Working papers

Physical vs. Institutional Public Goods Provision: Evidence from China (Job Market PaperAccepted by European Journal of Political Economy)

Abstract: This paper argues that political and market concentration levels explain why developing economies often underinvest in institutional infrastructure and legal capacity. Economic growth challenges this equilibrium, incentivizing rulers to invest in institutional infrastructure complementary to physical infrastructure. Rulers jointly invest to expand market entry and size only if they can secure higher rents and preserve institutions favoring concentration. The theoretical model predicts that physical infrastructure investment grows faster than institutional investment as market concentration rises. Using provincial coal reserve shares as an instrument for market concentration, a difference-in-differences analysis of Chinese data from 1997–2006 shows that the fiscal expenditure ratio of physical to institutional infrastructure increased 78% faster in provinces within the top market concentration quartile in 2000—the year before China joined the WTO.

Protecting Property Rights under State Ownership: Evidence from China (Full text 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.

Negative shocks, Political Collectivity, and State Capacity: Evidence from China (Abstract and full text available upon request)