Research

Publications

A Maximum Entropy Bootstrap Approach to Financial Development and Economic Growth in China, Economic Systems, 2024  (with Renfang Tian, Adian McFarlane, and Hui Feng) (latest version available for download with no sign up, fees or registration until June 04, 2024 https://authors.elsevier.com/c/1iy893LbXXZl2U)


Abstract

China's social safety net is still underdeveloped, hence family support in the form of intergenerational transfers often serves as a substitute for the public transfer system. Using data from the China Health and Retirement Longitudinal Study, this paper finds that both upstream inter-vivos transfers (from children to parents) and downstream inter-vivos transfers (from parents to children) are prevalent in urban China. Moreover, the relative income status of the parent and children has an impact on inter-vivos transfers. To investigate what economic factors generate the observed patterns of inter-vivos transfers, this paper adopts a general equilibrium life-cycle model in which overlapping generations are altruistically linked and calibrates the model to match data from urban China. Counterfactual experiments of removing one source of economic risk or modifying the social security replacement rate from the baseline model at a time reveal that intergenerational transfers mainly serve as informal insurance against the income risk of the children.

Intergenerational Transfers in China: What are the patterns of the transfers and when do the transfers occur? International Studies of Economics, 19 (1), 117-150, March 2024  (Invited Submission for the special issue "Population aging, health care, and the macroeconomy")

Abstract

China's social safety net is still underdeveloped, hence family support in the form of intergenerational transfers often serves as a substitute for the public transfer system. Using data from the China Health and Retirement Longitudinal Study, this paper finds that both upstream inter-vivos transfers (from children to parents) and downstream inter-vivos transfers (from parents to children) are prevalent in urban China. Moreover, the relative income status of the parent and children has an impact on inter-vivos transfers. To investigate what economic factors generate the observed patterns of inter-vivos transfers, this paper adopts a general equilibrium life-cycle model in which overlapping generations are altruistically linked and calibrates the model to match data from urban China. Counterfactual experiments of removing one source of economic risk or modifying the social security replacement rate from the baseline model at a time reveal that intergenerational transfers mainly serve as informal insurance against the income risk of the children.

The Welfare Effects of Social Insurance Reform in the Presence of Intergenerational Transfers The B.E. Journal of Macroeconomics, 23(1), Nov 2022.

Abstract

Family support in the form of intergenerational transfers could serve as a substitute for the public transfer system, especially when the public safety net is weak. These intergenerational transfers could be impacted by changes in public insurance. Conversely, induced changes in family transfers could also impact the effectiveness of a public insurance program. What is the impact of social insurance reform on household welfare in the context of intergenerational transfers? This paper investigates this question by using an overlapping generations general equilibrium model where parents and their children are linked by intergenerational transfers. In the model, individuals differ in earnings ability and face idiosyncratic uninsurable income risk, health risk, and mortality risk. This paper calibrates the model to key features in the urban Chinese economy. Using this calibrated model, this paper finds that households on average experience a welfare gain from an increase in the social insurance benefits but that this effect differs across households conditional on their economic status. This paper then provides a decomposition of these welfare changes into three channels: a direct policy channel, an intergenerational-transfers channel, and a general equilibrium channel.

Does Culture Play a Role in the Stock Market's Response to Uncertainty?   International Journal of Finance & Economics, 27(2), April 2022. 

Abstract

While a growing body of literature documents a decrease in stock returns with an increase in economic uncertainty, the magnitude of this decrease may differ across countries. This paper examines whether a national culture that shapes its people's views towards uncertainty can serve as an explanation if there are heterogeneous responses of the stock market responses to an increase in economic uncertainty at the country level. Using the economic policy uncertainty (EPU) index to proxy for economic uncertainty and employing an SVAR model, this paper first finds that the magnitude of a stock market's response to an increase in uncertainty varies across countries. This paper then adopts the

uncertainty avoidance index (UAI) as a proxy measure of culture relating to people's views towards uncertainty and finds that the observed cross-country heterogeneity is correlated with the degree of a society's uncertainty avoidance. The stock market index is likely to drop more in response to an increase in uncertainty in countries with higher uncertainty avoidance.


 

Work in Progress