Professor Chang-Tai Hsieh to Lead UChicago’s BFI-China

The Becker Friedman Institute for Economics (BFI) at UChicago is pleased to announce Chang-Tai Hsieh, the Phyllis and Irwin Winkelreid Distinguished Service Professor of Economics-Chicago Booth, as the new director of BFI-China. Hsieh replaces Zhiguo He, BFI-China founding director, formerly at Chicago Booth and now at Stanford.

BFI-China combines the rich intellectual tradition of Chicago Economics with that of Tsinghua University’s School for Economics and Management (Beijing), in a first-of-its-kind partnership to encourage frontier economics research. Founded in 2018, this partnership supports faculty and doctoral student exchanges, as well as regular workshops and forums to share results and discuss areas of mutual interest.

“I am thrilled to welcome Chang-Tai to this important leadership position,” said Erik Hurst, the Frank P. and Marianne R. Diassi Distinguished Service Professor of Economics at Chicago Booth and Director of BFI. “Chang-Tai not only brings keen insight into the complex Chinese economy, but he is also a world-class economist who personifies UChicago’s rich scholarly tradition. I look forward to working with Chang-Tai to achieve his vision for BFI-China.”

Hsieh received his PhD in economics from UC-Berkeley in 1998 and has served on Chicago Booth’s faculty since 2008. His research spans many issues related to growth and development in countries around the world, and he has published widely in prominent journals. Hsieh has been a visiting scholar at Federal Reserve Banks, as well as the World Bank’s Development Economics Group and the Economic Planning Agency in Japan. He is a Research Associate for the National Bureau of Economic Research, a Senior Fellow at the Bureau for Research in Economic Analysis of Development, and a member of the Steering Group of the International Growth Center in London. He is the recipient of an Alfred P. Sloan Foundation Research Fellowship, an Elected Member of Academia Sinica, and a two-time recipient of the Sun Ye-Fang Prize.

“I am honored to lead the Becker Friedman Institute’s work in China, on behalf of the UChicago Economics community,” said Hsieh. “China, with its astounding growth over the last three decades and its emerging economic challenges, offers important questions with global implications. I look forward to working with scholars at UChicago, in partnership with Tsinghua, to shed light on the world’s second-largest economy.”

EPIC-China Awards Four Grants to Expand its Scope of Research

The Energy Policy Institute at the University of Chicago (EPIC) is proud to announce four grants to explore critical energy, environment and climate issues in China—a country central to the global energy challenge. The grants will directly support new research on a wide range of issues, from the health impacts of transboundary air pollution to incentives to implement local green energy policies.

The grants are the first to be awarded after EPIC added Harris Public Policy scholar Shaoda Wang to the leadership team in September as a deputy director. The research grants will allow EPIC-China to broaden the scope of its research and further engage the University of Chicago’s leading scholars in solving the vital challenges China faces.

The four research awards will go to:

Koichiro Ito (Associate Professor, Harris) to study “The Impacts of Transboundary Air Pollution on Morbidity and Healthcare Expenditures.”

Transboundary air pollution has become an important problem in many countries because of growing levels of air pollution across the globe. In a previous project, “International Spillover Effects of Air Pollution: Evidence from Mortality and Health Data” (NBER Working Paper #30830, January 2023, with Seonmin Will Heo and Rao Kotamarthi), the researcher and his colleagues found that transboundary air pollution from China had significant impacts on mortality in South Korea. In this new project, they will investigate how transboundary air pollution from China affects morbidity and healthcare expenditures in South Korea. The South Korean government has recently started to disclose individual-level national health insurance claim data for researchers with a confidential agreement. This dataset includes each individual’s health insurance claim information (diagnosis, treatment, prescription, costs) from 2002 to 2019. They leverage this dataset to ask the long-run impacts of the rapid increases in Chinese air pollution in 2000’s and its remarkable decline in 2010’s on morbidity and healthcare expenditures in South Korea.

Shaoda Wang (Assistant Professor, Harris) to study “Environmental Regulation in Production Networks.”

