Working papers

Physical vs. Institutional Public Goods Provision: Evidence from China (Job Market Paper)

Abstract: This paper argues that market concentration level explains why developing economies often under-invest in institutional infrastructure and legal capacity. Economic growth challenges this equilibrium and incentivizes rulers to invest in institutional infrastructure complementary to physical infrastructure. Rulers make joint investments to expand market entry and size if they can secure greater rents and preserve institutions favoring concentration. Instrumenting market concentration level with the share of the coal mining industry in local industrial output, the difference-in-differences analysis of Chinese data from 1997 to 2006 shows that the fiscal expenditure ratio of physical to institutional infrastructure rose 42% faster in provinces with market concentration indexes in the top quartile in 2000 (the year before China acceded to the World Trade Organization). The paper also presents a theoretical model proposing that investment in physical infrastructure rises faster than institutional infrastructure when the market concentration level increases.

Protecting Property Rights under State Ownership: Evidence from China (available upon requests)

Abstract: My job market paper shows that monopoly matters for investment in institutions. The subsequent question is why this is the case. This paper provides evidence suggesting that monopoly serves as the de facto institution for protecting private property rights in the absence of formal ones. Unlike in capitalist economies, high-skilled workers in communist economies exhibit a preference for the state sector even in the absence of wage premiums. Analysis of Chinese data from 1992 to 2006 reveals that high-skilled workers are motivated to work in the state sector not primarily for wage differentials (and sometimes not at all for high-skilled managers), but rather for rent differentials. These differentials are measured by the asset per employee ratio, which can reach as high as 26.6 percent for high-skilled managers, in the state sector compared to the non-state sector. Higher-skilled workers join the state sector for better positions with richer monopoly rents and higher capacity protecting them from being taken away.

Work in Progress

Negative Shocks, Political Collectivism, and State Capacity: Evidence from China

Social Norms, Family Institutions, and Political Regimes: Evidence from China