After-school tutoring has risen globally despite limited evidence of effectiveness. We implement a randomized after-school tutoring program in rural China where many children are left-behind by parents in care of grandparents. Compared to tutees cared for by parents, those in care of grandparents reported much smaller home-tutoring reductions but larger test-score gains. We interpret our data analysis with a model with tutoring efficacy and substitution between private and public inputs both differing by family background: Increased public tutoring generates larger test-score gains for children who experience greater tutoring efficacy and lesser substitution with household inputs, consistent with our estimates.

This paper analyzes the roles of innate talent versus family background in shaping intergenerational mobility and social welfare under different education systems. We establish an overlapping-generations model in which the allocation of workforce between a high-paying skilled labor sector and a low-paying unskilled labor sector depends on talent, parental human capital, and educational resources, and the wage rate of skilled workers is governed by their average talent. Our model suggests that under the private education system, income inequality is inversely associated with social mobility, and the steady-state average talent of skilled labor declines as parents increase educational spending. The introduction of public education, which makes the allocation of workforce depend more on talent and less on family background, tends to increase both inequality and mobility and improve welfare under reasonable conditions. Our simulations show that if the government diverts public school funding to redistribution, the economy has lower inequality and mobility in the steady state. Moving from elitist to meritocratic systems yields lower inequality and greater mobility.

We study a developing countries setting in which agglomeration efficiency of urban production attracts rural-to-urban migration, whereas urban pollution deters rural-to-urban migration. By means of a general equilibrium model we study the formation of policies aimed at striking a socially optimal balance between supporting efficient levels of urban agglomeration and mitigating urban pollution in the presence of endogenous rural-to-urban migration. We show that without government intervention, although rural-to-urban migration contributes to agglomeration economies, it does not improve social welfare because it also exacerbates environmental degradation. We also show that urban pollution problems cannot be resolved by means of environmental regulation alone: for example, an emissions tax aimed at curbing urban pollution can backfire as and when it increases the appeal of rural-to-urban migration. A policy of emissions tax in conjunction with a subsidy to rural individuals is an effective means of enhancing urban productivity while reducing urban pollution.

In this paper, we develop a computational linguistic approach based on supervised machine learning using the People’s Daily to measure Chinese official relations and political uncertainty towards the US. In the first step, we create training samples by asking experts to manually annotate news articles. In the second step, we use supervised machine learning algorithms to adjust our single neural network and support vector machine classifiers to better fit our training data. Finally, we combine our two individual classifiers and a dictionary approach to automatically detect whether an article in the newspaper sample is relevant. Using all of the relevant textual data, we then apply the computational linguistic approach to generate state-of-the-art indices and show that our indices outperform similar current textual indicators in some situations, particularly in the financial market.

This paper extends an intergenerational context to the prospect of upward mobility hypothesis, showing that the poor majority in democracies may not support massive redistribution for the sake of their children’s educational attainment and upward mobility. We develop an overlapping generations model in which human capital formation depends on individual effort and educational resources. Parents vote on redistributive policies under majority rule by considering the disincentive effects of high tax rates on children’s study efforts. We characterize the stationary Markov perfect equilibrium in which children respond negatively to the extent of redistribution, and parental altruism discourages poor voters from expropriating the rich. Under private education, a tax rate is only credible above a certain threshold, and children’s efforts and their parental inputs are complements in the steady state. Under public education, a credible policy embodies a moderate income tax combined with a small educational fund. Under both school systems, the optimal credible tax increases with wage inequality and decreases as parental altruism becomes stronger.

This paper designs a field experiment in a real job environment, which incorporates differential observability in a job with multiple tasks (quality and quantity) to study the effect of peer pressure on outputs. The treatment group was informed of each individual's output quality information, whereas the control group only knew the group mean. The treatment group produced better output quality but lower output quantity, implying that workers adjusted their efforts between tasks. After switching off the treatment, results from the follow-up experiment show that the output quality produced by the treatment group rolled back to the baseline low level, whereas their output quantity continued to decrease. These results suggest that peer pressure, as a tool for promoting workers' productivity, should be adopted with caution.

