The Geography of Pollution Regulation and Productivity, with Yanwen Yun and Wenjie Wu, Journal of Environmental Economics and Management, May 2025 (131), 103134.
Abstract
This paper examines the impact of China's 1998 "Two Control Zones" (TCZ) policy on firm productivity and local economies using geolocated micro data. The analysis relies on an instrumental variable based on engineering considerations related to pollution emissions. We find that the TCZ policy led to the exit of low-productivity firms and reduced ten-year productivity growth among surviving firms. These surviving firms adjusted by reducing coal consumption, altering their product mix, and increasing innovation activities, resulting in significant transitional costs. The negative effects are disproportionately larger for initially high-productivity firms that engage more actively in abatement efforts. The adverse impact is amplified in counties with closely related industries and strong vertical linkages. These findings highlight the uneven distributional costs of place-based environmental regulations.
Place-Based Policies: First-Mover Advantage and Persistence, with Teng Huang and Xiaochen Xie, Journal of Economic Geography, January 2025, lbaf001.
Abstract
Researchers have explored various place-based policies for promoting economic growth, but the long-term effects and drivers of successful policies have not been thoroughly studied. In this paper, we first document significant heterogeneity in growth trends between early and late national development zones in China. Then, we develop a theoretical framework to analyze the influence of their establishment timing on the spatial equilibrium dynamics. Using new archival data and novel empirical strategies, we demonstrate that the early zones consistently have higher firm entries, innovation, and labor pooling. These results highlight the importance of agglomeration for the long-term success of place-based policies.
Environmental Regulation, Local Labor Market, and Skill Heterogeneity, Regional Science and Urban Economics, July 2023 (101), 103898.
Abstract
This paper examines the impact of environmental regulation on the local labor markets by exploiting China’s first air pollution regulation as a natural experiment. The identification strategy uses a novel instrumental variable based on engineering considerations related to coal-burning activities. The analysis shows that the pollution regulation has led to employment decline in the targeted prefectures and sectors, mainly through the channel of firm exits. Furthermore, detailed census data with worker characteristics are used to examine the skill heterogeneity and the regulation-induced spatial transition costs.
Political Favoritism in China’s Capital Markets and Its Effect on City Sizes, with Vernon Henderson and Wei Cai, Journal of Urban Economics, March 2017 (98), 69-87.
Abstract
This paper examines political favoritism of cites in national capital markets and the effect of that favoritism on city sizes. The paper estimates the city-by-city variation in the prices of capital across cities in China from 1998 to 2007. It relates how the prices facing the highest order political units and overall cross-city price dispersion change with changes in national policy and leadership. The effect of capital market favoritism on city growth after the national relaxation of migration restrictions in the early 2000’s is investigated. The elasticity of the city growth rate with respect to the price of capital is estimated to be 0.07 in the OLS approach and 0.12 in the IV approach.