Publications
Multi-prize for Multi-task: Externalities and the Optimal Design of Tournaments, Journal of Economics, 142, 291-303, 2024, (with Yongsheng Xu)
This paper studies a multi-task tournament in which each agent undertakes two tasks. An agent’s effort on one task creates externalities on the performance of the other task of the agent as well as the performances of other competing agents. We discuss the design of an optimal tournament to achieve a social optimum in the presence of such externalities. In particular, we show that the traditional single-prized tournament is unable to elicit a social optimum, while a task-specific, multi-prized tournament, which we propose in this paper, can achieve socially optimal outcomes.
Morally Monotonic Choice in Public Good Games, Experimental Economics, 26, 697-725, 2023 (With James Cox and Vjollca Sadiraj)
Consequentialist rational choice theory, including models of (unconditional) social preferences, is challenged by decades of robust data from payoff-equivalent public good games with provision or appropriation as well as by robust data showing contributions to public goods, funded by lump-sum taxation, do not crowd out voluntary contributions on a one-for-one basis. This paper offers an extension of rational choice theory that incorporates observable moral reference points. This morally monotonic choice theory is consistent with robust data in the literature and has idiosyncratic features that motivate new experimental designs that introduce nonbinding quotas on appropriations or floors on provisions. Data, from three previous experiments and our new experiment, favor moral monotonicity over alternative theoretical models including rational choice theory, prominent belief-based models of kindness, and popular reference-dependent models with loss aversion.
Differential Effects of Federal and State Gasoline Taxes on Gasoline Consumption, Hacienda Pública
Española /Review of Public Economics, 2019, 229: 11-32 (with David Sjoquist)
Previous studies find that gasoline consumption is more responsive to the gasoline tax than the tax-exclusive price. We examine this topic more extensively by considering the differential effects of the tax-exclusive price, federal gasoline excise tax, and total state taxes on gasoline consumption. We find evidences that the response to changes in the federal excise tax is larger than to changes in state taxes and the tax-exclusive price. We also consider the three specific state taxes and fees on gasoline: excise tax, sales tax, and fees.
International Trading System and Chinese Internationalization Construction of Tax System: Based on the Analysis of “FSC” and Other Cases of Trading Disputes, Review of Economy and Management, 2012, Vol. 3, pp. 102-106 (With Yanfeng Bai in Chinese).
This paper studies a multi-task tournament in which each agent undertakes two tasks. An agent’s effort on one task creates externalities on the performance of the other task of the agent as well as the performances of other competing agents. We discuss the design of an optimal tournament to achieve a social optimum in the presence of such externalities. In particular, we show that the traditional single-prized tournament is unable to elicit a social optimum, while a task-specific, multi-prized tournament, which we propose in this paper, can achieve socially optimal outcomes.
Morally Monotonic Choice in Public Good Games, Experimental Economics, 26, 697-725, 2023 (With James Cox and Vjollca Sadiraj)
Consequentialist rational choice theory, including models of (unconditional) social preferences, is challenged by decades of robust data from payoff-equivalent public good games with provision or appropriation as well as by robust data showing contributions to public goods, funded by lump-sum taxation, do not crowd out voluntary contributions on a one-for-one basis. This paper offers an extension of rational choice theory that incorporates observable moral reference points. This morally monotonic choice theory is consistent with robust data in the literature and has idiosyncratic features that motivate new experimental designs that introduce nonbinding quotas on appropriations or floors on provisions. Data, from three previous experiments and our new experiment, favor moral monotonicity over alternative theoretical models including rational choice theory, prominent belief-based models of kindness, and popular reference-dependent models with loss aversion.
Differential Effects of Federal and State Gasoline Taxes on Gasoline Consumption, Hacienda Pública
Española /Review of Public Economics, 2019, 229: 11-32 (with David Sjoquist)
Previous studies find that gasoline consumption is more responsive to the gasoline tax than the tax-exclusive price. We examine this topic more extensively by considering the differential effects of the tax-exclusive price, federal gasoline excise tax, and total state taxes on gasoline consumption. We find evidences that the response to changes in the federal excise tax is larger than to changes in state taxes and the tax-exclusive price. We also consider the three specific state taxes and fees on gasoline: excise tax, sales tax, and fees.
International Trading System and Chinese Internationalization Construction of Tax System: Based on the Analysis of “FSC” and Other Cases of Trading Disputes, Review of Economy and Management, 2012, Vol. 3, pp. 102-106 (With Yanfeng Bai in Chinese).
Working Papers
Competition or Coordination: Strategic Environmental Policymaking Across OECD Countries
In the era of globalization, competition for the investment and the possibility that it sparks a “race to the bottom” bring about considerable concern. This paper explores how countries strategically interact in setting environment policies. This paper directly estimates the causal effect of other countries’ changes in environmental policies on home country’s policy choice. Considering that the strategic interaction can be caused by distinct mechanisms, this paper also disentangles different underlying mechanisms and explores the role of interjurisdictional competition for capital, transboundary pollution spillovers, and coordination in determining the observed interactions. I build a simple theoretical model which incorporates distinct mechanisms of interaction and derives ways to differentiate them empirically. In the estimation, I use a panel dataset consisting of 26 OECD countries for the period of 1990 to 2012 and use spatial econometrics with the Generalized Methods of Moments (GMM) continuously updated estimator (CUE) with Instrumental Variable (IV). To deal with endogeneity issue, I use other countries' political characteristics as instruments for other countries' environmental policies. A new composite index is used to measure environmental policy, which is the Environmental Policy Stringency (EPS) index developed by the OECD. This index captures multiple dimensions of environmental policies and is comparable across countries. Use of this index is a significant improvement in how environmental policy is measured in previous research. This paper finds that there is positive and statistically significant effect of other countries' environmental policies. And the interjurisdictional competition and transboundary pollution spillovers play limited roles in causing the effect. The coordination across EU countries mainly drive the effect, which is further reinforced after adopting euro as a common currency.
