Economy

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, Wenhao Hu, and Dale W. Jorgensen. 2020. “Estimating flexible consumption functions for urban and rural households in China.” China Economic Review, 61, 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.

Jing Cao, Mun S. Ho, Wenhao Hu, and Dale Jorgenson. 2020. “Effective labor supply and growth outlook in China.” China Economic Review, 61, 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.
2019 Dec 05

Opportunities and Challenges in China's Carbon Market: From Model to Reality

3:45pm to 5:00pm

Location: 

Pierce 100F, 29 Oxford Street, Cambridge

A Harvard-China Project Research Seminar with Cecilia Han Springer, Postdoctoral Research Fellow, Environment and Natural Resources and Science, Technology and Public Policy, Harvard Kennedy School

Please note the start time of 3:45pm

Abstract: Can China's policies promote economic growth and environmental protection at the same time? I examine the economy vs. environment dichotomy in Chinese...

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Wei Qi

Wei Qi

Ph.D student, School of Economics and Management, Tsinghua University
Alumnus (Visiting Fellow) and Associate, Harvard-China Project
Pierce Hall G2B, 29 Oxford St., Cambridge, MA
James K. Hammitt, Fangli Geng, Xiaoqi Guo, and Chris P. Nielsen. 2019. “Valuing mortality risk in China: Comparing stated-preference estimates from 2005 and 2016.” Journal of Risk & Uncertainty, 58, 2-3, Pp. 167–186. Publisher's VersionAbstract
We estimate the marginal rate of substitution of income for reduction in current annual mortality risk (the “value per statistical life” or VSL) using stated-preference surveys administered to independent samples of the general population of Chengdu, China in 2005 and 2016. We evaluate the quality of estimates by the theoretical criteria that willingness to pay (WTP) for risk reduction should be strictly positive and nearly proportional to the magnitude of the risk reduction (evaluated by comparing answers between respondents) and test the effect of excluding respondents whose answers violate these criteria. For subsamples of respondents that satisfy the criteria, point estimates of the sensitivity of WTP to risk reduction are consistent with theory and yield estimates of VSL that are two to three times larger than estimated using the full samples. Between 2005 and 2016, estimated VSL increased sharply, from about 22,000 USD in 2005 to 550,000 USD in 2016. Income also increased substantially over this period. Attributing the change in VSL solely to the change in real income implies an income elasticity of about 3.0. Our results suggest that estimates of VSL from stated-preference studies in which WTP is not close to proportionate to the stated risk reduction may be biased downward by a factor of two or more, and that VSL is likely to grow rapidly in a population with strong economic growth, which implies that environmental-health, safety, and other policies should become increasingly protective.
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.
2019 Sep 05

Walking Culture in China

3:00pm

Location: 

Gund Hall, Room 121, Harvard Graduate School of Design, 42-28 Quincy Street

A dissertation defense by Yingying Lu, a Harvard Graduate School of Design doctoral candidate and incoming researcher of the Harvard-China Project.

Abstract: Walking brings wide-ranging health benefits to individuals (Hanson & Jones, 2015) and increases social interaction as well (Talen & Koschinsky, 2013). Walking, as a sustainable transportation mode, can contribute to the urban environment by saving transportation energy...

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Jing Cao, Mun S. 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.
2019 Jun 01

CCICED Annual Meeting

Sat Jun 1 (All day) to Wed Jun 5 (All day)

Location: 

Hangzhou International Expo Center, Zhejiang Province, China

China Project faculty chair, Michael McElroy, who has been appointed to the China Council for International Cooperation on Environment and Development (CCICED) for a 5-year term, and Executive Director, Chris Nielsen, will be participating in the ...

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