Working Papers

Peer Effects, Parental Migration and Children's Human Capital: A Spatial Equilibrium Analysis in China (Job Market Paper) 

(Granted by Doctoral Fellowships of Chiang Ching-kuo Foundation)

Abstract: In China, migrant children are disadvantaged and sometimes cannot enroll in public schools in migration destinations due to some policy restrictions. Some migrant workers have to leave their children behind in their hometowns, which causes the left-behind children problem. In this study, I first identify the peer effects of migrant children and left-behind children on their classmates using classroom random assignment. I then analyze the human capital consequences of the enrollment restriction on migrant students within a spatial equilibrium model. My results show that there are negative spillovers from migrant and left-behind students. The negative effect is generally larger from left-behind students, but both shrink over time. In the counterfactual analysis, I find that if the enrollment restriction on migrant children is relaxed, migration of parents and children will increase, and the average human capital in the society will also increase. Low-skill families from small cities benefit most. This policy increases human capital through two channels. First, it directly increases enrollment in good public schools and alleviates the left-behind children problem. Second, it attracts more parents to take their left-behind children to migrate with them and indirectly reduces the total spillovers. This is the first formal quantitative analysis of public school enrollment policy in China.

Fertility, Child Gender, and Parental Migration Decision: Evidence from One Child Policy in Chinawith Lin Lin and Junsen Zhang (Reject and Resubmit at The Review of Economics and Statistics)                            

Abstract: In this study, we investigate the effect of the number and gender of children on parents' rural-to-urban migration in China. The canonical instrumental variable approach based on China's One Child Policy may only provide a combination of these two effects, because One Child Policy led to not only a reduction in the birth rate but also an increase in the ratio of boys born in China. We separately estimate these two effects by constructing a new semi-parametric method which incorporates a specific matching strategy. Results show that the addition of one girl in the family will result in a 13.7% increase in the probability that both parents in rural households migrate to urban areas; whereas the addition of one boy will result in a 24.3% increase in this probability, which is almost twice as large as the increase for a girl. Therefore, without considering the effect of child gender, the canonical instrumental variable estimate for the effect of the number of children will be heavily downward biased.

Migration, Housing Constraint, and Inequality: A Quantitative Analysis of China

with Min Fang

Abstract: We investigate the role of migration and housing constraints in determining income inequality within and across Chinese cities. Combining microdata and a spatial equilibrium model, we quantify the impact of the massive spatial reallocation of workers and the rapid growth of housing costs on the national income distribution. We first show several stylized facts detailing the strong positive correlation between migration flows, housing costs, and imputed income inequality among Chinese cities. We then build a spatial equilibrium model featuring workers with heterogeneous skills, housing constraints, and heterogeneous returns from housing ownership to explain these facts. Our quantitative results indicate that the reductions in migration costs and the disproportionate growth in productivity across cities and skills result in the observed massive migration to developed areas. Combining with the tight land supply policy in big cities, the expansion of the housing demand causes the rapid growth of housing costs and enlarges the inequality between local housing owners and migrants. The counterfactual analysis shows that a migration-based land supply reform with regional transfer and a US-level property tax lower the within-city income inequality by 34% and 21%, respectively. Meanwhile, both reforms lower the national income inequality by 20%. However, only land supply reform encourages more workers to migrate to higher productivity cities.

Peer Effects of Migrant and Left-behind Children: Evidence from Classroom Random Assignment in China                                        

Abstract: In this study, we investigate the peer effects of domestic migrant children and left-behind children on their classmates. Left-behind children are the children who are left in their hometown when their parents migrate. We exploit the large-scale random assignment of students into classes within schools in China to deal with the identification challenge due to the self-selection of students, which is rarely seen in other countries. Results show that an increase of ten percentage points in the proportion of left-behind peers and the proportion of migrant peers in the class results in a decrease of 0.12 and 0.06 standard deviations in a student's test score, respectively. However, the negative peer effects of left-behind peers are halved and the negative peer effects of migrant peers are totally erased in the second year. The reduction can be attributed to an improved class environment, such as students' relationships. Left-behind students' misbehavior due to the lack of parents' supervision may cause long-lasting damage and negative spillover. In addition, the indirect channel of family background of migrant and left-behind students explains only part of the peer effect. Relaxing the enrollment restriction of migrant students and encouraging migrant parents to take their children with them might reduce the overall negative spillovers.

Regional Convergence or Just An Illusion? Place-based Land Policy and Spatial Misallocation

with Min Fang, Libin Han, Ming Lu and  Li Zhang

Abstract: We study how place-based land allocation policy can create spatial misallocation. Combining microdata and a spatial equilibrium model, we investigate a major policy change of distributing more land to underdeveloped inland (non-eastern) regions in China. First, by a method combining RD and DID, we show causal evidence that this inland-favoring policy increased land prices and decreased firm-level TFP in developed eastern regions relative to inland regions. Second, we build a spatial equilibrium model featuring worker mobility and floor space constraints on housing and production. Counterfactuals reveal that national TFP and urban output would have been 7.3% and 2.4% higher in 2010 if the policy had not been implemented. Moreover, wage and income of workers from underdeveloped regions would have increased by 1% to 2%. We find that the inland-favoring policy seems to reduce regional output gaps. However, it causes aggregate TFP and output losses, and hurts workers from underdeveloped regions by hindering their migration to developed regions with high wages. Last, we show that instead of the inland-favoring land policy, a direct regional transfer can increase the income of people from underdeveloped regions without causing efficiency losses.

Labor Demand During Covid-19: Evidence from Online Job Postings in China

with Qin Chen, Lisa Kahn and Geunyong Park (Preliminary Draft)



Abstract: In this paper, we investigate the impact of the Covid-19 pandemic on China's labor market using online job posting data. The data is scraped from job search websites and covers most of the online job postings in China. The results show that the number of online job postings declined by 40\% at the beginning of the pandemic hit and bounced back quickly after March. Small firms are more vulnerable which experienced larger reductions in both job posting numbers and average wages of these postings. It also leads to an increase in the average wages of the posted jobs during the crisis when low-wage jobs from small businesses were disappeared. After controlling for seasonality and year trend, we find that 1,000 new deaths is associated with 18\%-40\% decrease in the online job postings. The service and leisure sector experienced the largest losses. The public sector and the primary industries were hurt the least. High-end industries such as IT and finance are also less vulnerable to this negative shock. Occupations that are more feasible for working from home, also suffered from the Covid-19 crisis and recovered at a even lower speed than other occupations. We also find that the recovery paths are very different for jobs in different industries and occupations. This is the first study discussing a labor market that has recovered from the Covid-19 crisis and gives the first picture of how labor demand reacts and recovers when hit by the pandemic.

Work In Progress

What Do Alibaba Data Tell Us about Price and Quality in China?

with Mark Bils, Min Fang and Tianchen Song (Granted by Alibaba Huoshui Research Plan)

Offshoring of Jobs in Multinational Companies: Evidence from Online Job Postings in the U.S. and China

with Qin Chen, Lisa KahnLindsay Oldenski and Geunyong Park