This paper conceptualizes that a human mind consists of three components: (1) rational self (2) emotions (3) an automatic system that memorizes habits. Based on anthologists’ research, I posit that rational self is used only in the occasions that the return of using it is high, which serves human genes’ purposes of saving vital energy of physical strength for production and fighting against ferocious animals in ancient times. In other occasions, rational self is in a dormant mode, with habits determining human behaviors. The switch from dormant to active state of rational self is through the spur of emotions. For example, in ancient times, when an individual’s peers obtain something valuable, it is usually a good opportunity for him to try to obtain it as well. Therefore, human genes create the emotion of jealousy, which yields psychological pain to spur the rational self to find the best way to get it as well through learning from his peers. When an individual makes a serious mistake, human genes create the emotion of regret, which generates psychological pain to spur the rational self to learn the lesson. When humans feel contended and their energies are under-used, human genes create the emotion of greed and boredom, which yields psychological pain to spur them to act… In contemporary times, however, these emotions may often only yield tremendous human suffering while bringing no benefits to the survival of the gene. To mitigate pains or to utilize the pleasure mechanism that human genes create, rational self may choose illusions, sexual promiscuity, taking drugs, addiction to video games, or even suicide, all of which can be conceptualized as a “principal-agent problem” between human genes and rational self. Moreover, religions may be a way to reduce human suffering. The goal of rational self is to maximize the individual’s lifetime happiness by trying to be fully aware of all of the desires and emotions that human gene creates and imposed on the individual and striking an optimal balance among them. This goal can be interpreted as the “meaning of life”, which often amounts to the satisfactions of biological needs and/or the continuous pursuit of the sense of “winning” in some aspects of life.

We analyze the role of pay-as-you-go social security in intragenerational risk sharing in an overlapping-generations model with individual heterogeneity. Parents invest in their children’s education in state schools in exchange for old-age financial support. Due to random factors such as luck in the job market, children may have different earning capacities despite that they receive the same education. Without social security, a parent gets a transfer payment from her own child, so the received amount is uncertain as it depends on the child’s earnings. The social security scheme, which essentially serves to pool transfer contributions from all children and then redistribute them equally to each parent, insures parents against the risk of educational investments. Our model shows that social security stimulates educational spending, enhances labor earnings, and increases ex ante individual utility. However, it may worsen ex post intragenerational inequality of lifetime income.

China’s growing influence on the world has generated profound effects on the political and economic decisions of her partner nations. Recent conflict escalation between China and western countries gives rise to widespread concern over the possibility of delinking China from global trade and supply chain. By drawing on utility theory, we suggest that the political relationship is a key determinant of collective emotions of consumers and trading companies and consequently the interactions between importers and exporters. We hypothesize that warmer relations lead to larger increases (or smaller decreases) in trade while cooler relations have the opposite effect. Based on monthly data of China and her twelve trading partners from 1981 to 2019, our study provides an empirical investigation into the association between political relationship and bilateral trade flows. Our results show that shocks to relations are highly persistent and frequently cause changes in trade. However, relations themselves are little influenced by changes in trade, changes that show little persistence. We also address the US-China trade war and the observation that innovations to China’s exports to the US improve China’s relations with the US while shocks to American exports to China worsen relations from China’s perspective.

Government expenditures can be used for various socio-economic objectives, including public education, consumption of public goods and services, and social protection. This paper analyzes the optimal allocation of public expenditures among these competing functions. We establish an overlapping generations model with heterogeneous individuals in which the government optimally chooses income tax, transfer payment, educational spending, and public consumption. Our model characterizes the transitional dynamics and the steady state of each function with and without a pay-as-you-go international contract. We also conduct a simulation illustrating that the presence of an intergenerational contract may raise public consumption and social welfare in the ssteady state.

This study examines the relative importance of soft skills versus hard skills across occupations and its impact on the observed wage gap between Blacks and Whites in the United States. It posits that the Black/White pay gap may vary across occupations that require the use of different types of skills. We classify occupations into hard‐skill intensive versus soft‐skill intensive jobs using the skill content measures of different occupations from the Occupational Information Network (O*Net). We then use data from the National Longitudinal Survey of Youth (NLSY) and Current Population Survey (CPS) to investigate the impact of job skill type on the wage gap. Consistent with our theoretical predictions, we show that this wage gap in white‐collar jobs is smaller for hard‐skills jobs than it is for soft‐skills jobs. Moreover, we demonstrate that, in response to variations in the wage gap across different occupations, Blacks are more likely to self‐select themselves into hard‐skills jobs, ceteris paribus. This shows not only that discrimination against Blacks varies across occupations, but also that such discrimination induces the self‐selection of Blacks into certain occupations. Moreover, this finding highlights the role played by co‐worker/customer discrimination in explaining the racial wage gap in the U.S. labor market. (JEL J15, J31)