Ho, Mun S.

In Press
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.
2024
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.
2023
Xiuli Liu, Mun S Ho, Geoffrey JD Hewings, Yuxing Dou, Shouyang Wang, Guangzhou Wang, Dabo Guan, and Shantong Li. 2023. “Aging Population, Balanced Diet and China’s Grain Demand.” Nutrients, 15, 13, Pp. 2877. Publisher's VersionAbstract
The need to make more accurate grain demand (GD) forecasting has become a major topic in the current international grain security discussion. Our research aims to improve short-term GD prediction by establishing a multi-factor model that integrates the key factors: shifts in dietary structures, population size and age structure, urbanization, food waste, and the impact of COVID-19. These factors were not considered simultaneously in previous research. To illustrate the model, we projected China’s annual GDP from 2022 to 2025. We calibrated key parameters such as conversion coefficients from animal foods to feed grain, standard person consumption ratios, and population size using the latest surveys and statistical data that were either out of date or missing in previous research. Results indicate that if the change in diets continued at the rate as observed during 2013–2019 (scenario 1), China’s GD is projected to be 629.35 million tons in 2022 and 658.16 million tons in 2025. However, if diets shift to align with the recommendations in the Dietary Guideline for Chinese Residents 2022 (scenario 2), GD would be lower by 5.9–11.1% annually compared to scenario 1. A reduction in feed grain accounts for 68% of this change. Furthermore, for every 1 percentage point increase in the population adopting a balanced diet, GD would fall by 0.44–0.73 million tons annually during that period. Overlooking changes in the population age structure could lead to an overprediction of annual GDP by 3.8% from 2022 to 2025. With an aging population, China’s GD would fall slightly, and adopting a balanced diet would not lead to an increase in GD but would have positive impacts on human health and the environment. Our sensitivity analysis indicated that reducing food waste, particularly cereal, livestock, and poultry waste, would have significant effects on reducing GD, offsetting the higher demand due to rising urbanization and higher incomes. These results underscore the significance of simultaneous consideration of multiple factors, particularly the dietary structure and demographic composition, resulting in a more accurate prediction of GD. Our findings should be useful for policymakers concerning grain security, health, and environmental protection.
Jing Cao, Mun Ho, and Qingfeng Liu. 2023. “Analyzing multi-greenhouse gas mitigation of China using a general equilibrium model.” Environmental Research Letters, 18, 2, Pp. 025001. Publisher's VersionAbstract
Climate actions have focused on CO2 mitigation and only some studies of China consider non-CO2 greenhouse gases (GHGs), which account for nearly 18% of gross GHG emissions. The economy-wide impact of mitigation covering CO2 and non-CO2 GHGs in China, has not been comprehensively studied and we develop a multi-sector dynamic model to compare the impact of CO2-only mitigation with a multi-GHG mitigation policy that also price non-CO2 GHGs. We find that the multi-GHG approach significantly reduces the marginal abatement cost and economic loss to reach the same level of GHG emissions (measures as 100 year global warming potential) compared to a CO2-only scenario. By 2060, multi-gas mitigation can reduce the tax rate by 15.44% and improve real gross domestic product (GDP) by 0.41%. The aggregate gain brought by multi-GHG mitigation are robust to various pathways and but vary across periods and sectors.
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.
Faan Chen, Yaxin Li, Qianqian Feng, Zehao Dong, Yiming Qian, Yi Yan, Mun S. Ho, Qianchen Ma, Dashan Zhang, and Yuanzhe Jin. 2023. “Road safety performance rating through PSI-PRIDIT: A planning tool for designing policies and identifying best practices for EAS countries.” Socio-Economic Planning Sciences. Publisher's VersionAbstract
Road traffic injuries are a leading cause of socio-economic loss in East Asia Summit (EAS) countries. A regular performance rating to monitor progress and calibrate interventions is crucial for road safety improvement, helping to save human lives and reducing economic losses. To this end, we propose a new and easy-to-adapt multi-criteria decision-making method for systematically rating the road safety performance of the EAS countries, the preference selection index with principal component analysis of RIDIT scores (PSI-PRIDIT) (scores of a distribution relative to an identified distribution integral transformation). Using the results from other classical methods as a reference, we rank the EAS countries robustly and place them into three groups over the last decade (2009–2019), based on the composite road safety development index. Our findings should be useful for EAS countries to detect underlying problems and identify best practices, as well as provide government officials, policymakers, and practitioners with meaningful guidelines on the adoption of successful road safety measures. Overall, the proposed rating framework should help to strengthen the institutional capacity for road safety management and addresses road safety issues.
2022
Jianglong Li, Mun S. Ho, Chunping Xie, and Nicholas Stern. 2022. “China's flexibility challenge in achieving carbon neutrality by 2060.” Renewable and Sustainable Energy Reviews, 158, April, Pp. 112112. Publisher's VersionAbstract
China, with a heavy dependence on coal power, has announced a clear goal of carbon neutrality by 2060. Electrification of final energy use and high penetration of renewable energy are essential to achieve this. The resulting growth of intermittent renewables and changes in demand curve profiles require greater flexibility in the power system for real-time balancing – greater ability of generators and consumers to ramp up and down. However, the plan and market system with regulated prices makes this challenging. We discuss the options to improve flexibility, including 1) increasing supply-side flexibility, through retrofitting existing power plants to boost their responsiveness; 2) promoting flexibility from power grids, through building an efficient power grid with inter-provincial and inter-regional transmission capacity to balance spatial mismatch, given that China has a vast territory; 3) encouraging demand flexibility, through demand-response measures to enable demand shifting over time and space to address fluctuations in renewable energy generation; and 4) providing flexibility from energy storage. We consider policies to achieve this, in particular, power market reforms to unlock the flexibility potential of these sources. Regulated electricity prices and lack of auxiliary services markets are major obstacles and we discuss how markets in other countries provide lessons in providing incentives for a more flexible system.
