Working Papers:
Learning from Your Family: A Theory of Intergenerational Occupational Persistence
Abstract: I develop a dynamic model of occupational choice with intergenerational transmission of ability and information frictions about ability. In this model, workers enter the labor market with imperfect information about their ability endowment, learn their actual ability through working, and eventually choose occupations that maximize their earnings. The theory suggests that workers whose occupational choices coincide with their father’s occupation at the beginning of their career are less likely to switch occupations later. These workers are also more likely to experience a higher rate of wage growth. This learning process is consistent with several key facts about intergenerational occupational persistence, such as the heterogeneity of persistence levels across occupations, the decline of intergenerational occupational persistence with age, and the dispersion in earnings between workers who follow their father’s occupational choices and workers who do not. I illustrate how information frictions in the ability learning process enhance intergenerational occupational persistence and lead to mismatch, consequently reducing worker productivity. I use the calibrated model to investigate how a decrease in information frictions improves the allocation of workers in the labor force and reduces occupational persistence at the aggregate level.
Occupational Choice and Intergenerational Persistence: Evidence from Germany
Abstract: Occupations not only determine success in the labor market but also reflect a general social-economic standing. Using both survey and administrative panel data from Germany, I generate a ranking of occupations based on estimated wage premia and document a novel set of facts characterizing occupational persistence across generations. The intergenerational occupational persistence is U-shaped against the wage-premia ranking of occupations: workers who belong to a high- and low-wage-premia occupation are more likely to work in the same occupation as their father. The framework adopted in this paper can consistently explain the variations in intergenerational occupational persistence across occupations. I also find empirical evidence from the German data to show that workers who work in their father’s occupation exhibit a lower likelihood of switching occupations and experience a higher rate of wage growth over the life cycle. Information frictions regarding ability play a significant role in delaying workers’ ability learning processes and lead to a mismatch in allocating talents across occupations, especially in their early stages of life. Quantitatively, this mechanism accounts for 51.52\% of the total persistence observed in Germany.
Save in Bank or Invest in Children: Impacts of the One-child Policy
Abstract: The one-child policy has effectively curbed China's population growth in the last few decades and has led to economic consequences in several dimensions. This paper develops a life-cycle model with intergenerational transfers and human capital accumulation. It provides channels to understand households' response to fertility restrictions on saving and education investment in their offspring. This theory also links effects at the household level to consequences at the aggregate level through shifts in demographic compositions. Using multiple China's household survey data sources, I find strong empirical support for my theory -- only child households save 5% - 8% higher and spend 4% (as a share of household income) more on education per child than households exempted from the fertility restriction. Individuals who are the only child in their original families have a better chance of attending universities.
Work in Progress
The Puzzling Evolution of Chinese Household Savings and Borrowings
Abstract: The household sector leverage ratio in China has considerably increased in the last decade, especially after the global financial crisis in 2008, despite an increasing trend in households' saving rates. Using multiple microdata sources from China, I first document the age-saving profile changed from a U-shaped profile in 2002 to one where the saving rate increased by age in 2013, and leverage ratios of young households skyrocketed over this period. Then, through an OLG model, I show that the interaction between household credit constraints and house price dynamics can account for much of the changes in saving and borrowing behaviors of Chinese households over this period.
Quality-Adjusted Prices and Welfare Measures: Evidence from the U.S. Insulin Treatments Market
Abstract: The pharmaceutical industry is characterized as having substantial investment in R&D and a large number of new product introductions, which poses particular problems for price measurements caused by the quality of drug products changing over time. This paper applies recent demand estimation techniques to individual-level data to construct a constant-quality price index for insulin drugs in the U.S. market. Although the average price for insulin drugs steadily increases over the sample period, I find that the constant-quality price index drops by 7%, a pace more in line with our expectations in such a dynamic segment of the industry.
Other Writings
Oil Prices and Canadian Exchange Rates, Published in Iona Journal of Economics, vol (1) 2016, pp 46- 67