The researchers will study the impact of environmental regulation on production networks in general equilibrium. They will compile the most comprehensive dataset to date on environmental regulation in China, exploit randomized environmental audits to causally estimate the impact of regulation on firm emissions, and estimate a structural model of firm linkages to simulate alternative forms of regulation and to show how environmental regulation can account for production networks in equilibrium.

Shaoda Wang (Assistant Professor, Harris) to study “Government-led green investment in China.”

Scrutinizing China’s rapid rise in green innovation, a surprising pattern is that, even conditional on local economic conditions, green innovation today is most vibrant in regions with higher pollution levels in the 2000s, suggesting that there might be a “home market” effect in green innovation: regions facing higher pressure for pollution mitigation had stronger incentives to implement local industrial policies supporting green energy, which gave these regions first-mover advantages when national environmental regulations became more stringent later on. In this project, the researchers plan to explore this hypothesis, and investigate the dynamic interactions between centralized regulations and localized industrial policies.

Claire Fan (PhD, Harris), Ashton Pallottini (PhD, Economics), Yuqi Song (PhD, Harris), Yixin Sun (PhD, Booth) to study “Development and conservation: Evidence from desertification in China”

Poverty reduction and preservation of resources are closely linked, yet there is a lack of research on how people and governments make choices that impact both goals at the same time. The researchers will study the co-evolution of poverty alleviation and resource conservation, specifically focusing on land degradation and desertification in China. Although the government has implemented large and costly policies to mitigate and reverse desertification, their long-term effectiveness and costs are highly controversial, and overall welfare impacts remain ambiguous. They will combine administrative and remote-sensed datasets to provide reduced-form evidence of the efficacy of large-scale conservation policies in this setting. These estimates will inform a structural general equilibrium model which analyzes the welfare impacts of place-based policies against other social policies, such as cash transfers or subsidized migration.

China’s Pollution Policies Have Vastly Improved Air Quality, With Benefits Spilling to South Korea

Leaders have long thought that air pollution crossing lines from neighboring countries posed a significant challenge. But how much of a challenge and what to do about it has remained an open question. A new study sheds some light by measuring the toll of transboundary air pollution on people’s health, as well as the important role strong policies can play in improving health outcomes throughout the region.

“Using recent advances in atmospheric science that allowed us to measure the trajectory of fine particulate pollution—the deadliest form of air pollution—we discovered that countries are vastly impacted by the pollution caused by their neighbors,” says Koichiro Ito, an associate professor at the University of Chicago Harris School of Public Policy. “The good news is the benefits of strong policies to reduce pollution also extend to neighboring states. This underscores the importance of treating air pollution as a regional and even global challenge that requires cooperation, and not just a problem to confront at a local level.”

Ito and his co-authors Rao Kotamarthi from the U.S. Department of Energy’s Argonne National Lab, and Seonmin Will Heo, a PhD student at UC Santa Barbara who began work with Ito in 2020 as a Harris Public Policy graduate student, study the case of South Korea. Northwest South Korea experiences strong westerly winds from China during the fall and winter. The researchers found that these winds lead to significantly higher levels of pollution compared to southeast South Korea. The northwest and southeast experience similar pollution levels during the spring and summer—when there is far less westerly wind from China.

This pollution has a direct impact on people’s health in South Korea, leading to a 0.6 percent increase in mortality for every one microgram per cubic meter increase in transboundary particulate matter pollution (PM2.5 ). That translates to an additional 31.2 deaths for every million people annually. The youngest members of society—babies who are a year old or younger—are the most vulnerable, with the mortality rate increasing by 2.1 percent for every one microgram per cubic meter increase in transboundary particulate pollution from China.

Other health indicators also increased during the time studied, 2013 to 2017. The researchers found that a one microgram per cubic meter increase in particulate pollution from China leads to about 18 additional ER visits for every million people a year for asthma and 176 additional ER visits for every million people for rhinitis (nasal inflammation)—a 0.5 percent and 3.4 percent increase, respectively.

