Research

Abstract:  We study recurring auctions wherein a follow-up auction will be held in the future if a previous one fails to sell the item. Recurring auctions are ubiquitous for selling durable assets, such as houses and artwork.  Many auctions for durable assets, such as houses and artwork, are recurring: If an auction fails to sell the item, a follow-up auction will be held in the future.  We characterize the equilibrium of the recurring auction game. When entry is costly for potential buyers, we show that recurring auctions outperform static mechanisms in both efficiency and revenue. We further consider recurring auction design and find solutions to both the efficiency-maximizing and revenue-maximizing problems. Next, we apply our theoretical findings to data and investigate the home foreclosure auction market in China. We propose an empirical framework to structurally identify the recurring auction model parameters. Our counterfactual exercises show that using a recurring auction design leads to an annual efficiency gain of 3.2 billion USD and an annual revenue gain of 2.7 billion USD in China. Moreover, with optimally chosen reserve price sequences, the efficiency and revenue can be further raised by 1.1 billion USD and revenue by 0.9 billion USD, respectively. 

Abstract: This paper provides the first theory and evidence on the role of presale policies in the residential housing market. To do so, we construct a novel dataset of unfinished projects, presale policies, and land auction outcomes across 270 major cities in China. By project starting year, we identify 2,330 unfinished residential projects from 2010 to 2017 on a citizen complaint website run by the central government. We find that both presale criterion and postsale construction cost supervision relate to a lower probability of unfinished projects. But only presale criterion relates negatively to the pace of new housing development, measured by developers' multi-tasking and land auction outcomes. A back-of-the-envelope calculation suggests that the average bundle of presale policies is inferior to the Pareto frontier in our sampled cities. Reducing the presale criterion to the minimum level required by the central government and increasing the postsale supervision by 1.8 standard deviations can relate to a 40% reduction in the occurrence of unfinished projects, while keeping the pace of new housing development unchanged.  Eliminating unfinished projects would entail a drastic increase in both presale criterion and postsale supervision, with slower housing development. 

Abstract:  In this paper, I develop a model to study the equilibrium effects of price control policies. My framework considers the option for consumers to wait and re-enter the market if items are not immediately allocated due to excess demand. While waiting is commonly associated with the price ceiling,  it has received limited attention in prior research. I study the housing market in Shanghai, where a price ceiling has been imposed on new houses since 2017. I have compiled a new dataset incorporating sales, characteristics of new and existing houses, and records of households' participation in housing lotteries. Using a structural model, I estimate household demand, housing supply, and waiting costs.  The price ceiling on new houses resulted in a social welfare loss of 13 billion USD from 2018 to 2020. Consumer surplus increased by 1.3 billion USD, as most of the gains from lower prices of new houses were offset by waiting costs and misallocation. Counterfactual analyses suggest that distributing a discount voucher to buyers rather than imposing a price ceiling could significantly reduce the welfare loss and achieve more equitable outcomes 

Abstract: This paper investigates the economic impacts of inefficient transport network design, using China's restrictive airspace as a case study. China's commercial airlines are limited to using 20% of its airspace, giving rise to an average route curvature of 17% compared to 5% in the US and Europe. Using route curvature as a direct measure of inefficiency and an IV estimation strategy, We find that greater route curvature increases airfares and delays while reducing flight frequency and aeroconnected city pairs. These inefficiencies cascade into broader economic costs, hampering cross-city activities including corporate investment, patent collaboration, personal travel, and migration. 

Abstract: What role do local officials’ incentives play in regional economic growth? How do local officials behave under promotion pressure? This paper studies the unintended impact of mayors’ promotion incentives on regional economic growth and subnational-level GDP manipulation in China. We employ a regression discontinuity design that accounts for age restrictions in deciding promotions for mayors. We find that when GDP performance is prioritized in officials’ promotion evaluations (before 2013), mayors’ promotion incentives significantly increase the statistical GDP growth rate by 3.4 percentage points. However, their effects on nighttime light and other non-manipulable real economic growth indicators are close to zero. This gap can be attributed to GDP manipulation under our empirical framework. The above pattern no longer persists after 2013, when the role of GDP statistics in mayoral promotions was reduced. Our findings indicate that GDP manipulation makes performance-based competition between mayors devolve into a data manipulation game.

 Abstract:  How does housing wealth affect people’s health outcomes and health behaviors? We study such an effect on the  middle-aged and older population in China by exploiting a discontinuity in housing wealth generated by two housing policies under a regression discontinuity design (RDD) framework. These policies gave tax and down-payment breaks to owners of houses 90m2 or smaller. Using objective biomarker information, we find that increased housing wealth only has a deteriorating effect on lung functionality. Subjective health indicators point to exacerbated cases of the number of chronic diseases, driven mostly by individuals’ self-reported lung and stomach diseases and dyslipidemia. One explanation for such discrepancy is that wealth not only has a direct impact on health but also increases the possibility of having a health condition diagnosed. These results also echo our findings that increased housing wealth is accompanied by more frequent healthcare use and worsened smoking habits. The results of our paper highlight several important biases that arise when the diagnostic effect is ignored in using subjective health indicators. 

Abstract: Faced with serious environmental degradation, China under Xi Jinping has pursued an unprecedentedly massive and sustained campaign against pollution, especially air pollution, since 2013. How much of a burden has the campaign-style escalation in environmental enforcement had on manufacturing firms? Using firm-level environmental supervision records, we directly measure the environmental regulation intensity. We combine a regression discontinuity design based on Qinling-Huaihe winter heating policy with a first difference approach to estimate the causal effect of environmental regulatory enforcement on firm performance. We find that, for high air-polluting manufacturing firms, a 1% increase in the probability of being penalized for environmental violations lowers their TFP by 2.8%. We also find that the campaign-style environmental enforcement has affected larger enterprises and state-owned enterprises less while deterring the entry of new firms. While we appreciate the importance of improving air quality, our research offers a more well-rounded understanding of China’s environmental enforcement initiatives and especially the costs of such enforcement on industry. Our findings suggest that the reward and punishment of local officials and of firms need to be sensitive to the costs of adjustment.