Jianglong Li and Mun S. Ho. 2022. “Indirect cost of renewable energy: Insights from dispatching.” Energy Economics, 105, January 2022, Pp. 105778. Publisher's VersionAbstract
The rapidly falling costs of renewable energy has made them the focus of efforts in making a low-carbon transition. However, when cheap large-scale energy storage is not available, the variability of renewables implies that fossil-based technologies have to ramp up-and-down frequently to provide flexibility for matching electricity demand and supply. Here we provide a study on the indirect cost of renewable energy due to thermal efficiency loss of coal plants with such ramping requirements. Using monthly panel data for China, we show that higher renewable share is associated with fewer operating hours of coal-fired units (COHOUR). We use an instrumental variable depending on natural river flows to identify the causal effect of reduced COHOURs in raising the heat rate of coal-fired units. Specifically, a 1 percentage point increase in the share of renewables leads to a 6.4 h reduction per month, and a reduction of one COHOUR results in a 0.09 gce/kWh increase of gross heat rate (+0.03%). We estimate that the thermal efficiency loss indicates 4.77 billion US dollars of indirect cost of renewables in 2019, or 9.44 billion if we include the social cost of carbon emissions. These results indicate that we should consider the indirect impacts of renewables on total coal use and the importance of increasing flexibility of the system.
2021
Jing Cao, Hancheng Dai, Shantong Li, Chaoyi Guo, Mun Ho, Wenjia Cai, Jianwu He, Hai Huang, Jifeng Li, Yu Liu, Haoqi Qian, Can Wang, Libo Wu, and Xiliang Zhang. 2021. “The general equilibrium impacts of carbon tax policy in China: a multi-model assessment.” Energy Economics, 99, July, Pp. 105284. Publisher's VersionAbstract
We conduct a multi-model comparison of a carbon tax policy in China to examine how different models simulate the impacts in both near-term 2020, medium-term 2030, and distant future 2050. Though Top-down computable general equilibrium(CGE) models have been applied frequently on climate or other environmental/energy policies to assess emission reduction, energy use and economy-wide general equilibrium outcomes in China, the results often vary greatly across models, making it challenging to derive policies. We compare 8 China CGE models with different characteristics to examine how they estimate the effects of a plausible range of carbon tax scenarios – low, medium and high carbon taxes.. To make them comparable we impose the same population growth, the same GDP growth path and world energy price shocks. We find that the 2030 NDC target for China are easily met in all models, but the 2060 carbon neutrality goal cannot be achieved even with our highest carbon tax rates. Through this carbon tax comparison, we find all 8 CGE models differ substantially in terms of impacts on the macroeconomy, aggregate prices, energy use and carbon reductions, as well as industry level output and price effects. We discuss the reasons for the divergent simulation results including differences in model structure, substitution parameters, baseline renewable penetration and methods of revenue recycling.
Jaume Freire-González and Mun S. Ho. 2021. “Voluntary actions in households and climate change mitigation.” Journal of Cleaner Production, 321, 25 October, Pp. 128930. Publisher's VersionAbstract
Governments foster voluntary actions within households to mitigate climate change. However, the literature suggests that they may not be as effective as expected due to rebound effects. We use a dynamic economy–energy–environment computable general equilibrium (CGE) model of the Catalan economy to simulate the effect of 75 different actions on GDP and net CO2 emissions, over a 20-year period. We also examine how a carbon tax could counteract the carbon rebound effects. We find energy rebound effects ranging from 61.77% to 117.49% for voluntary energy conservation actions, depending on where the spending is redirected, with similar carbon rebound values. In our main scenarios, where energy savings are redirected to savings and all non-energy goods proportionally, the rebound is between 64.47% and 66.90%. We also find, for these scenarios, that a carbon tax of between 2.4 and 3.6 €/ton per percentage point of voluntary energy reduction would totally offset carbon rebound effects. These results suggest that voluntary actions in households need additional measures to provide the expected results in terms of energy use reduction and climate change mitigation.
Jing Cao, Mun S. Ho, Rong Ma, and Fei Teng. 2021. “When carbon emission trading meets a regulated industry: Evidence from the electricity sector of China.” Journal for Public Economics, 200, August, Pp. 104470. Publisher's VersionAbstract
This paper provides retrospective firm-level evidence on the effectiveness of China’s carbon market pilots in reducing emissions in the electricity sector. We show that the carbon emission trading system (ETS) has no effect on changing coal efficiency of regulated coal- fired power plants. Although we find a significant reduction in coal consumption associated with ETS participation, this reduction was achieved by reducing electricity production. The output contraction in the treated plants is not due to their optimizing behavior but is likely driven by government decisions, because the impacts of emission permits on marginal costs are small relative to the controlled electricity prices and the reduction is associated with financial losses. In addition, we find no evidence of carbon leakage to other provinces, but a significant increase in the production of non-coal-fired power plants in the ETS regions. 
2020
Jing Cao, Mun S. Ho, and Wenhao Hu. 2020. “Analyzing carbon price policies using a general equilibrium model with household energy demand functions.” In Measuring Economic Growth and Productivity: Foundations, KLEMS Production Models, and Extensions, edited by Barbara Fraumeni. Cambridge, MA: Academic Press. Publisher's VersionAbstract