This paper contributes to the literature on two fronts. First, most of the papers in the literature estimate environmental interaction at the subnational government level, such as across states. The evidence on countries is extremely limited. This paper directly estimates interaction pattern across OECD countries. Second, there are very few empirical papers in the environmental policy literature that disentangle the mechanism behind the strategic interaction. This paper provides empirical evidence on the potential causes and finds that interjurisdictional competition does not play a significant role in setting a country’s environmental policy. This result implies that since interjurisdictional competition is limited, the possibility of a “race to the bottom” would not be a serious concern. Moreover, instrument variables in this paper also show improvement compared with the literature.
Tax Competition for Mobile Capital: An Experiment
This paper uses laboratory experiments to explore governments’ tax policies when there is tax competition. To the best of my knowledge, this is the first experiment paper on tax competition. I design a set of experiments to examine the effects of several factors on tax policies, such as the number of competing jurisdictions and whether the competition is symmetric or not. I explore a total of 8 experiments. The set of experiments correspond to different theoretical models, and experiment results are used to test whether the behaviors in experiments are consistent with theoretical predictions and to explore the edges of theory validity. I also examine the effects of two policy instruments that potentially mitigate the inefficiency caused by tax competition, namely minimum tax rate constraint and communication. One main finding is that the number of competing regions has a substantial impact on tax choices. However, this effect has long been ignored in the theoretical literature. The two policies, particularly communication, have positive effects on increasing the tax rate and enhancing efficiency. It suggests better communication and cooperation among regions would increase the social welfare. The results are also consistent with the findings in my job market paper.
In the era of globalization, competition for the investment and the possibility that it sparks a “race to the bottom” bring about considerable concern. This paper explores how countries strategically interact in setting environment policies. This paper directly estimates the causal effect of other countries’ changes in environmental policies on home country’s policy choice. Considering that the strategic interaction can be caused by distinct mechanisms, this paper also disentangles different underlying mechanisms and explores the role of interjurisdictional competition for capital, transboundary pollution spillovers, and coordination in determining the observed interactions. I build a simple theoretical model which incorporates distinct mechanisms of interaction and derives ways to differentiate them empirically. In the estimation, I use a panel dataset consisting of 26 OECD countries for the period of 1990 to 2012 and use spatial econometrics with the Generalized Methods of Moments (GMM) continuously updated estimator (CUE) with Instrumental Variable (IV). To deal with endogeneity issue, I use other countries' political characteristics as instruments for other countries' environmental policies. A new composite index is used to measure environmental policy, which is the Environmental Policy Stringency (EPS) index developed by the OECD. This index captures multiple dimensions of environmental policies and is comparable across countries. Use of this index is a significant improvement in how environmental policy is measured in previous research. This paper finds that there is positive and statistically significant effect of other countries' environmental policies. And the interjurisdictional competition and transboundary pollution spillovers play limited roles in causing the effect. The coordination across EU countries mainly drive the effect, which is further reinforced after adopting euro as a common currency.
This paper contributes to the literature on two fronts. First, most of the papers in the literature estimate environmental interaction at the subnational government level, such as across states. The evidence on countries is extremely limited. This paper directly estimates interaction pattern across OECD countries. Second, there are very few empirical papers in the environmental policy literature that disentangle the mechanism behind the strategic interaction. This paper provides empirical evidence on the potential causes and finds that interjurisdictional competition does not play a significant role in setting a country’s environmental policy. This result implies that since interjurisdictional competition is limited, the possibility of a “race to the bottom” would not be a serious concern. Moreover, instrument variables in this paper also show improvement compared with the literature.
Tax Competition for Mobile Capital: An Experiment
This paper uses laboratory experiments to explore governments’ tax policies when there is tax competition. To the best of my knowledge, this is the first experiment paper on tax competition. I design a set of experiments to examine the effects of several factors on tax policies, such as the number of competing jurisdictions and whether the competition is symmetric or not. I explore a total of 8 experiments. The set of experiments correspond to different theoretical models, and experiment results are used to test whether the behaviors in experiments are consistent with theoretical predictions and to explore the edges of theory validity. I also examine the effects of two policy instruments that potentially mitigate the inefficiency caused by tax competition, namely minimum tax rate constraint and communication. One main finding is that the number of competing regions has a substantial impact on tax choices. However, this effect has long been ignored in the theoretical literature. The two policies, particularly communication, have positive effects on increasing the tax rate and enhancing efficiency. It suggests better communication and cooperation among regions would increase the social welfare. The results are also consistent with the findings in my job market paper.
