Place Prosperity vs People Prosperity: Migration and the Intergenerational Transmission of Knowledge
Carol H. Shiue, Wolfgang Keller, Apr 23,
2025
The trajectory of an economy's development can often be better understood through the historical experiences of its populace. Long before the availability of comprehensive official data, Chinese family genealogies are a valuable resource for reconstructing economic evolution over time, as the following shows.
Drive Down the Cost: Learning by Doing and Government Policies in the Global EV Battery Industry
Panle Jia Barwick, Hyuk-soo Kwon, Shanjun Li, Nahim Bin Zahur, Apr 16,
2025
Electric vehicle (EV) battery costs have fallen over 90% in the last decade. This study examines how learning-by-doing (LBD) drives this decline and interacts with government policies such as consumer EV subsidies and local content requirements. Leveraging rich data on EV models and battery suppliers from 13 countries with largest EV sales that account for 95% of global EV sales, we develop a structural model of the EV industry that incorporates consumer choices and pricing strategies by EV producers and battery suppliers....
Input-Trade Liberalization, Female Skill Intensity, and Fertility in China
Feng Chen, Renliang Liu, Miaojie Yu, Apr 09,
2025
The interplay between trade liberalization and demographic behavior illuminates the challenges of reconciling career and family. This paper examines how gender-specific trade liberalization influences fertility, leveraging a Bartik-style shift-share instrumental variable strategy that incorporates female skill intensity into input tariff exposure. We find that input-trade liberalization significantly reduces fertility, particularly among highly educated women, private sector employees, and first-time mothers—groups experiencing the steepest career-family trade-offs. Mechanism analysis shows that enhanced labor market prospects raise the opportunity cost of childbearing, delaying or reducing family formation. These findings underscore the socioeconomic implications of trade policy for demographic trends.
Beyond the Fundamentals: How Media-Driven Narratives Influence Cross-Border Capital Flows
Isha Agarwal, Wentong Chen, Eswar Prasad, Apr 02,
2025
We provide the first empirical evidence on how media-driven narratives influence cross-border institutional investment flows. Applying natural language processing techniques to 1.5 million newspaper articles, we document substantial cross-country variation in sentiment and risk indices constructed from domestic media narratives about China in 15 countries. These narratives significantly affect portfolio flows, even after controlling for macroeconomic and financial fundamentals. This impact is smaller for investors with greater familiarity or private information about China and larger during periods of heightened uncertainty. Political and environmental narratives are as influential as economic narratives. Investors react more sharply to negative narratives than positive ones.
Banking and Banking Reforms in China in a Model of Costly State Verification
Jie Luo, Cheng Wang, Mar 26,
2025
We present a macro view of China’s financial system, in which a monopolistic banking sector coexists endogenously with bonds and private loans. In equilibrium smaller firms raise finance from private lending, larger firms do so through bank loans, and the largest firms do so by issuing bonds. The model predicts that expanding credit supply increases bank loans but reduces bond finance and private lending, in absolute terms and relative to total credit. In addition, removing the interest rate ceiling on bank lending—a recent reform in China—induces larger loans and higher lending rates, lowering the share of bank loans in total credit. We present empirical evidence to support these predictions.
High-Speed Rail and China's Electric Vehicle Adoption Miracle
Hanming Fang, Ming Li, Long Wang, Yang Yang, Mar 19,
2025
We investigate whether high-speed rail (HSR) connectivity influences electric vehicle (EV) adoption, using a quasi-natural experiment from China’s HSR expansion and several identification strategies. Our findings consistently show that, by alleviating range anxiety, the expansion of HSR can account for up to one third of the increase in EV market share and EV sales in China during our sample period from 2010 to 2023, with effects particularly pronounced in cities served by faster HSR lines. These results suggest that transportation infrastructure can play a complementary role in accelerating the transition to electric mobility.
E vs. G: Environmental Policy and Earnings Management in China
Darwin Choi, Feifei Lai, Mar 12,
2025
We examine the conflict between environmental and governance issues arising from China’s automatic air pollutant monitoring system, introduced in 2012. Our findings suggest that polluting firms engage in downward earnings management to potentially minimize regulatory attention, with factors such as firm size, profitability, and market conditions influencing the extent of this behavior. This study highlights the unintended consequences of environmental policies.
Free Education's Impact on Schooling Outcomes: Direct Effects and Intra-household Spillovers
Naijia Guo, Shuangxin Wang, Junsen Zhang, Mar 05,
2025
This study estimates the direct and spillover effects of a free education program on educational outcomes in rural China. We find that although the program encourages more eligible children to attend secondary school, it also leads to a decrease in high school enrollment among ineligible girls with eligible siblings, as they are more likely to choose work instead. In the long run, males exposed to free education have more years of schooling than their non-exposed counterparts. However, such effect is not found among females. This disparity suggests that a gender-neutral policy may have an asymmetric effect between males and females because of spillover effects through intra-household resource allocation.
Pricing the Priceless: The Financing Cost of Biodiversity Conservation
Fukang Chen, Minhao Chen, Lin William Cong, Haoyu Gao, Jacopo Ponticelli, Feb 26,
2025
This study investigates the pricing of financial risks associated with biodiversity conservation, with a particular focus on the Green Shield Action, a major regulatory initiative launched in China in 2017 to enforce biodiversity preservation rules in national nature reserves. While the initiative improved biodiversity, it also significantly increased bond yields for municipalities that are home to these reserves, effectively raising the general cost of public capital. These effects were primarily driven by heightened default risks plausibly caused by transition costs from shutting down illegal economic activities within the reserves and additional public spending on biodiversity conservation, even when local governments raise the same amount of money. Furthermore, the study reveals that the biological benefits of these conservation policies were not adequately recognized or impounded into the prices by the capital markets.
Can Environmental Regulation Enhance Productivity? Evidence from China’s Industrial Sector
Yangsiyu Lu, Jacquelyn Pless, Feb 19,
2025
Our study also contributes to the broader discourse on industrial policy (see Juhász, Lane, and Rodrik 2023 for a recent review of related academic literature). As debates about green industrial policy gains traction in the U.S., Europe, and beyond, there is revived interest in developing a better understanding of how it might impact economic activity. Although economic growth and environmental regulation are often pitted against each other, our findings suggest that this need not be the case.