Working Papers
Economic Growth and Skill Premium in China: The Role of Infrastructure Investment (Job Market Paper)
Abstract: Following the expansion of infrastructure investment in China starting in 2003, there has been a period of higher economic growth and a slowdown in the rise of the skill premium. To understand these changes in the Chinese economy, I construct a dynamic multi-sector model. The model features an infrastructure-driven externality, which leads to higher firm productivity as the aggregate infrastructure capital in the economy grows. Meanwhile, firms hire more low-skilled labor than high-skilled labor when producing infrastructure investment goods. Therefore, unskilled labor benefits more from infrastructure investment. As the government promotes infrastructure investment, both the firm productivity and the relative demand for low-skilled labor increase, resulting in both higher economic growth and a lower skill premium.
Financial Intermediation Cost, Growth and Income Inequality: A Counterfactual Experiment
Abstract: Chinese economy features incomplete asset markets and high financial intermediation cost. In this paper, I develop a heterogeneous agent model to conduct an experiment of reducing the financial intermediation cost. The model is characterized by incomplete markets and a costly financial intermediation. Simulation of the model establishes two key results. First, lower financial intermediation cost facilitates capital accumulation and promotes economic growth. Second, the income inequality becomes more severe at early stages and then drops continuously. Therefore, policies pursuing a lower financial intermediation cost could benefit economic growth without side-effect on income inequality in the long run.
Work in Progress
What is Behind the Slowdown in the Rise of China's Income Inequality? (with Emin Dinlersoz)
Economic Growth and Skill Premium in China: The Role of Infrastructure Investment (Job Market Paper)
Abstract: Following the expansion of infrastructure investment in China starting in 2003, there has been a period of higher economic growth and a slowdown in the rise of the skill premium. To understand these changes in the Chinese economy, I construct a dynamic multi-sector model. The model features an infrastructure-driven externality, which leads to higher firm productivity as the aggregate infrastructure capital in the economy grows. Meanwhile, firms hire more low-skilled labor than high-skilled labor when producing infrastructure investment goods. Therefore, unskilled labor benefits more from infrastructure investment. As the government promotes infrastructure investment, both the firm productivity and the relative demand for low-skilled labor increase, resulting in both higher economic growth and a lower skill premium.
Financial Intermediation Cost, Growth and Income Inequality: A Counterfactual Experiment
Abstract: Chinese economy features incomplete asset markets and high financial intermediation cost. In this paper, I develop a heterogeneous agent model to conduct an experiment of reducing the financial intermediation cost. The model is characterized by incomplete markets and a costly financial intermediation. Simulation of the model establishes two key results. First, lower financial intermediation cost facilitates capital accumulation and promotes economic growth. Second, the income inequality becomes more severe at early stages and then drops continuously. Therefore, policies pursuing a lower financial intermediation cost could benefit economic growth without side-effect on income inequality in the long run.
Work in Progress
What is Behind the Slowdown in the Rise of China's Income Inequality? (with Emin Dinlersoz)