“Pollution coming from China makes people in South Korea sicker and die at higher rates—that much is clear,” says Ito. “But China’s immense success in reducing pollution in recent years provided the perfect case study to see that the benefits of pollution policies also travel across boundaries.”

After China began its “war on pollution” in 2014, which came with a series of strong clean air rules, pollution significantly declined nationwide. Ito and his coauthors find that China had a 14.07 microgram per cubic meter drop in particulate pollution and South Korea had a 9.63 microgram per cubic meter drop in transboundary particulate pollution from China from 2015 to 2019. This drop led to fewer deaths from transboundary air pollution—about 300 fewer deaths for every million people a year—which they calculate saved South Korea $2.62 billion per year.

Ito and his coauthors did find evidence that China may have strategically reduced more air pollution in Chinese cities where most air pollution stays inside the country borders and reduced less in cities where most air pollution blows outside of the country. This implies the spillover benefits of clean air rules could be larger for neighboring countries, and therefore, further regional or global cooperation can be valuable to address air pollution.

Ito and Kotamarthi thank the Global Energy Challenge conference sponsored by the Energy Policy Institute at the University of Chicago (EPIC) and the Argonne National Laboratory for seeding their collaboration and work in exploring this topic.

Study Finds Reducing Energy Use Increases Mortality

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As the world warms with climate change, a clear dilemma emerges: While communities should reduce the amount of energy they use in order to mitigate emissions, they will also need to adapt to the changing temperatures by using more energy like through air conditioning. What happens when they don’t take steps to adapt? A new study tackles this question using a unique case study.

After the Fukushima nuclear accident in 2011, Japan gradually shut down all of its nuclear power plants, causing a countrywide power shortage. In response, the government launched large-scale energy-saving campaigns to reduce electricity consumption. The government paid particular attention to reducing the usage of air conditioning because it is the largest contributor to residential electricity consumption in Japan. A pair of researchers dug into the impact of these policies.

“Policies to reduce energy use and greenhouse gas emissions are indeed important to our future in order to reduce the severity of climate change,” says co-author Guojun He, the director of research at EPIC-China and an associate professor at the University of Hong Kong. “But climate change is already upon us and encouraging less use of air conditioning or other means of adapting to extreme temperatures can kill people living right now. A better approach when designing climate policies is to speed up the transition to clean energy and encourage people to use more clean energy to protect themselves, rather than limiting individuals’ electricity or energy consumption.”

He and his co-author Takanao Tanaka, a Ph.D. student at the University of California-Berkeley, found that the campaign to save electricity was highly effective. People switched from using air conditioning to electric fans, and electricity consumption was curtailed by about 15% within a short period. The majority of citizens reduced their electricity because of increased information, peer pressure or appeals to their morals, with only 10 to 30 percent reducing electricity because of price increases.

However, as energy use declined, the mortality rate increased. The researchers estimate that each year about 7,710 people died prematurely because of the energy-saving policies. Notably, around 60 percent of the excess deaths occurred during the summer, pointing to the reduction in air conditioning as a main contributing factor to those deaths.

“Policymakers could improve the design of programs meant to mitigate greenhouse gas emissions, as well as increase the use of clean energy in their communities,” says Tanaka from University of California-Berkeley. “Such changes would be especially beneficial to developing countries as they continue to use more energy, and have the resources to adapt, as they grow. These countries are also often the ones most at risk of hot and rising temperatures.”

The research will be in an upcoming edition of the American Economic Journal: Applied Economics.

EPIC Adds New Faculty Leadership to India and China Efforts

As EPIC expands the breadth and reach of its efforts in India and China, it is adding new leadership to its regional teams. Harris Public Policy Assistant Professor Fiona Burlig is joining EPIC Director Michael Greenstone as the new deputy faculty director of EPIC-India, while Harris Public Policy Assistant Professor Shaoda Wang joins Greenstone as the new deputy faculty director of EPIC-China. The additional leadership will broaden the scope of research and bring additional capacity to build new projects, programming and partnerships on the ground in two countries central to confronting the global energy challenge.

