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Ho, Mun S.

In Press
Jing Cao, Mun S. Ho, Wenhao Hu, and Dale Jorgenson. In Press. “Effective labor supply and growth outlook in China.” China Economic Review.Abstract
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.
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.Abstract
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, 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.
Appendix
Jing Cao, Mun Sing Ho, Yating Li, Richard G. Newell, and William A. Pizer. 2019. “Chinese residential electricity consumption estimation and forecast using micro-data.” Resource and Energy Economics, 56, Pp. 6-27. Publisher's VersionAbstract
Based on econometric estimation using data from the Chinese Urban Household Survey, we develop a preferred forecast range of 85–143 percent growth in residential per capita electricity demand over 2009–2025. Our analysis suggests that per capita income growth drives a 43% increase, with the remainder due to an unexplained time trend. Roughly one-third of the income-driven demand comes from increases in the stock of specific major appliances, particularly AC units. The other two-thirds comes from non-specific sources of income-driven growth and is based on an estimated income elasticity that falls from 0.28 to 0.11 as income rises. While the stock of refrigerators is not projected to increase, we find that they contribute nearly 20 percent of household electricity demand. Alternative plausible time trend assumptions are responsible for the wide range of 85–143 percent. Meanwhile we estimate a price elasticity of demand of −0.7. These estimates point to carbon pricing and appliance efficiency policies that could substantially reduce demand.
Jing Cao, Mun S Ho, and Wenhao Hu. 2019. “Energy consumption of urban households in China.” China Economic Review, 58, 101343. Publisher's VersionAbstract
We estimate China urban household energy demand as part of a complete system of consumption demand so that it can be used in economy-wide models. This allows us to derive cross-price elasticities unlike studies which focus on one type of energy. We implement a two-stage approach and explicitly account for electricity, domestic fuels and transportation demand in the first stage and gasoline, coal, LPG and gas demand in the second stage. We find income inelastic demand for electricity and home energy, but the elasticity is higher than estimates in the rich countries. Demand for total transportation is income elastic. The price elasticity for electricity is estimated to be −0.5 and in the range of other estimates for China, and similar to long-run elasticities estimated for the U.S.
Final Manuscript in DASH
2018
Govinda R. Timilsina, Jing Cao, and Mun S. Ho. 2018. “Carbon tax for achieving China's NDC: Simulations of some design features using a CGE model.” Climate Change Economics, 9, 3. Publisher's VersionAbstract
China has set a goal of reducing its CO2 intensity of GDP by 60–65% from the 2005 level in 2030 as its nationally determined contribution (NDC) under the Paris Climate Change Agreement. While the government is considering series of market and nonmarket measures to achieve its target, this study assesses the economic consequences if the target were to meet through a market mechanism, carbon tax. We used a dynamic computable general equilibrium model of China for the analysis. The study shows that the level of carbon tax to achieve the NDC target would be different depending on its design features. An increasing carbon tax that starts at a small rate in 2015 and rises to a level to meet the NDC target in 2030 would cause smaller GDP loss than the carbon tax with a constant rate would do. The GDP loss due to the carbon tax would be smaller when the tax revenue is utilized to cut existing distortionary taxes than when it is transferred to households as a lump-sum rebate.
Jaume Freire-González and Mun S. Ho. 2018. “Environmental fiscal reform and the double dividend: evidence from a dynamic general equilibrium model.” Sustainability, 10, 2. Publisher's VersionAbstract
An environmental fiscal reform (EFR) represents a transition of a taxation system toward one based in environmental taxation, rather than on taxation of capital, labor, or consumption. It differs from an environmental tax reform (ETR) in that an EFR also includes a reform of subsidies which counteract environmental policy. This research details different ways in which an EFR is not only possible but also a good option that provides economic and environmental benefits. We have developed a detailed dynamic CGE model examining 101 industries and commodities in Spain, with an energy and an environmental extension comprising 31 pollutant emissions, in order to simulate the economic and environmental effects of an EFR. The reform focuses on 39 industries related to the energy, water, transport and waste sectors. We simulate an increase in taxes and a reduction on subsidies for these industries and at the same time we use new revenues to reduce labor, capital and consumption taxes. All revenue recycling options provide both economic and environmental benefits, suggesting that the “double dividend” hypothesis can be achieved. After three to four years after implementing an EFR, GDP is higher than the base case, hydrocarbons consumption declines and all analyzed pollutants show a reduction.
Xiaolin Guo, Mun Sing Ho, Liangzhi You, Jing Cao, Yu Fang, Taotao Tu, and Yang Hong. 2018. “Industrial water pollution discharge taxes in China: A multi-sector dynamic analysis.” Water, 10, 12, Pp. 1742. Publisher's VersionAbstract
We explore how water pollution policy reforms in China could reduce industrial wastewater pollution with minimum adverse impact on GDP growth. We use a multi-sector dynamic Computable General Equilibrium (CGE) model, jointly developed by Harvard University and Tsinghua University, to examine the long-term impact of pollution taxes. A firm-level dataset of wastewater and COD discharge is compiled and aggregated to provide COD-intensities for 22 industrial sectors. We simulated the impact of 4 different sets of Pigovian taxes on the output of these industrial sectors, where the tax rate depends on the COD-output intensity. In the baseline low rate of COD tax, COD discharge is projected to rise from 36 million tons in 2018 to 48 million in 2030, while GDP grows at 6.9% per year. We find that raising the COD tax by 8 times will lower COD discharge by 1.6% by 2030, while a high 20-times tax will cut it by 4.0%. The most COD-intensive sectors—textile goods, apparel, and food products—have the biggest reduction in output and emissions. The additional tax revenue is recycled by cutting existing taxes, including taxes on profits, leading to higher investment. This shift from consumption to investment leads to a slightly higher GDP over time.
2016
Jing Cao, Mun S. Ho, and Huifang Liang. 2016. “Household energy demand in urban China: Accounting for regional prices and rapid economic change.” The Energy Journal, 37. Publisher's VersionAbstract

