Research

Working Papers

1. Ranking Regret (Job market paper)

Abstract: A social planner wants to rank people, e.g., assign airline passengers a boarding order. A natural ranking is to order people from most to least sensitive to rank. But people's feelings can depend both on their assigned rank, and on the alternatives they might have been assigned, e.g., regret. As a result, there could be no best ranking, due to intransitive cycles. This paper shows how to tell when a best ranking exists, and that when it exists, it is indeed the natural ranking. When this best does not exist, an alternative second-best group ranking strategy is proposed, which resembles actual airline boarding policies.

2. Over-Identified Doubly Robust Identification and Estimation, (R&R, Journal of Econometrics)

with Arthur Lewbel and Jin-Young Choi

Abstract: Consider two parametric models. At least one is correctly specified, but we don't know which. Both models include a common vector of parameters. An estimator for this common parameter vector is called Doubly Robust (DR) if it's consistent no matter which model is correct. We provide a general technique for constructing DR estimators. Our General Doubly Robust (GDR) technique is a simple extension of the Generalized Method of Moments. We illustrate our GDR with a variety of models, including average treatment effect estimation. Our empirical application is instrumental variables estimation, where either one of two instrument vectors might be invalid.

3. Transitivity of Redistribution Regret

Abstract: A social planner wants to allocate resources, e.g., allocate fiscal revenue or distribute toys to children. The social planner cares about individuals' feelings, which depend both on their assigned resources, and on the alternatives they might have been assigned. As a result, there could be intransitive cycles. This paper shows that the preference orders are almost never transitive except one case where the resources are fixed and one individual out of three is extremely sensitive.

Works In Progress

1. Counterfactual Thinking in Social Choice: Evidence from the COVID-19 Pandemic

Counterfactual thinking says that people compare their current outcomes to some alternative outcomes constructed by altering some mutable factors, and therefore have emotions or behaviors, e.g., unhappiness or happiness, blame or compliment. Consider a social choice problem, where a social planner needs to allocate resources. This paper studies whether people have counterfactual thoughts by considering the social planner's alternative policy, and if so, what kind of thoughts they would have. This paper takes the Covid pandemic as an example. One citizen may wonder if the governor had taken actions at the very beginning of the disease, then people might have suffered less from it. And this citizen would blame. Meanwhile, people may give compliments if they think the government could have done worse. This paper plans to conduct surveys and show the existence of counterfactual thoughts during the pandemic, and analyze the proportion of different thoughts in different cultures.

2. The Impact of Property Tax on House Prices: Incomplete Information with News Shock

with Liyang Hong

A news shock about the property tax expansion may decrease house prices, especially when there are bubbles in the market. However, the data shows that China's pilot property tax increases house prices instead of decreasing, which contradicts with the intuition. This paper develops a house price model in a higher-order beliefs framework and introduces heterogeneous priors to mitigate the contradiction. The result shows that if everyone believes the others are biased, then the biased aggregate belief stimulates the house prices, which agrees with the data. This paper is going to study policy implications by adding public information in the model.

3. Can Estate Tax Narrow the Income Gap? – A Simulation Based on an Overlapping Generation Model

Abstract: This paper establishes a 60-period overlapping generation economy to study the distributive effect of estate tax. The model considers heterogeneous initial capital endowment, family educational investment, random death and bequest. The shocks include the definition of taxpayer, marginal tax rate and usage of tax revenue. The result shows that estate tax narrows income gap if the taxpayers are the top 2%-4% wealthy families and the tax revenue is spent on education.

Publications

1. An Empirical Study of the Income Redistribution Effect of the Taxes Imposed on Citizens in China, with Jinzhi Tong and Xing Li, Finance & Trade Economics, Jun. 2011.

Abstract: This paper estimates the pre-tax and post-tax Gini coefficient, and studies the redistribution effect of taxes imposed on citizens in China. The result shows a slightly regressive tax system. To identify the structural reasons, this paper decomposes the redistribution effect by Kakwani’s method. It shows that the redistribution effect of direct tax is positive while that of indirect tax is negative, and the former effect is weaker than the latter one. Therefore, the regressive tax system is formed by the small proportion of progressive direct tax and the large proportion of regressive indirect tax.

2. A review on Tax Salience Based on Heuristic Bias, with Jinzhi Tong, Journal of Xiamen University (Arts & Social Sciences), Jun. 2011.

Abstract: This paper reviews the studies on the theory of tax salience developed from heuristic bias. Some studies provide experimental evidence of tax salience; some papers use tax salience to explain related phenomenon; and some literatures provide suggestions on tax policy. This paper summarizes the results, introduces the way to revise the traditional tax models, and applies it to the design of tax system.

3. Comparison on the Redistribution Effects of Direct Tax between China and USA, with Jinzhi Tong and Xing Li, International Taxation in China, Oct. 2010.

Abstract: This paper conducts Theil index to estimate the redistribution effect of direct tax both in China and USA during 2005-2008. It shows that the direct tax in the U.S. significantly narrows income gap while the direct tax in China barely affects income inequality. The reason is that the direct tax in China only takes 6% of the total tax revenue, which is too small to affect the income distribution.

Research Grants

1. Participant, Sustainable Development of Fiscal Policy in Jiangbei District During 2015-2019, supported by Department of Finance, Jiangbei District, Ningbo City, China, 2015.

2. Participant, China’s Estate Tax in a Heterogeneous Dynamic Stochastic General Equilibrium Framework (71473209), supported by The National Natural Science Foundation of China, 2014-2019.

3. Participant, Studies on Improving the Public Finance System (10zd&036), supported by The National Social Science Found of China, 2010-2014.

4. Participant, Studies on the Subsidy Policy for Leading Enterprise during the Industrialization of Agriculture (02BJY086), supported by The National Social Science Found of China, 2006-2008.