“China and India are two of the world’s most dynamic and rapidly evolving economies, with economic growth raising living standards for many hundreds of millions of people—a massive success story. But both nations are also home to some of the world’s most complex and far-reaching energy and environmental challenges that requires them to balance the need for inexpensive and reliable energy with local environmental challenges and with avoiding disruptive climate change,” says Greenstone, the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago. “Fiona and Shaoda’s exceptional intellectual leadership will heighten our ability to deliver new insights critical to understanding and helping to confront the global energy challenge. Their research in India and China has already produced groundbreaking results, and so we’re thrilled to have them on board in a full leadership capacity to build on their work in new and innovative ways.”

Fiona Burlig studies energy and environmental economics, with a focus on the developing world. Her ongoing research examines the impacts of rural electrification in India and the design of developing-country electricity markets. One recent study explores the impact of rural electrification, finding that electrification does not generate benefits in small villages, but has substantial potential in larger villages across India. Another study explores the continued prevalence of blackouts in developing countries like India, showing that the lack of financial trading in the power market contributes to load shedding. Burlig holds a PhD from the University of California, Berkeley and a BA from Williams College.

“India is at the center of the world’s energy challenges, and its power sector plays a critical role,” says Burlig. “I’m really excited to continue finding ways to improve our understanding of electricity markets in India. EPIC-India already has a fantastic team who have formed the strong partnerships vital for understanding the needs and opportunities on the ground; I am looking forward to bringing more UChicago faculty into the fold to build on this work.”

Shaoda Wang’s research centers on understanding the political economy of public policy, particularly in China. In one study, Wang finds that facing political pressures to improve surface water quality, local officials enforce tighter regulations on polluters the central government can track while shirking on their responsibility to reduce pollution coming from firms not tracked. In another study, he discovers that when citizens use social media to point out pollution violations, it forces accountability and leads to reduced pollution—providing the first experimental evidence on bottom-up participation in environmental governance that is common worldwide. Wang holds a BA from Peking University and a PhD from the University of California, Berkeley.

“After observing firsthand China’s significant pollution problems and the government’s heavy-handed response, I became interested in better understanding how policymakers, industry and citizens interacted and how this interaction influences policy,” says Wang. “I’m looking forward to expanding this research interest, including by fostering new faculty projects with my colleagues at Harris, and working to further collaborations inside China to improve our understanding of energy and environmental policy opportunities in the country.”

Social Media Engagement Increases Government Action, Decreases Pollution

When high levels of pollution filled the air and waterways of American communities in the 1960’s, citizens took to the streets and marched for change on the first Earth Day in 1970—leading to major government efforts to control pollution. Today, social media has largely become the gathering place for people throughout the world. But does it effectively lead to change? A new study takes up this question.

The international team of researchers investigated if citizen pressure could improve environmental enforcement and reduce pollution, and if so, what types of citizen pressure—private or public. Exploring this in the context of China, citizen volunteers sent messages appealing for action after an industrial plant violation occurred. Some of the messages were sent privately through a government hotline or online messaging platform, others were sent through the popular Twitter-like Chinese social media site Weibo.

“We found that social media is the new ‘public street,’ galvanizing momentum for change in much the same way as a protest or march, and the more popular the social posts are, the more effective they are in generating action from the government,” says study co-author Michael Greenstone, the Milton Friedman Distinguished Service Professor in Economics and director of the Energy Policy Institute at the University of Chicago (EPIC). “More specifically, it demonstrates that providing the public with information about individual polluter’s emissions can lead to pollution reduction. This has long been hypothesized by proponents of the United States’ Toxics Release Inventory program and other similar programs elsewhere in the world.”

Greenstone and his colleagues found that the public appeals for action delivered through social media reduced violations by more than 60 percent, and decreased air and water pollution by 12.2 percent and 3.7 percent, respectively. Private appeals also led to improvements but by a lesser amount. When the visibility of the social media appeals increased through “likes” and “shares,” creating at least the appearance of growing public support, government regulators were 40 percent more likely to reply and 65 percent more likely to inspect the polluting plants.

