The Chinese University of Hong Kong-Tsinghua University Joint Research Center for Chinese Economy 清華大學-香港中文大學中國經濟聯合研究中心 - Research Papers The Chinese University of Hong Kong-Tsinghua University <br/>Joint Research Center for Chinese Economy 清華大學-香港中文大學中國經濟聯合研究中心

Research Papers

Soo Hong Chew, Junjian Yi, Junsen Zhang, Songfa Zhong
We study the role of risk aversion underlying son preference in patriarchal societies, where sons serve as better insurance for old-age support than daughters. The implications of an insurance motive on son preference are two-fold. First, prior to the birth of their children, more risk-averse parents...

Shiyuan Pan, Kang Shi, Lisheng Wang, Juanyi (Jenny) Xu
China's M2/GDP ratio keeps rising, although it is already in the highest tier throughout the world. In this paper, we investigate empirically this puzzle using different levels of data. We first provide a quantitative approach to estimate the degree of China's excess liquidity based on cross-country...

Kang Shi, Jiandong Ju, Yifu Justin Lin, Qing Liu

Yousha Liang, Kang Shi, Lisheng Wang, Juanyi (Jenny) Xu
Focusing on the pricing differential between the Renminbi onshore and offshore exchange rates, this paper characterizes the exchange rate fluctuations and investigates the effect of recent Renminbi currency market reforms. Using GARCH models, we find volatility clustering phenomena and leverage effect...

Loren Brandt, Johannes Van Biesebroeck, Luhang Wang, Yifan Zhang
We examine the effects of the trade liberalization that accompanied China’s WTO accession on the evolution of markups and productivity of Chinese manufacturing firms. Although these two dimensions of performance cannot be separately identified when firm output is measured by revenue, we show that...

Chong-En Bai, Chang-Tai Hsieh, Zheng (Michael) Song
In 2009 and 2010, China undertook a 4 trillion Yuan fiscal stimulus, roughly equivalent to 12 percent of annual GDP. The "fiscal" stimulus was largely financed by off-balance sheet companies (local financing vehicles) that borrowed and spent on behalf of local governments. The off-balance sheet...

Wei Ha, Junjian Yi, Ye Yuan, Junsen Zhang
Using a newly constructed panel dataset that covers the 14-year period from 1997 to 2011 for more than 100 villages in China, this study analyzes the dynamic effect of rural-to-urban migration on inequality in source villages. Given that income inequality is time persisting, we use a system GMM...

Jun Han, Runjuan Liu, Beyza Ural Marchand, Junsen Zhang
This paper investigates the tariff pass-through mechanism and the distributional effects of trade liberalization in urban China. We study how market structure, specifically the size of the private sector, affects tariff pass-through, and how this mechanism influenced the extent to which households...

Kinda Cheryl Hachem, Zheng Michael Song
Many countries try to mitigate business cycle fluctuations by regulating the activities of their banks. We develop a theoretical framework to study the endogenous response of the banking sector and the implications for the aggregate economy. Under fairly mild conditions, we find that stricter liquidity...

Ying Bai, Ruixue Jia
This paper studies how the abolition of an elite recruitment system—China's civil exam system that lasted over 1,300 years—affects political stability. Employing a panel data set across 262 prefectures and exploring the variations in the quotas on the entry-level exam candidates, we find...

Dongya Li, Yi Lu, Travis Ng, Jun Yang
Some firms have achieved good performance in developing countries where the financial sector is far from established. One explanation in the literature is that these firms benefit from trade credit, a form of informal financing. Using a survey of firms in China conducted by the World Bank in early 2003,...

Shaojie Zhou, Junsen Zhang
This study conducts a long-run analysis on the trends and components of Chinese saving rates from 1953 to 2012. We identify two structural changes in aggregate saving rates around 1978 and 2001, and examine them through a decomposition analysis of the income distribution and sector-specific saving...

Jun Ma, Kang Shi, Honglin Wang, Lisheng Wang
We construct a Dynamic Stochastic General Equilibrium( DSGE) model to illustrate the transmission mechanism of the central bank policy rate in China based on Ma and Wang( 2014). Using a bank- centric financial system to characterize Chinese economy,our model qualitatively demonstrates and quantitatively...

