welfare and industrial output.
FDI_bunching (1).pdf
Notching Foreign Equity Share with Corporate Income Tax Cuts, with Phil Huang and Rui Zhang, Under Review.
Abstract We evaluate a Foreign Direct Investment (FDI) preferential policy in China that provides a corporate tax reduction for firms with foreign equity shares no less than 25%. We find that a massive number of multinational firms in China choose to bunch their foreign ownership share at the 25% level, which leads to a 20.8% increase in the total FDI. Meanwhile, we observe a jump-down in firms’ sizes and total factor productivity around the tax notch. To expound on this phenomenon, we construct a model where joint ventures make their ownership structure decisions with incomplete contracts under the tax policy. By aligning our model with empirical data, we find that: First, smaller firms with lower total factor productivity are more responsive to this policy. Second, the government sacrifices 19.38% of the tax revenue collected from the foreign-invested firms to bring in more FDI. Last, almost half of the tax benefit is spent to cover the adjustment cost and production loss from firms’ bunching behaviors.
PUBLICATIONS
Incomplete Protectionism along Global Value Chains: the Effects of China's Processing Trade during the Trade War, 2023. with Nan Liu, Wei Tian and Miaojie Yu. Under Review.
The Impacts of US-China Trade War: An overview, with Nan Liu, Wei Tian and Miaojie Yu. Journal of the Asia Pacific Economy, forthcoming.
The Effects of China’s Retaliatory Duties during the China-US Trade War, 2022. with Wei Tian and Miaojie Yu, China Economic Quarterly, 22 (06), 2042-2062.