WORKING PAPERS
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Local Land Allocation and Demographic Transitions across Time and Space. Job Market Paper (with Qiaohairuo Lin)
Abstract This paper argues that the dramatic population decline in China in recent years is an unintended consequence of local governments’ land allocation decisions, driven by industrial discounts in the land market. We construct a dynamic spatial overlapping-generation framework to capture the interplay between governments’ land allocation, population controls, and public education expenditures on household family-planning decisions. By estimating the model to match empirical population distributions and conducting counterfactual analysis, we find two key results: First, under the One Child Policy, China’s realized fertility rate was significantly below the fertility rate needed for natural population replacement. However, shifting to a free land market could potentially have reduced this fertility rate gap by 16.33%. Second, the geographic variations in fertility rates across cities increased following the removal of the fine, suggesting that the effects of land allocation and housing prices would become more pronounced in the future.
Conferences: the 18th North American Meeting of the Urban Economics Association (UEA), the 94th Annual Meeting of the Southern Economic Association (SEA), the 19th Economics Graduate Student Conference at Washington University in St. Louis, and the 2024 Carolina Region Empirical Economics Day (CREED), the 2nd Summer Meeting in Urban Economics, China, the 2024 UVa Huskey Conference, the 6th GSIPE conference; Selected by the 2024 Royal Economic Society (RES) PhD Conference, the 2024 SMU-Jinan Conference on Urban and Regional Economics. Participant of 2024 NBER Summer Institute International Trade & Investment Meeting, the 1st International Economics Annual Workshop at NC State University, the 7th Mid- Atlantic International Trade Workshop.
Notching Foreign Equity Share with Corporate Income Tax Cuts, with Phil Huang and Rui Zhang, Under Review.
Abstract We evaluate a Foreign Direct Investment (FDI) preferential policy in China that provides a corporate tax reduction for firms with foreign equity shares no less than 25%. We find that a massive number of multinational firms in China choose to bunch their foreign ownership share at the 25% level, which leads to a 20.8% increase in the total FDI. Meanwhile, we observe a jump-down in firms’ sizes and total factor productivity around the tax notch. To expound on this phenomenon, we construct a model where joint ventures make their ownership structure decisions with incomplete contracts under the tax policy. By aligning our model with empirical data, we find that: First, smaller firms with lower total factor productivity are more responsive to this policy. Second, the government sacrifices 19.38% of the tax revenue collected from the foreign-invested firms to bring in more FDI. Last, almost half of the tax benefit is spent to cover the adjustment cost and production loss from firms’ bunching behaviors.
Presentations the Annual Conference of ASSA 2024, the Empirical and Structural Trade Workshop 2023 at Shanghai University of Finance and Economics, the Trade Workshop at Central University of Finance and Economics.
China's Retaliatory Tariffs Against the US:Firm Import-Export Linkage Along Global Production Line, with Miaojie Yu and Wei Tian, Under Review.
Abstract This paper investigates the impact of China’s retaliatory tariffs against American products at the firm level during 2016-2019. We document two novel empirical findings: First, Chinese firms adjust their import baskets in response to rising tariffs. Second, firm’s likely export diversion to other countries is not evident. These imply the magnification dampening effects of import tariffs on firm exports via firm's import-export linkage. Particularly, the dampening effect of upstream import tariffs in downstream exports is accumulated and more pronounced with the length of global supply chains. Furthermore, the increasing sourcing costs in either upstream or downstream sectors fall firm exports.
Bidding for Firms or Bidding for People: Local Urban Land Allocation Competitions in China, with Qiaohairuo Lin (Vanderbilt University), Job Market Paper.
Abstract With the authority to allocate limited land resources, local governments in China face a critical trade-off between industrial and residential usages. Using granular records of urban land transactions in China, we uncover a widespread but uneven pro-industrial land discount across cities, indicating an oversupply of industrial land to varying degrees nationwide. To explain this misallocation, we construct a parsimonious but powerful spatial model to demonstrate how competing local governments prioritize land use to maximize local output. We introduce a new algorithm to solve and calibrate the spatial Nash equilibrium at the city level, and find that: First, even modest policy reforms—such as adjusting local government incentives or easing migration restrictions—could reduce the share of land allocated to industrial use from 40% to 10%. Second, the competition among local governments can amplify the effectiveness of place-based policies, leading to reduced spatial inequality and improved welfare.
Presentations the 13th European Meeting of the Urban Economics Association, 2nd Summer Meeting in Urban Economics, China; Scheduled for the SEA 94th Annual Meeting, the 19th Economics Graduate Student Conference at Washington University in St. Louis.
Incomplete Protectionism along Global Value Chains: the Effects of China's Processing Trade during the Trade War, with Nan Liu, Wei Tian and Miaojie Yu. Under Review.
Abstract This paper studies the impact of the 2018-2019 trade war in the presence of processing trade and global value chains. In contrast to the United States, approximately 40% of Chinese imports are processing imports of intermediate inputs used in export-oriented products. Most notably, processing imports pay zero tariffs, even during the trade war. Using monthly Chinese customs data from 2017 to 2019, we estimate the effects of China’s retaliatory tariffs and find significant reductions in non-processing imports from the United States, whereas there is no significant effect on processing imports. Motivated by the reduced-form estimation, we incorporate China’s duty-free policy on processing imports in a quantitative general equilibrium model with sectoral linkages, trade in intermediate goods, and sectoral heterogeneity in production to quantify the welfare and trade effects of the trade war. The model shows that the duty-free policy reduced China’s welfare loss by 44%.
Presentations the 60th Anniversary of Institute of World Economy, Fudan University, Special Issue Workshop of China Economic Review.
PUBLICATIONS
The Impacts of US-China Trade War: An overview, with Nan Liu, Wei Tian and Miaojie Yu. Journal of the Asia Pacific Economy, forthcoming.
The Effects of China’s Retaliatory Duties during the China-US Trade War, 2022. with Wei Tian and Miaojie Yu, China Economic Quarterly, 22 (06), 2042-2062.
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