Zheng (Michael) Song, Kjetil Storesletten, Yikai Wang, Fabrizio Zilibotti
We analyze intergenerational redistribution in emerging economies with the aid of an overlapping generations model with endogenous labor supply. Growth is initially high but declines over time. A version of the model calibrated to China is used to analyze the welfare effects of alternative pension...

Zheng (Michael) Song, Guiying Laura Wu
Resource misallocation lowers aggregate productive effi ciency. The existing literature often infers the magnitude of misallocation from the dispersion of average revenue products. However, the methodology is subject to several identification issues.

Chang-Tai Hsieh, Zheng (Michael) Song
Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state...

Haifeng Zhang, Hongliang Zhang, Junsen Zhang
In this paper, we examine the economic implications of demographic age structure in the context of regional development in China. We extend the development accounting framework by incorporating age structure and apply it to a panel data set of 28 Chinese provinces. We find that changes in age structure,...

Daoju Peng, Kang Shi, Juanyi (Jenny) Xu
Chinese real business cycle (RBC) exhibits a unique pattern, which is characterized by moderate consumption volatility, substantially low investment volatility, and acyclical trade balance. These features are quite different from business cycles in other emerging markets and cannot be explained by...

Ying Bai, James Kai-sing Kung
Acknowledgments: We thank five anonymous reviewers and an associate editor of this journal, Robert Barro, Sascha Becker, Davide Cantoni, Eric Chaney, Claudia Goldin, Li Han, Avner Greif, Wenkai He, Philip Hoffman, Saumitra Jha, Yi-min Lin, Rachel McCleary, Nathan Nunn, Albert Park, Nancy Qian, Satoru...

Jiandong Ju, Kang Shi, Shang-Jin Wei
While a reduction in import barriers in a partial equilibrium may be thought to lead to an increase in imports and a reduction in trade surplus, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified Heckscher-Ohlin...

Zheng (Michael) Song, Kjetil Storesletten, Fabrizio Zilibotti
We construct a growth model consistent with China’s economic transition: high output growth, sustained returns on capital, reallocation within the manufacturing sector, and a large trade surplus. Entrepreneurial firms use more productive technologies, but due to financial imperfections they must...

Hongbin Li, Mark Richard Rosenzweig, Junsen Zhang
In this paper, we use new survey data on twins born in urban China, among whom many experienced the consequences of the forced mass rustication movement of the Chinesecultural revolution, to identify the distinct roles of altruism and guilt in affecting behavior within families. Based on a model...

Research Papers

Soo Hong Chew, Junjian Yi, Junsen Zhang, Songfa Zhong
We study the role of risk aversion underlying son preference in patriarchal societies, where sons serve as better insurance for old-age support than daughters. The implications of an insurance motive on son preference are two-fold. First, prior to the birth of their children, more risk-averse parents...

Shiyuan Pan, Kang Shi, Lisheng Wang, Juanyi (Jenny) Xu
China's M2/GDP ratio keeps rising, although it is already in the highest tier throughout the world. In this paper, we investigate empirically this puzzle using different levels of data. We first provide a quantitative approach to estimate the degree of China's excess liquidity based on cross-country...

Kang Shi, Jiandong Ju, Yifu Justin Lin, Qing Liu

Yousha Liang, Kang Shi, Lisheng Wang, Juanyi (Jenny) Xu
Focusing on the pricing differential between the Renminbi onshore and offshore exchange rates, this paper characterizes the exchange rate fluctuations and investigates the effect of recent Renminbi currency market reforms. Using GARCH models, we find volatility clustering phenomena and leverage effect...

Loren Brandt, Johannes Van Biesebroeck, Luhang Wang, Yifan Zhang
We examine the effects of the trade liberalization that accompanied China’s WTO accession on the evolution of markups and productivity of Chinese manufacturing firms. Although these two dimensions of performance cannot be separately identified when firm output is measured by revenue, we show that...

Chong-En Bai, Chang-Tai Hsieh, Zheng (Michael) Song
In 2009 and 2010, China undertook a 4 trillion Yuan fiscal stimulus, roughly equivalent to 12 percent of annual GDP. The "fiscal" stimulus was largely financed by off-balance sheet companies (local financing vehicles) that borrowed and spent on behalf of local governments. The off-balance sheet...

Wei Ha, Junjian Yi, Ye Yuan, Junsen Zhang
Using a newly constructed panel dataset that covers the 14-year period from 1997 to 2011 for more than 100 villages in China, this study analyzes the dynamic effect of rural-to-urban migration on inequality in source villages. Given that income inequality is time persisting, we use a system GMM...

