Work In Progress Papers

Quality Window and Skill Distribution in Trade

In international trade, products are produced by a wide range of countries.  For a single product, different levels of quality will co-exist in equilibrium, with prices increasing in quality. The set of countries that export the product give rise to the quality window for that product. With increasing globalization of production processes, conventional measure of global trade may give a misleading perspective on the country’s importance in particular products in trade. I define the product quality window using trade in value-added to better reflect a country’s real contribution in production.  In particular I investigate and find support for the hypothesis that countries with a more dispersed skill distribution specialize in industries characterized by wider quality window.

 

Intermediation and Trade: Theory and Evidence in Spain 

The benchmark model of international trade assumes that firms have access to a competitive, constant-returns-to-scale distribution sector. Models under this assumption attribute distribution as one of the many per-unit trade costs incurred in exporting, but are unable to address the issue of how distribution occurs and how it affects trade outcomes. 

In this paper, I seek to accomplish three things. First, using the Spanish firm-level data set, I can document some basic characteristics of the ways that trade is intermediated. Second, based on these characteristics, I develop a model of trade in which firms have access to multiple distribution technologies and choose a distribution technology as part of the equilibrium. As a result, distribution activities and associated trade costs vary with the trading environment, including with trade reforms. Finally, I provide evidence in support of the predictions of my trade and distribution model.

 

Housing Bubble and the School District Effect in China

 

Is there a housing bubble in China? This paper examines the extent of housing bubble in China by measuring the price premium to the School District Effect. It is well known that the price premium for a house located in a school district increases as school quality increases. In the case of China, students applying to Universities face lower admission standards for schools located in the city for which they are residents of. After the privatization of housing assets, in order to obtain residency status in a city, the students’ parents must’ve worked in a city for a number of years, depending on the city, and in addition, they must also have acquired property in that city. Current policies also require that children attend elementary, middle and high schools in the city for which they are residents of, unless they pay a school selection fee, or they are of top academic excellence admitted under special circumstances. In particular we investigate and find support for the hypothesis that the premium to the School District Effect increases for cities with better Universities.  The magnitude of such premium accounts for percent of the so-called “bubble” in major cities in China.

 

Relationship-Specificity, Institutions and Health Reforms in China

The dramatic cutbacks in public financing for the health sector and the failure of the state to establish effective and strong regulatory institutions are two major reasons for the declining healthcare accessibility and service quality in China. The new incentive structures within the hospital system have encouraged many physicians to prescribe unnecessary and expensive drugs, ordering excessive tests, overcharging, and hospitalizing more patients. This paper asks whether the degree of over-prescription of drugs and services by a physician is affected by the effectiveness of regulatory system and the degree of relationship-specificity of the healthcare provision. A physician visit is relationship-specific if the patient is seeking treatment for a serious illness and will suffer grave consequences without the treatment. The physician can hold-up the patient by over-prescribing drugs and services if the health care regulatory system is ineffective. This paper proposes that in geographic entities with good health care regulatory institutions, there is less over-prescription of drugs and services and the costs of health care are lower than in places with poor health care regulatory institutions. The more relationship-specific the health care provision is, the greater the cost advantages afforded to places with more effective regulatory institutions relative to places with less effective regulatory institutions. Provision of public health insurance to the rural area where there is lack of regulatory institutions will be an ineffective way to improve the healthcare services.