*: corresponding author 

Working Papers

Does Elite Capture Matter? Local Political Elites and the Targeted Poverty Alleviation Strategy in China with Jie Tang and Xia Li (Under Review, PDF) Presentations (including scheduled): 98th WEAI  Annual Conference 2023.

China has implemented a nationwide poverty alleviation campaign, called the targeted poverty alleviation (TPA) strategy, to achieve the national goal of completely eradicating poverty by the end of 2020. However, the capture of political elites is considered an obstacle to achieving this goal. This paper investigates whether political elite capture exists in TPA based on the specific targeting strategy using the “Thousand-Person Hundred-Village” survey dataset in 2017. Overall, TPA is not subject to political elite capture in practice and deliberately excludes political elite households from the strategy. Here, we present three main findings. First, the probability of political elite households registering in the national poverty database (jiandanglika) under TPA is approximately 12.5% lower than that of non-elite households. Second, we found that the lower registration probability of political elite households was mainly reflected in households with committee members in the village. Third, political elite connections increase the likelihood of political elite households receiving general government transfers, suggesting that political elite capture still exists in other public welfare programs.

Political Hierarchy Spillovers: Evidence from China with Meng-Ting Chen (R&R, PDF

Presentations (including scheduled): 96th WEAI Virtual International Conference 2021, 85th MEA annual conference 2021, the 100 Years of Economic Development Conference 2022 (Slides),  WRSA’s 62nd Annual Meeting (Slides), and AAG 2023 Annual Meeting.

It is widely believed that political hierarchy correlates with regional economic development. This paper investigates how different political hierarchies of cities in the context of China affect the local economy from different perspectives. We first examine the differences between prefectural cities and municipalities (provincial cities) in their own economic development and spillover effects on surrounding areas. In addition, this paper additionally draws upon a quasi-experiment in upgrading Chongqing to a municipality in 1997 on economic development, using the synthetic control method. The results show that the city-upgrading policy significantly increased Chongqing’s GDP in the following four years. Finally, we identify the positive spillover effects of the upgrade of Chongqing on the surrounding economy. The results show that the city-upgrading policy increases GDP in the treated cities located within the 1000-kilometer distance from Chongqing by approximately 11%-13% relative to other cities in the control zone. 

Economic Growth, Fiscal Inequality, and Fiscal Decentralization (under review, PDF) 

Presentations (including scheduled): 76th IIPF Virtual Conference 2020 and Dissertation Seminar 2021 at Graduate Center, CUNY (Slides).

This paper investigates the impact of fiscal inequality on regional economic growth under two different fiscal systems in China by adopting the event-study method. The "event" is the tax-sharing reform, switching from the "Fiscal Responsibility System" (FRS, 1987-1993), to the "Tax Sharing System" (TSS, 1994-present). I present three primary findings: First, there are different impacts of overall fiscal inequality on economic growth pre-and post-1994. Second, fiscal decentralization on the expenditure side could improve regional growth in China.  Finally, the use of extra-budgetary funds could reduce the economic growth gap between rich and poor provinces.

Local Fiscal Competition and Deficits in China with Timothy J. Goodspeed (Draft available upon request)

Presentations (including scheduled): 57th MVEA Virtual Conference 2020, 96th WEAI Annual Conference 2021, 77th Annual Congress of the IIPF 2021, Dissertation Seminar 2021 at Graduate Center, CUNY (Slides), 91st SEA Annual Conference 2021 (Slides), International Conference on Empirical Economics 2023, and 79th Annual Congress of the IIPF 2023.

This paper adds to the literature by examining fiscal competition and deficit financing by local governments in a developing country, China.   We examine a unique revenue source in China, land-use premiums (a type of property tax), in a panel dataset consolidated at the prefectural level from 2006 to 2016. Our results indicate that fiscal competition in land-use premiums exists and is stronger among wealthier than poorer local governments, a result that supports the view of Cai and Treisman (2005) that competition among asymmetrically endowed regions can lead to less discipline.  Moreover, we find higher local deficits are associated with lower land-use premiums, a result that suggests that the local government does not fill any fiscal gap with own revenues. 

VAT Distortion and Corporate Tax Avoidance with Renjie Zhao and Binbin Tian (Draft available upon request)

Presentations (including scheduled): 58th MVEA Virtual Conference 2021 and 97th WEAI Annual Conference 2022 (Slides).

Excess input VATs cannot be refunded in China, which causes a heavy financial burden for firms. Using the China National Tax Survey Database (NTSD), this paper explores the relationship between input VAT credit carryovers and corporate income tax avoidance behavior. We find that the ratio of input VAT credit carryovers (IVCCs) scaled to cash inflow is negatively associated with effective corporate income tax rates (ETRs). In addition, we find that the tax avoidance activities of firms can be carried out by increasing their costs deducted before tax to underreport their profits. Finally, to explore the causal effect of input VAT credit carryovers on corporate income tax avoidance, we investigated the impact of a recent VAT reform that allowed VAT refunds for excess input VAT credits in 18 industries in 2018 using the China Stock Market & Accounting Research Database (CSMAR). The results indicate that refunding excess input VAT credits could improve corporate tax compliance.

Selected Work in Progress

The Impact of China's Land Use Policy on the Local Labor Market and Housing Market with Meng-Ting Chen (Draft available upon request)

Juridical independence and Voluntary Disclosure with Jiayin Li and Yankuo Qiao

Fiscal Decentralization and Local Economic Growth

Household Consumption and the Targeted Poverty Alleviation Strategy with Xia Li