Market Formation in China from 1978

This paper studies the formation of market economy in China from 1978 to 1992, a period in which market economy was introduced and developed alongside planned government procurements for agricultural goods. Under the “dual track system” (DTS), rural farmers were obligated to fulfill government procurements before selling to the market, whereas urban consumers enjoyed de facto subsidies to agricultural products. Using a neoclassical general equilibrium model with heterogeneous firms and workers and input-output linkage, this paper exploits historical data and analyzes allocation, prices, and the formation of markets in China during this DTS period. Theoretically, while DTS will distort the resources allocation between rural and urban (misallocation effect), it selects workers and farmers in the rural (selection effect). What is more, comparing to the economy under Soviet-style big bang reform, DTS activates industrialization by providing intermediate goods with lower-than-market price (activation effect). Quantitatively, directly switching to market economy in 1978 would decrease total output by 4.5% as the activation effect dominates. On the intensive margin, reform on DTS ( procurement price was getting closer to market price ) had contributed to total output by 4.4% from 1978 to 1992

Educational mismatch and earnings inequality

We build a model to understand educational mismatch and earnings inequality among highly educated workers. Educational mismatch has a negative wage effect and a positive correlation with wage inequality, for occupuations and college majors. To disentangle different reasons or channels that contribute to wage inequality, we identity the three underlying reasons behind the mismatich-preference, promotion, and search friction-and quantify their impacts. Quantitatively, the preference and promotion channel negatively contribute to an inequality increase from 1990 to 2000; the match premium contributes to a 28.4% increase in inequality; and the contribution of search friction is 5.3%. We conclude that educational mismatch affects earnings inequality significantly and that the impact varies based on the underlying reasons. The study has important policy implications in that it shows that wage inequality can be reduced by policies for improving the education match rate and educational signaling and lowering market friction

On the transitional dynamics and policy analysis of the Romer (1990) model

In this paper we prove the existence, uniqueness and saddle-point stability of the steady state (or balanced growth path) of the Romer (1990) model by utilizing the reduction of dimensionality. Furthermore, we found out a set of policy instruments to improve the monopolistic competitive equilibrium allocation up to social optimum

Uniqueness and determinacy of the Romer model

In this paper we prove the existence, uniqueness and saddle-point stability of the steady state (or balanced growth path) of the Romer (1990) model by utilizing the reduction of dimensionality. Furthermore, we found out a set of policy instruments to improve the monopolistic competitive equilibrium allocation up to social optimum

Essays on Human Capital, Inequality and Development

This dissertation has three chapters. In this first chapter, I study the wage inequality. By decomposing residual wage inequality for the highly educated, I find that the within-job component is the main contributor to both the level and increase of wage inequality from 1990 to 2000. To explain this fact, I propose a model that allows within-job wage inequality to be influenced by performance-pay incidence and job fitness. Both factors were found to be correlated with withinjob wage inequality. Performance pay amplifies ability dispersion through self-selection and work incentives; job fitness causes wage inequality even among individuals with the same ability level, and the expected job fitness affects the motive for the performance pay. I calibrate the model to the US economy in 1990 and quantify the importance of these two factors for wage inequality. The model explains around 71.5% of residual wage inequality for the high skill group in 2000. The job-fitness channel explains 18.8% and performance-pay channel explains 34.1% of the increase in wage inequality. In the second chapter, I study the Chinese economy. About four decades ago, the agricultural sector in China was characterized by a Dual Track System (DTS) which featured the coexistence of a planned and market economy. Under the DTS, farmers were obligated to sell agricultural products to the government at a given price before selling the remainders to market. Urban workers and enterprises enjoyed quota benefits that allowed them to buy agricultural products at a lower price from the government. In this paper, I build a model to quantitatively analyze DTS’s impact on China’s transition between 1978 and 1992. Within the system, procurement requirements in- fluence the occupational choice of rural workers, and quota benefits impact firms’ entry decisions. Misallocation occurs when people with a comparative advantage in farming choose to work in rural enterprises in order to avoid procurement requirements and when urban firms with low productivity survive as a result of lower input prices. Quantitative analysis shows that compared to a market economy, the DTS has decreased rural and urban enterprises’ output by 6% and 37% respectively. Comparatively, a policy with the constant procurement would have decreased the output by more than 80%. The third chapter is about education mismatch. In order to better understand education mismatch, I build a model with three underlying channels–preference, promotion and search friction–and quantify their effects on residual wage inequality for the highly educated. Education mismatch is measured by the relatedness between a worker’s field of study of the highest degree and the current occupation. In survey data, these three factors attributed 70% of education mismatch. Workers who are mismatched because of preference change or search friction are usually paid relatively lower than matched workers. However, the pay for the mismatched workers due to promotion opportunities is actually higher than the matched group when controlling for demographic characteristics. These factors affect the wage inequality through the employment decision. Quantitatively, I found that the promotion channel has a large contribution to the increase of wage inequality, and the total contribution of preference and search friction is around 28%

The aggregate and distributional impacts of residence policy relaxation

Government often designs strict policy to control the conversion rate from temporary to permanent residents. The residence status may directly affect individuals’ migration decisions and housing tenure choices. We present a dynamic spatial equilibrium framework to study the aggregate and distributional impacts of residence policy relaxation with a focus on the housing market. The DID approach treating the recent hukou policy reform in China as a shock reveals hukou policy relaxation causes housing prices in the treatment cities to be 4.9% higher than the unaffected cities. The impacts are stronger in cities where obtaining hukou was harder. The model is calibrated to the Chinese economy and predicts that hukou policy relaxation can bring a positive spillover effect to those unaffected cities’ welfare. If hukou policy reform were implemented in those super-mega Chinese cities, housing prices would grow by 2.3%, but the welfare gain equivalent to 3.1% of their current levels.Rongsheng Tang thanks for the financial support from the National Natural Science Foundation of China (No. 71803112). Rongjie Zhang thanks National Natural Science Foundation of China (No. 71874093 and 72174100) for financial support

Investigation on the Influence of Flow Passage Structure on the Performance of Bionic Pumps

The flapping hydrofoil bionic pump drives the hydrofoil to make simple harmonic motion and completes one-way water pumping in the flow passage. As a new pump device that can realize ultra-low head water delivery, the flapping hydrofoil device can effectively enrich the drainage methods of plain rivers and improve water delivery efficiency, and the passage structure is the key factor of ultra-low head devices. In this paper, the two-dimensional flow passage models are established, and the flapping of the airfoil is realized by using the dynamic grid technology. Based on the continuity equation, k-ε turbulence model, and Reynolds time-averaged equation, the flapping hydrofoil device is simulated by transient calculation. The hydraulic performance characteristics of various passages with different widths, such as square passages, micro-arc passages, and convergent–divergent passages, are calculated and simulated. The results show that, under the fixed motion parameters, the narrower the passage width, the higher the outlet velocity, lift, and efficiency of the device, the lower the flow rate. The contraction–expansion pipe can effectively improve the efficiency and flow rate of the device, and, before the wake is stable, the longer the contraction section the better the lifting effect. However, the micro-arc pipeline will affect the formation of a double-row anti-Karman vortex street, resulting in greater energy loss and in its hydraulic performance being inferior to that of the square passage