Working Papers:
International Trade, Immigration and Macroeconomic Dynamics (Job Market Paper)
International trade and immigration are two important dimensions of globalization, but their dynamic linkages and the macroeconomic effects of immigration are less well understood. I focus on studying skilled immigration because of its growth and significance. By developing a two-country dynamic stochastic general equilibrium model featuring heterogeneous firm and endogenous firm entry and labor migration, this paper studies whether trade and immigration are substitutes or complements and investigates the macroeconomic consequences of low barriers to labor mobility with emphasizing the roles of the extensive margins of production and trade in shaping immigration dynamics. First, the model predicts that trade and immigration potentially act as substitutes, which is consistent with the derivation from the Heckscher-Ohlin model of trade. Second, high-skilled labor migration makes the labor-sending country worse off due to less output and firm entry, and changes in migration costs create asymmetric welfare effects on high-skilled and low-skilled households. Third, the firm entry channel provides new insights into immigration dynamics: (i) more firm establishments demand more immigrants, and (ii) inflows of immigrants induce firm entry and result in higher labor costs in the long run.
Trade Liberalization and Skill Upgrading: Evidence on the Impact of APTA on Chinese Manufacturers
(with Castiel Chen Zhuang and Qiliang Chen), submitted
This paper studies the impact of an Asian trade agreement, APTA, on skill upgrading by Chinese manufacturers. First, we develop a general equilibrium model of trade with heterogeneous firms and endogenous export and employee training decisions to explain firm performance following trade liberalization. Second, we test the theoretical model based on general difference-in-differences estimations, showing that firms in some sectors facing higher reductions in India's tariffs increase investment in on-the-job training faster. However, there may exist a reverse effect of trade integration on firms' labor training in other sectors. New exporters have a greater likelihood of entering the Indian market following India's concessions. The effects of trade openness on export participation and training spending of firms are the largest in the middle range of productivity, consistent with our model prediction.
Human Capital Investment, Fiscal Policies and Inequality (with Qiliang Chen)
This paper develops an endogenous growth model to study the effect of taxation on human capital and examine the implications of private and public investment in human capital on growth and inequality. Individuals can accumulate human capital through schooling or working. To achieve a certain level of education, individuals need to pay part of the costs for educational services, and also receive public education from the government and private training provided by firms. In particular, we attempt to investigate the impact of the reduction in income tax rate on human capital accumulation, and distinguish the influences of public education (government expenditure on education) and on-the-job training (firm spending on labor training) on inequality and economic growth, as well as other aggregate variables.
Work in Progress:
Foreign Direct Investment and Labor Market Outcomes in China
Foreign direct investment inflows into China increased by 6% in 2020, and the accelerated FDI inflows contribute to economic growth and technological improvement in China. In the meantime, this leads to changes in labor market outcomes including unemployment, skill distribution and income inequality. This paper develops a two-country dynamic general equilibrium model featuring labor market frictions and endogenous skill upgrading decisions by households to study the impacts of the increase in FDI inflows on unemployment, skill distribution and skill premium in China. The home economy (China) attracts FDI inflows from the foreign economy (the rest of the world). FDI enters the home economy through acquisition of domestic firms. The household decides endogenously to either allocate low-skill labor to domestic sectors or to invest in labor training and then provide skilled labor to FDI occupations.
Global Talent Flows and Population Health (with Castiel Chen Zhuang)
International Trade, Worker Heterogeneity and Wage Inequality: Theory and Evidence from Developing Countries
International Trade, Immigration and Macroeconomic Dynamics (Job Market Paper)
International trade and immigration are two important dimensions of globalization, but their dynamic linkages and the macroeconomic effects of immigration are less well understood. I focus on studying skilled immigration because of its growth and significance. By developing a two-country dynamic stochastic general equilibrium model featuring heterogeneous firm and endogenous firm entry and labor migration, this paper studies whether trade and immigration are substitutes or complements and investigates the macroeconomic consequences of low barriers to labor mobility with emphasizing the roles of the extensive margins of production and trade in shaping immigration dynamics. First, the model predicts that trade and immigration potentially act as substitutes, which is consistent with the derivation from the Heckscher-Ohlin model of trade. Second, high-skilled labor migration makes the labor-sending country worse off due to less output and firm entry, and changes in migration costs create asymmetric welfare effects on high-skilled and low-skilled households. Third, the firm entry channel provides new insights into immigration dynamics: (i) more firm establishments demand more immigrants, and (ii) inflows of immigrants induce firm entry and result in higher labor costs in the long run.
Trade Liberalization and Skill Upgrading: Evidence on the Impact of APTA on Chinese Manufacturers
(with Castiel Chen Zhuang and Qiliang Chen), submitted
This paper studies the impact of an Asian trade agreement, APTA, on skill upgrading by Chinese manufacturers. First, we develop a general equilibrium model of trade with heterogeneous firms and endogenous export and employee training decisions to explain firm performance following trade liberalization. Second, we test the theoretical model based on general difference-in-differences estimations, showing that firms in some sectors facing higher reductions in India's tariffs increase investment in on-the-job training faster. However, there may exist a reverse effect of trade integration on firms' labor training in other sectors. New exporters have a greater likelihood of entering the Indian market following India's concessions. The effects of trade openness on export participation and training spending of firms are the largest in the middle range of productivity, consistent with our model prediction.
Human Capital Investment, Fiscal Policies and Inequality (with Qiliang Chen)
This paper develops an endogenous growth model to study the effect of taxation on human capital and examine the implications of private and public investment in human capital on growth and inequality. Individuals can accumulate human capital through schooling or working. To achieve a certain level of education, individuals need to pay part of the costs for educational services, and also receive public education from the government and private training provided by firms. In particular, we attempt to investigate the impact of the reduction in income tax rate on human capital accumulation, and distinguish the influences of public education (government expenditure on education) and on-the-job training (firm spending on labor training) on inequality and economic growth, as well as other aggregate variables.
Work in Progress:
Foreign Direct Investment and Labor Market Outcomes in China
Foreign direct investment inflows into China increased by 6% in 2020, and the accelerated FDI inflows contribute to economic growth and technological improvement in China. In the meantime, this leads to changes in labor market outcomes including unemployment, skill distribution and income inequality. This paper develops a two-country dynamic general equilibrium model featuring labor market frictions and endogenous skill upgrading decisions by households to study the impacts of the increase in FDI inflows on unemployment, skill distribution and skill premium in China. The home economy (China) attracts FDI inflows from the foreign economy (the rest of the world). FDI enters the home economy through acquisition of domestic firms. The household decides endogenously to either allocate low-skill labor to domestic sectors or to invest in labor training and then provide skilled labor to FDI occupations.
Global Talent Flows and Population Health (with Castiel Chen Zhuang)
International Trade, Worker Heterogeneity and Wage Inequality: Theory and Evidence from Developing Countries
