Land Market Misallocation in China, Job Market Paper
Abstract: We quantify the welfare losses of land market frictions in China by proposing a spatial equilibrium model where heterogeneous firms in a variety of sectors choose their locations across regions with costly trade, labor migration frictions, and land distortions. We matched land transaction and firm-level survey data to estimate frictions in both output and land frictions for firms. Misallocation arises because firms of different ownerships are faced with various land prices, which effectively preventing more productive firms to choose bigger cities where they could benefit from agglomeration forces and access to higher productivity. Our framework incorporating land market frictions could explain the undersized cities in China, which is pointed out by Au and Henderson (2006) and Chauvin et al. (2017). Our estimates suggest large negative effects of land policies on the economic welfare in China.
Role of Exchange Rate in Trade Balance Adjustment in Turkey, with Plamen Iossifov
Abstract: There is an ongoing debate on whether there is a disconnect between the large, postcrisis, foreign exchange rate movements and global trade flows. The question has important policy implications for the role of exchange rates in growth and restoring external balances. As a large emerging market with sizeable external imbalances and large swings of the real effective exchange rate (REER), Turkey is a good case study on the topic. Our findings chime with the WEO (2015) results that the link between REER and trade flows is alive and well, though we also uncover important structural breaks. Interestingly, the trade balance appears to have become more responsive to the REER in recent large depreciation episodes.
Trade Liberalization and Structural Changes: Prefecture-level Evidence from China
Abstract: Notable heterogeneity regarding international trade freeness and level of development across different regions with significant cross-provincial migration has been a prominent feature in contemporary China. This paper studies the particular role of international trade in the structural transformation of each region in China. Combining several databases, I find that there exhibits a non-monotone, hump-shaped relationship between international trade freeness and prefecture-level manufacture labor share in China. I rationalize this stylized fact in a spatial equilibrium model with multi-region, multi-sector, costly trade and endogenous allocation of labor, capital, and land. The analysis highlights the role of internal geography in the international trade's impact of shaping the structural changes.
Does Where You are From Affect How You Land? Evidence from Land Transactions of Chinese Manufacturers
(Minor Revision Requested, Applied Economics Letters)
Abstract: Leveraging the unique matched land transaction and firm survey data, we empirically examine if firm ownership will affect the access to land factor for Chinese manufacturers. The state-owned firms display no advantage in paying less when acquiring land, while it is more costly for foreign-owned firms. Consistent with this finding, we find land acquisitions for foreign-owned firms are more likely to take place via the non-market based transaction in the early stage of China's land market reform with the goal of eliminating corruption. The research suggests that potential land miss-allocation (if any) could be resulted from "tax" to the foreign firm rather than "subsidy" to state-owned firms.
Work in Progress
Estimating the Impact of Trade Openness on Pollution in China
Productivity of Foreign-ownership Firms in China: Using a Control Function Approach