Understanding the rapidly rising demand for energy in China is essential to efforts to reduce the country's energy use and environmental damage. In response to rising incomes and changing prices and demographics, household use of various fuels, electricity and gasoline has changed dramatically in China. In this paper, we estimate both income and price elasticities for various energy types using Chinese urban household micro-data collected by National bureau of Statistics, by applying a two-stage budgeting AIDS model. We find that total energy is price and income inelastic for all income groups after accounting for demographic and regional effects. Our estimated electricity price elasticity ranges from - 0.49 to -0.57, gas price elasticity ranges from -0.46 to -0.94, and gasoline price elasticity ranges from -0.85 to -0.94. Income elasticity for various energy types range from 0.57 to 0.94. Demand for coal is most price and income elastic among the poor, whereas gasoline demand is elastic for the rich.

2013
Chris P Nielsen and Mun S Ho. 2013. “Atmospheric Environment in China: Introduction and Research Review.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 3-58. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Clearer Skies Over China: Reconciling Air Pollution, Climate, and Economic Goals
2013. Clearer Skies Over China: Reconciling Air Pollution, Climate, and Economic Goals. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Jing Cao, Mun S Ho, and Dale W Jorgenson. 2013. “The Economics of Environmental Policies in China.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 329-372. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Chris P Nielsen and Mun S Ho. 2013. “Op-ed: Clearing the air in China.” New York Times (Sunday Review), October 27 , Pp. SR4. Publisher's Version
Chris P Nielsen, Mun S Ho, Jing Cao, Yu Lei, Yuxuan Wang, and Yu Zhao. 2013. “Summary: Carbon Taxes for 2013-2020.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 103-157. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Chris P Nielsen, Mun S Ho, Yu Zhao, Yuxuan Wang, Yu Lei, and Jing Cao. 2013. “Summary: Sulfur Mandates and Carbon Taxes for 2006-2010.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 59-102. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