Multi-sector general equilibrium models are used to simulate the effects of environmental policies on industry output and consumption at disaggregated levels. The specification of household demand in such models often use simpler forms such as CES or Linear Expenditure Systems since there are few estimates of more flexible systems. We estimate a 2-stage translog utility function that explicitly accounts for detailed energy expenditures to allow us to capture the price and income effects more accurately than these simpler forms. We incorporate this into a China growth model to simulate the effects of a carbon price to achieve the government targets for the Climate Change (Paris) agreements.

Final Manuscript in DASH.
An edited volume dedicated to Prof. Dale W. Jorgenson by his students and collaborators.

Jing Cao, Mun S Ho, and Rong Ma. 2020. “Analyzing carbon pricing policies using a general equilibrium model with production parameters estimated using firm data.” Energy Economics, 92, October, Pp. 104958. Publisher's VersionAbstract

Policy simulation results of Computable General Equilibrium (CGE) models largely hinge on the choices of substitution elasticities among key input factors. Currently, most CGE models rely on the common elasticities estimated from aggregated data, such as the GTAP model elasticity parameters. Using firm level data, we apply the control function method to estimate CES production functions with capital, labor and energy inputs and find significant heterogeneity in substitution elasticities across different industries. Our capital-labor substitution elasticities are much lower than the GTAP values while our energy elasticities are higher. We then incorporate these estimated elasticities into a CGE model to simulate China's carbon pricing policies and compare with the results using GTAP parameters. Our less elastic K-L substitution lead to lower base case GDP growth, but our more elastic energy substitution lead to lower coal use and carbon emissions. In the carbon tax policy exercises, we find that our elasticities lead to easier reductions in coal use and carbon emissions.

Jing Cao, Mun S. Ho, Wenhao Hu, and Dale Jorgenson. 2020. “Effective labor supply and growth outlook in China.” China Economic Review, 61, June, Pp. 101398. Publisher's VersionAbstract
The falling projections of working-age population in China has led to predictions of much slower economic growth. We consider three mechanisms that could contribute to higher effective labor supply growth – further improvement in educational attainment due to cohort replacement and rising college enrollment, improvement in aggregate labor quality due to urbanization, and higher labor force participation due to later retirement. We find that these factors result in a projected growth rate of effective labor input of 0.40% for 2015-2030 compared to -0.60% for working age population. As a result, the projected growth rate of GDP will be 5.80% for 2015-2030 compared to 5.23% if these factors are ignored.
Richard Goettle, Mun S. Ho, and Peter Wilcoxen. 2020. “Emissions accounting and carbon tax incidence in CGE models: bottom-up versus top-down.” In Measuring Economic Growth and Productivity: Foundations, KLEMS Production Models, and Extensions, edited by Fraumeni, B, 1st ed. Cambridge, MA: Academic Press. Publisher's VersionAbstract
Multi-sector general equilibrium models are the work-horses used to analyze the impact of carbon prices in climate policy discussions. Such models often have distinct industries to represent coal, liquid fuels, and gas production where the output over time is represented by quantity and price indexes. The industries that buy these fuels, however, do not use a common homogenous quantity (e.g., steam coal vs. metallurgical coal) and have distinct purchasing price indexes. In accounting for energy use or CO2 emissions, modelers choose to attach coefficients either bottom-up to a sector specific input index or top-down to an average output index and this choice has a direct bearing on the incidence of carbon taxation. We discuss how different accounting methods for the differences in prices can have a large effect on the simulated impact of carbon prices. We emphasize the importance for modelers to be explicit about their methods.
An edited volume dedicated to Prof. Dale W. Jorgenson by his students and collaborators.  Final Manuscript in DASH
Jing Cao, Mun S. Ho, Wenhao Hu, and Dale W. Jorgensen. 2020. “Estimating flexible consumption functions for urban and rural households in China.” China Economic Review, 61, June, Pp. 101453. Publisher's VersionAbstract