Jun Han, Runjuan Liu, Beyza Ural Marchand, Junsen Zhang
This paper investigates the tariff pass-through mechanism and the distributional effects of trade liberalization in urban China. We study how market structure, specifically the size of the private sector, affects tariff pass-through, and how this mechanism influenced the extent to which households...

Kinda Cheryl Hachem, Zheng Michael Song
Many countries try to mitigate business cycle fluctuations by regulating the activities of their banks. We develop a theoretical framework to study the endogenous response of the banking sector and the implications for the aggregate economy. Under fairly mild conditions, we find that stricter liquidity...

Ying Bai, Ruixue Jia
This paper studies how the abolition of an elite recruitment system—China's civil exam system that lasted over 1,300 years—affects political stability. Employing a panel data set across 262 prefectures and exploring the variations in the quotas on the entry-level exam candidates, we find...

Dongya Li, Yi Lu, Travis Ng, Jun Yang
Some firms have achieved good performance in developing countries where the financial sector is far from established. One explanation in the literature is that these firms benefit from trade credit, a form of informal financing. Using a survey of firms in China conducted by the World Bank in early 2003,...

Shaojie Zhou, Junsen Zhang
This study conducts a long-run analysis on the trends and components of Chinese saving rates from 1953 to 2012. We identify two structural changes in aggregate saving rates around 1978 and 2001, and examine them through a decomposition analysis of the income distribution and sector-specific saving...

Jun Ma, Kang Shi, Honglin Wang, Lisheng Wang
We construct a Dynamic Stochastic General Equilibrium( DSGE) model to illustrate the transmission mechanism of the central bank policy rate in China based on Ma and Wang( 2014). Using a bank- centric financial system to characterize Chinese economy,our model qualitatively demonstrates and quantitatively...

Zheng (Michael) Song, Kjetil Storesletten, Yikai Wang, Fabrizio Zilibotti
We analyze intergenerational redistribution in emerging economies with the aid of an overlapping generations model with endogenous labor supply. Growth is initially high but declines over time. A version of the model calibrated to China is used to analyze the welfare effects of alternative pension...

Zheng (Michael) Song, Guiying Laura Wu
Resource misallocation lowers aggregate productive effi ciency. The existing literature often infers the magnitude of misallocation from the dispersion of average revenue products. However, the methodology is subject to several identification issues.

Chang-Tai Hsieh, Zheng (Michael) Song
Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state...

Haifeng Zhang, Hongliang Zhang, Junsen Zhang
In this paper, we examine the economic implications of demographic age structure in the context of regional development in China. We extend the development accounting framework by incorporating age structure and apply it to a panel data set of 28 Chinese provinces. We find that changes in age structure,...

Daoju Peng, Kang Shi, Juanyi (Jenny) Xu
Chinese real business cycle (RBC) exhibits a unique pattern, which is characterized by moderate consumption volatility, substantially low investment volatility, and acyclical trade balance. These features are quite different from business cycles in other emerging markets and cannot be explained by...

Ying Bai, James Kai-sing Kung
Acknowledgments: We thank five anonymous reviewers and an associate editor of this journal, Robert Barro, Sascha Becker, Davide Cantoni, Eric Chaney, Claudia Goldin, Li Han, Avner Greif, Wenkai He, Philip Hoffman, Saumitra Jha, Yi-min Lin, Rachel McCleary, Nathan Nunn, Albert Park, Nancy Qian, Satoru...

Jiandong Ju, Kang Shi, Shang-Jin Wei
While a reduction in import barriers in a partial equilibrium may be thought to lead to an increase in imports and a reduction in trade surplus, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified Heckscher-Ohlin...

Zheng (Michael) Song, Kjetil Storesletten, Fabrizio Zilibotti
We construct a growth model consistent with China’s economic transition: high output growth, sustained returns on capital, reallocation within the manufacturing sector, and a large trade surplus. Entrepreneurial firms use more productive technologies, but due to financial imperfections they must...

Hongbin Li, Mark Richard Rosenzweig, Junsen Zhang
In this paper, we use new survey data on twins born in urban China, among whom many experienced the consequences of the forced mass rustication movement of the Chinesecultural revolution, to identify the distinct roles of altruism and guilt in affecting behavior within families. Based on a model...