Research Papers

Research Papers

Special Deals with Chinese Characteristics

(2019)

Chong-en Bai, Chang-Tai Hsieh, Zheng Song

Chinese local governments wield their enormous political power and administrative capacity to provide “special deals” for favored private firms. We argue that China’s extraordinary economic growth comes from these special deals. Local political leaders do so because they derive...

A Forensic Examination of China’s National Accounts

(2019)

Wei Chen, Xilu Chen, Chang-Tai Hsieh, Zheng (Michael) Song

China’s national accounts are based on data collected by local governments. However, since local governments are rewarded for meeting growth and investment targets, they have an incentive to skew local statistics. China’s National Bureau of Statistics (NBS) adjusts the data provided by local...

Fluctuation and Reform: a Tale of Two RMB Markets

(2019)

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...

Risk Aversion and Son Preference: Experimental Evidence from Chinese Twin Parents

(2017)

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...

Excess Liquidity and Credit Misallocation: Evidence from China

(2017)

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...

Cross-border Marriage Costs and Marriage Behavior: Theory and Evidence

(2018)

Yoram Weiss, Junjian Yi, Junsen Zhang

This paper analyzes cross-border marriages between mainland China and Hong Kong (HK). We examine the effects of a reduction in cross-border marriage costs following an increase in marriage-migration quotas and the handover of HK to China. We find that cross-border marriages mainly involve men from the...

Exchange Rate Volatility and Trade: The Role of Credit Constraints

(2018)

Kang Shi, Shu Lin, Haichun Ye

This study examines the role of credit constraints in determining the trade effect of exchange rate volatility. We first develop a small open economy general equilibrium model with credit constraints. In our model, constrained firms respond to real depreciations and appreciations in an asymmetric way,...

WTO Accession and Performance of Chinese Manufacturing Firms

(2017)

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...

The Long Shadow of a Fiscal Expansion

(2016)

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...

The dynamic effect of rural-to-urban migration on inequality in source villages: System GMM estimates from rural China

(2016)

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...

Market structure, imperfect tariff pass-through, and household welfare in Urban China

(2016)

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...

Elite Recruitment and Political Stability: The Impact of the Abolition of China's Civil Service Exam

(2016)

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...

Does Trade Credit Boost Firm Performance?

(2016)

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,...

Chinese Saving Rates from 1953 to 2012: Trends, Compositions and Prospects

(2016)

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...

A Study of Interest Rate Transmission Dynamics

(2016)

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...

Sharing High Growth across Generations: Pensions and Demographic Transition in China

(2015)

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...

Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China

(2015)

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...

Demographic Age Structure and Economic Development: Evidence from Chinese Provinces

(2015)

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,...

Diffusing knowledge while spreading God's message: Protestantism and economic prosperity in China, 1840–1920

(2014)

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...

Growing Like China

(2011)

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...

Altruism, Favoritism, and Guilt in the Allocation of Family Resources: Sophie's Choice in Mao's Mass Send Down Movement

(2010)

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...

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