There are few comprehensive studies of household consumption in China due to data restrictions. This prevents the calculation of inequality indices based on consumption. Secondly, this makes a comprehensive analysis of policies that affect consumption difficult; economy-wide models used for analysis often have to employ simple consumption forms with unit income elasticities. We estimate a translog demand system distinguished by demographic characteristics, giving price and income elasticities that should be useful for policy analysis. We estimate separate functions for urban and rural households using household expenditure data and detailed commodity prices (1995-2006). This allows future analysis of social welfare and inequality based on consumption to supplement existing studies based on income. To illustrate an application of the model, we project consumption composition based on projected prices, incomes and demographic changes – aging, education improvement and urbanization.

Mun Ho, Wolfgang Britz, Ruth Delzeit, Florian Leblanc, Roson Roberto, Franziska Schuenemann, and Matthias Weitzel. 2020. “Modelling consumption and constructing long-term baselines in final demand.” Journal of Global Economic Analysis, 5, 1, Pp. 63-108. Publisher's VersionAbstract
Modelling and projecting consumption, investment and government demand by detailed commodities in CGE models poses many data and methodological challenges. We review the state of knowledge of modelling consumption of commodities (price and income elasticities and demographics), as well as the historical trends that we should be able to explain. We then discuss the current approaches taken in CGE models to project the trends in demand at various levels of commodity disaggregation. We examine the pros and cons of the various approaches to adjust parameters over time or using functions of time and suggest a research agenda to improve modelling and projection. We compare projections out to 2050 using LES, CES and AIDADS functions in the same CGE model to illustrate the size of the differences. In addition, we briefly discuss the allocation of total investment and government demand to individual commodities.
Jing Cao, Mun S Ho, Wenhao Hu, and Dale W Jorgenson. 2020. “Urban household consumption in China: price, income and demographic effects.” Review of Development Economics, 152, 25 October, Pp. 810-833. Publisher's Version
2019
Jaume Freire-González and Mun S. Ho. 2019. “Carbon taxes and the double dividend hypothesis in a recursive-dynamic CGE model for Spain.” Economic Systems Research, 31, 2, Pp. 267-284. Publisher's VersionAbstract
A carbon tax is potentially a policy that can reduce CO2 emissions and mitigate climate risks, at lowest economy-wide costs. We develop a dynamic CGE model for Spain to assess the economic and environmental effects of a carbon tax, and test the double dividend (DD) hypothesis. We simulate the impact of three carbon taxes: €10, €20 and €30 per ton of CO2. For each tax, four ‘revenue recycling’ scenarios are examined: a reduction of taxes on capital, on labor, on value-added tax, and a scenario in which revenues are not recycled. We find a DD for taxes of €10/ton and lower, within five to seven years of implementation. We estimate an annual CO2 emissions reduction of around 10% with this tax. Under some circumstances, the DD can be achieved for a tax of €20/ton. In any case, recycling revenues to cut pre-existing taxes reduces costs of imposing carbon taxes.
Jing Cao, Mun S. Ho, Dale W. Jorgenson, and Chris P. Nielsen. 2019. “China’s emissions trading system and an ETS-carbon tax hybrid.” Energy Economics, 81, June, Pp. 741-753. Publisher's VersionAbstract
China is introducing a national carbon emission trading system (ETS), with details yet to be finalized. The ETS is expected to cover only the major emitters but it is often argued that a more comprehensive system will achieve the emission goals at lower cost. We first examine an ETS that covers both electricity and cement sectors and consider an ambitious cap starting in 2017 that will meet the official objective to reduce the carbon-GDP intensity by 60-65% by 2030 compared to 2005 levels. The two ETS-covered industries are compensated with an output-based subsidy to represent the intention to give free permits to the covered enterprises. We then consider a hybrid system where the non-ETS sectors pay a carbon tax and share in the CO2 reduction burden. Our simulations indicate that hybrid systems will achieve the same CO2 goals with lower permit prices and GDP losses. We also show how auctioning of the permits improves the efficiency of the ETS and the hybrid systems. Finally, we find that these CO2 control policies are progressive in that higher incomes households bear a bigger burden.
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