“Our study found that social media can be a very effective, and easy, tool to involve citizens in the government process and hold regulators accountable,” says Shaoda Wang, an assistant professor at the Harris School of Public Policy and deputy faculty director for EPIC-China. “The fact that the more popular social posts spurred more action from government officials is not surprising, but does confirm that there is a lot of opportunity for citizens to participate in governance and help improve government accountability.”

The researchers also investigated the indirect impacts of citizen participation in environmental governance. Specifically, they randomized the proportion of firms that are subject to citizen appeals in each prefecture and tracked how non-appealed firms’ environmental performance was affected when a larger share of its prefecture peers received appeals. They found that increasing the amount of citizen appeals in a prefecture does not lead to higher violation rates or emissions from non-appealed firms. The implication is that citizen participation does not crowd- out other local regulatory efforts.

“Previously, this type of bottom-up citizen participation has been shown to be effective in other parts of the world, and especially in contexts where leaders are voted into power as they would feel more accountable to those electing them,” says Guojun He, associate professor in economics and management & strategy at the University of Hong Kong​ and research director at EPIC-China. “Our study provides the first experimental evidence that this type of citizen engagement can be very effective in a context like China, showing the government does feel a great sense of accountability to its people.”

Along with Greenstone, Wang and He, the study was co-authored by Mark Buntaine from the University of California, Santa Barbara, Mengdi Liu from the University of International Business and Economics, and Bing Zhang from Nanjing University.

Tsinghua University – UChicago Joint Research Center for Economics and Finance Awards Seven 2022 Research Grants

The Tsinghua University – University of Chicago Joint Research Center for Economics and Finance is pleased to announce its award of seven new research grants. The goal of these awards is to support frontier academic research that provides new understanding and insights on the Chinese economy broadly and on important issues in Chinese economic policy.

Grants are intended to support a number of research activities, including but not limited to the purchase of data, hiring of research assistants, and travel. Preference was given to teams whose primary findings will become available within 24 months.

The Joint Center previously funded 10 new research proposals in 2020 and seven proposals in 2021.

The 2022 research grant recipients are listed below, along with the research the grant will be supporting.

New Grants for the Study of the Chinese Economy

Research: Judicial Independence, Local Protectionism, and Economic Prosperity: Follow-up Data Collection

Research: Higher Education, Migration, and Long-Run Financial Outcomes

Research: Non-Tariff Trade Barriers in the U.S.-China Trade War

Research: The Composition of Demand in the Chinese Land Market

Research: Talent in China

Research: Who Gets Help? China’s Bank Behavior Under SMEs Financing Support Policy

Research: Government Investment and Entrepreneurship in China

More information on the Tsinghua University –University of Chicago Joint Research Center for Economics and Finance can be found here.

BFI and Joint Center Announce 2021-22 Visiting Students

The Becker Friedman Institute for Economics China (BFI-China) and the Tsinghua-UChicago Joint Research Center for Economics and Finance are pleased to announce the selection of four visiting students for the 2021-22 academic year.

“We are excited to have these students here with us in Chicago and to benefit from their talent,” said BFI-China Director Zhiguo He, the Fuji Bank and Heller Professor of Finance, Booth School of Business. “The experiences they have gained and the perspectives they bring to research projects here have been invaluable already.”

I-Han Lai, Yiyuan Wang, Shiqi Yang, and Chun Zhao – undergraduate students at Tsinghua University – are working as research professionals in economics at the University of Chicago for the 2021-22 academic year, supporting research led by multiple scholars.

“Our projects are deeply rooted in Chinese society and economy; hence it’s quite challenging but interesting to share China’s unique situation with professors here,” I-Han Lai said. “It is a precious chance to build the bridge in this bicultural environment.”