2012
Jing Cao, Mun S Ho, and Dale W Jorgenson. 2012. “An integrated assessment of the economic costs and environmental benefits of pollution and climate control.” In The Chinese Economy: A New Transition, edited by Masahiko Aoki. London: Palgrave Macmillan. Publisher's Version
2010
Yuxuan Wang, J. William Munger, Shicheng Xu, Michael B. McElroy, Jiming Hao, Chris P Nielsen, and Hong Ma. 2010. “CO2 and its correlation with CO at a rural site near Beijing: Implications for combustion efficiency in China.” Atmospheric Chemistry and Physics, 10, Pp. 8881-8897. Publisher's VersionAbstract
Although China has surpassed the United States
as the world’s largest carbon dioxide emitter, in situ measurements
of atmospheric CO2 have been sparse in China.
This paper analyzes hourly CO2 and its correlation with CO
at Miyun, a rural site near Beijing, over a period of 51 months
(Dec 2004 through Feb 2009). The CO2-CO correlation analysis
evaluated separately for each hour of the day provides
useful information with statistical significance even in the
growing season. We found that the intercept, representing the
initial condition imposed by global distribution of CO2 with
influence of photosynthesis and respiration, exhibits diurnal
cycles differing by season. The background CO2 (CO2,b)
derived from Miyun observations is comparable to CO2 observed
at a Mongolian background station to the northwest.
Annual growth of overall mean CO2 at Miyun is estimated at
2.7 ppm yr−1 while that of CO2,b is only 1.7 ppm yr−1 similar
to the mean growth rate at northern mid-latitude background
stations. This suggests a relatively faster increase in the regional
CO2 sources in China than the global average, consistent
with bottom-up studies of CO2 emissions. For air masses
with trajectories through the northern China boundary layer,
mean winter CO2/CO correlation slopes (dCO2/dCO) increased
by 2.8±0.9 ppmv/ppmv or 11% from 2005–2006 to
2007–2008, with CO2 increasing by 1.8 ppmv. The increase
in dCO2/dCO indicates improvement in overall combustion
efficiency over northern China after winter 2007, attributed
to pollution reduction measures associated with the 2008
Beijing Olympics. The observed CO2/CO ratio at Miyun is
25% higher than the bottom-up CO2/CO emission ratio, suggesting
a contribution of respired CO2 from urban residents
as well as agricultural soils and livestock in the observations
and uncertainty in the emission estimates.
Final Manuscript in DASH
2009
Jing Cao, Richard Garbaccio, and Mun S Ho. 2009. “China's 11th Five-Year Plan and the environment: Reducing SO2 emissions.” Review of Environmental Economics and Policy, 3, 2, Pp. 189-208. Publisher's VersionAbstract
China's rapid economic growth has been accompanied by a high level of environmental degradation. One of the major sources of health and ecosystem damages is sulfur dioxide (SO2). Reducing SO2 emissions is a priority of China's environmental authorities, and the 11th Five-Year Plan (2006–2010) includes the target of reducing total SO2 emissions by 10 percent from the 2005 level. Given the rapid increase in SO2 emissions that is expected to occur in absence of intervention, attaining this target will require a significant effort. This article examines the two major policy measures the government is taking to achieve the SO2 target: a shutdown of many small, inefficient power plants and the installation of desulfurization equipment on existing and new coal-fired plants. We present results from a joint U.S.–China study that we participated in, which estimated the costs and benefits of these policies. We then estimate the economy-wide impacts of the two policies using a multisector model of the Chinese economy. We find that in the aggregate, the economic benefits of the shutdown of the small power plants are large enough to offset the costs of the desulfurization equipment, even without considering the substantial environmental benefits from the reduction of emissions of SO2 and other pollutants.
Jing Cao, Mun S Ho, Dale W Jorgenson, Rouen Ren, Linlin Sun, and Ximing Yue. 2009. “Industrial and aggregate measures of productivity growth in China, 1982-2000.” Review of Income Wealth , 55, s1, Pp. 485-513. Publisher's VersionAbstract
We estimate productivity growth for 33 industries covering the entire Chinese economy using a time series of input–output tables covering 1982–2000. Capital input is measured using detailed investment data by asset and labor input uses demographic information from household surveys. We find a wide range of productivity performance at the industry level. We then show how these industry growth accounts may be consistently aggregated to deliver a decomposition of aggregate GDP growth. For the 1982–2000 period aggregate TFP growth was 2.5 percent per year; decelerating from a rapid rate in the early 1980s to negative growth during 1994–2000. The main source of growth during the 1982–2000 period was capital accumulation, with a small negative contribution from the reallocation of factors across industries.
Jing Cao, Mun S Ho, and Dale W Jorgenson. 2009. “The local and global benefits of green tax policies in China.” Review of Environmental Economics and Policy, 3, 2, Pp. 231-250. Publisher's VersionAbstract
This article describes a multidisciplinary study of market-based policies for controlling air pollution in China. While previous studies have examined the costs and benefits of pollution control separately, this approach determines them together using an economy–environment model for China. We employ air dispersion simulations and population maps to calculate health damages due to air pollution. This provides estimates of incremental damages for industry output and fuel use. Based on these marginal damages, we simulate the effect of “green taxes” on the economy and show that the environmental benefits exceed the aggregate costs, ignoring adjustment costs for individual sectors.

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