Economy and Policy

From its founding, the Harvard-China Project has had a major component led by economists to study how policies affect the economy and environment.

The core economics team, long based in the Harvard Department of Economics and the Harvard-China Project itself, has studied how policies affect the macroeconomy, e.g., GDP growth and employment, and the microeconomy, e.g., enterprises and households. Example questions include how policies to control sulfur dioxide (SO2) have affected energy use and economic growth in China, or how a prospective carbon tax might affect economic growth, air pollution, and carbon emissions. A smaller economics activity based at the Harvard T.H. Chan School of Public Health has conducted research on the valuation of environmental health risk and mortality in China. Both economics research streams have also been key components of a series of interdisciplinary studies that integrate the economic frameworks with the emissions, atmospheric modeling, and environmental health research of the HCP to analyze the costs and benefits of national emission control policies in China.
 
The economics research was led by Dale W. Jorgenson until he passed away in 2022. Jorgenson, a pioneer in tax and energy policy research, was the Samuel W. Morris University Professor of Economics at Harvard. The core economics team today is led by Mun S. Ho (Harvard-China Project) and CAO Jing (School of Economics and Management, Tsinghua University), and includes active collaborations with a number of research alumni of the Harvard-China Project at universities across China.
 

Overview of the Economics Research of the Harvard-China Project

Related Publications

Jing Cao, Mun S Ho, Rong Ma, and Yu Zhang. In Press. “Transition from plan to market: Imperfect regulations in the electricity sector of China.” Journal of Comparative Economics. Publisher's VersionAbstract
We present evidence on the distortions that arise from imperfect regulations compared with market allocation mechanisms. Using a triple difference strategy, we evaluate the effectiveness of the Energy-Saving Generation Dispatch reform in China, which aims to allocate more generating hours to power plants with higher energy efficiency. We find that the new dispatch rule improved resource allocation within provinces compared with the previous equal-share dispatch rule. However, despite these improvements, the reform fell short of its intended goals because of the failure to strictly implement the merit order based on real-time coal consumption rates. We demonstrate how the lack of compensation for losers, technical requirements for grid stability, the existence of multiple goals, and information costs contribute to imperfect regulation.
Jianglong Li, Jinfeng Gao, and Mun Sing Ho. 2024. “Causal effect of aviation on air pollution: An instrumental variable from faraway COVID-19 restrictions in China.” China Economic Review, 84, April 2024, Pp. 102140. Publisher's VersionAbstract
The causal impacts of aviation on local air pollution are poorly understood. Leveraging variation in aviation frequency caused by COVID-19 travel restrictions that occurred hundreds of miles away between 2020 and 2022, this study identifies the short-run effect of aviation on air pollution in Hangzhou, a Chinese megacity. The results demonstrate that a one standard deviation change in aviation is associated with 12% to 21.82% changes in ambient pollution concentrations, with even more substantial pollution effects on downwind days and flights departing from Hangzhou, respectively. These estimates also remain robust to alternative specifications, satisfy external validity beyond Hangzhou and the epidemic period, and exclude pollution spillover effects. We further quantify the welfare losses from aviation pollution and find that people are willing to pay 1.76 US dollars a day in per capita household income for reducing pollution caused by each standard deviation increase in flights (i.e., 134 flights). Further analysis reveals higher economic losses resulting from pollutants at international airports. Our results underscore the need to regulate airborne contaminants from aviation in China urgently.
Mun S Ho, Koji Nomura, and Jon D Samuels. 2023. “The growing impact of ICT productivity via the cost of capital: Evidence from the U.S. and Japan.” Telecommunications Policy, 47, 9, Pp. 102635. Publisher's VersionAbstract
We identify and measure two impacts of industry-level total factor productivity(TFP) growth on aggregate price change in the U.S. and Japan. The first is a standard effect from the definition of aggregate GDP. TFP change lowers aggregate prices ceteris paribus. The second is that a change in TFP in the production of investment goods lowers the cost of capital via lower investment prices. We call this the cost-of-capital effect and formulate an expanded growth accounting framework to capture both effects. We apply it to a harmonized dataset for the two countries and find that the standard effect has fallen since the peak around 2000 due to lower TFP growth and a diminished share of GDP. However, the cost-of-capital effect has risen in importance and offsets part of this decline in the standard effect.
More Publications

Related Working Papers

Jing Cao and Mun S. Ho. "Appendix A: Economic-Environmental Model of China (version 18); ETS-Hybrid tax application." This description of the Model updates the one given in Clearer Skies over China (Nielsen and Ho eds. 2013).  

Jing Cao, Mun S. Ho, Wenhao Hu, and Dale Jorgenson. December 31, 2017."Urban household consumption in China."

Jing Cao, Mun S. Ho, and Govinda R. Timilsina. June 2016. "Impacts of carbon pricing in reducing the carbon intensity of China's GDP." World Bank Group: Development Research Group Environment and Energy Team Policy Research Working Paper 7735.

MORE WORKING PAPERS