BFI-China and the Joint Center are proud to facilitate academic and cultural exchange that provides key opportunities for students and crucial support for economics scholars.

“This has been a great chance to immerse myself into a complete research procedure, from data to model, from proposals to publications,” Lai said. “And the experiences with different professors will also be a lifetime treasure.”

The goal of BFI-China’s research support is to deepen economists’ understanding of the Chinese economy and to produce new insights on the most critical policy challenges facing China today.

“Joining BFI-China and the Joint Center in Chicago has given me more exposure to economic research and a clearer understanding of the real economy,” Yiyuan Wang  said. “The projects I am currently working on cover many aspects of the Chinese economy, including China’s judicial reform, China’s interbank market, and China’s land development and transactions.”

“Here in Chicago, I can devote myself to research and accumulate research experience,” Wang added. “Rather than just learning the laws of economics in books, getting my hands dirty with data provides me with a deeper understanding of the real economy. I also have learned a lot from participating in the whole process of the initiation, exploration, conduct, and publication of a research project.”

Shaoda Wang on Environmental Regulations in China

Harris Public Policy Assistant Professor Shaoda Wang takes on important questions on the political economy of China’s public policies, with a specific emphasis on environmental actions. He looks at the enforcement of environmental regulations, their effectiveness and economic costs, as well as how citizen participation impacts pollution enforcement.

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BFI and EPIC-China Announce 2021-22 Liang Family Research Fellow

The Energy Policy Institute at the University of Chicago (EPIC) and the Becker Friedman Institute for Economics (BFI) have announced the selection of Kaixin Wang as the 2021-22 Liang Family Research Fellow at BFI. Liang Family Fellows are highly promising, early-career researchers who receive mentorship and training from leading economists working on issues related to economic policy in greater China, with a goal of placing scholars into top PhD programs.

“I am very honored and excited to be selected as this year’s Liang Family Research Fellow,” Wang says. “The fellowship allows me to pursue my interest in environmental economics research with important policy impact under mentorship from Professor Michael Greenstone and other leading researchers. I hope to contribute to projects that will further our understanding of the social impact of environmental issues, especially those related to my home country China.”

Wang graduated from the University of Chicago in the spring of 2021 with a bachelor’s degree in economics and mathematics. His research interests are in micro-econometrics and its application in environmental and energy policy. During his fellowship, Wang will work closely with EPIC-faculty Director Michael Greenstone and other leading researchers at EPIC-China, EPIC’s dedicated center focused on Chinese energy and environmental policy.

The inaugural Liang Family Research Fellow, Shaoda Wang, completed his fellowship in June. In July, he began work as an Assistant Professor at the Harris School of Public Policy – a testament to the quality of the scholarship made possible by this fellowship. At Harris, he will continue his pioneering work on environmental regulations and environmental quality in China.

Professor Michael Greenstone, the Milton Friedman Distinguished Service Professor of Economics, and Director of both BFI and EPIC, credits the Liang fellowship with providing a launchpad for Dr. Wang’s career. “Thanks to James Liang’s visionary gift to BFI and UChicago, we are able to provide an opportunity for promising scholars to work on understanding the economics of energy and the environment in China. This gift is not just providing a flying start to early-career researchers; it is helping to create a new field.”

“The Liang Family Research Fellowship is helping build BFI-China into a destination for top scholars to engage in research on the Chinese economy,” added Zhiguo He, the Fuji Bank and Heller Professor of Finance at Chicago Booth and Director of BFI-China. “We are grateful to the Liang Family for their support.”

EPIC-China is an initiative of BFI-China, which aims to foster and produce cutting-edge economics research, share expertise and insights with Chinese academics and policymakers, and invest in the next generation of researchers on Chinese economic policy. As part of their commitment to advancing frontier research in China, both BFI-China and EPIC-China work closely with premier Chinese research institutions through joint research partnerships. These include the Tsinghua University – University of Chicago Joint Research Center for Economics and Finance and EPIC’s Joint Energy Policy Research Center with the University of the Chinese Academy of Sciences.