张力 Li Zhang

Research

Working Papers

  1. Migration Restrictions and the Migrant-Native Wage Gap: The Role of Wage Setting and Sorting (with Naijia Guo, Rongjie Zhang, Ben Zou). Revision requested by American Economic Review.
    • presented: RFBerlin-CReAM Workshop 2024; 2024 AMES; 2024 SOLE Annual Conference ; 2023 EWMES; 2023 HKEA Biennial Conference; 2023 AASLE Annual Conference; Invited seminar at Jinan University
    Abstract We study the wage gap between internal migrants and native workers in China's urban labor market. Using employer-employee-linked administrative records from a large city, we estimate a two-way fixed effects model and decompose the average migrant-native wage gap. Compared to natives with the same skills, migrants receive lower pay from the same employers and are less likely to be employed by high-premium employers. These wage setting and sorting effects contribute to an 8.7-log-point wage penalty for migrants. We then study the role of employer-sponsored hukou (household registration) quotas in determining the wage gap. Following a policy change that decreased the number of quotas by 40%, migrants' wages relative to natives increased by 5.3 log points. The decrease in quotas reduced workplace amenities for migrants, whose earnings increased relative to natives as predicted by the theory of compensating wage differentials. This rise in the wage-setting effect was especially notable among the young, the skilled, and those in the private sector. The quota tightening also induced high-skilled migrants to shift towards the public sector, which was less affected by the quota reduction but on average paid a lower wage premium, and hence, the sorting effect worsened for the migrants. Based on a wage-posting model, we estimate the willingness-to-pay for a quota to be between 2.2 and 3.7 times the average annual earnings.
  2. Is a Better School Better for All? Evidence from Elite Education in China (with Lunyu Xie).
    • 2021 CES Annual Conference Best Student Paper: Honorable Mentions
    • presented: 2023 WEAI International Conference; 2022 AASLE Annual Conference; 2021 Symposium on Contemporary Labor Economics; 2021 CMES; 2021 CES Annual Conference
    Abstract The impact of elite education on academic outcomes is a topic of much debate. Utilizing the discontinuity in enrollment probability around the enrollment thresholds in the high school entrance exams, this study estimates the heterogeneous effect of elite high schools on the college entrance exam results for students with different levels of academic preparation measured by their previous academic performance. Academically well-prepared students significantly benefit more from elite high schools than under-prepared students. Peer effects partially explain the heterogeneous effect. The results imply potential misallocation of resources when using one-shot high-stakes exams to allocate educational resources.
  3. Rural Labor Allocation, Risk Insurance, and Temporary Migration (with Yucheng Wang)[slides]
    • presented: 2023 AMES-Tsinghua; 2023 WEAI International Conference; 2023 CES North American Conference*
    Abstract Migration risks are an important barrier holding rural households back from allocating labor to urban areas. Existing literature suggests that rural households have better insurance against productivity risks and emphasizes the informal insurance network as a channel. This paper proposes local labor allocation as an alternative channel, highlighting the importance of diversified labor income sources and labor supply flexibility. Using unique and rich longitudinal data on rural households in China, we develop a formal test examining how rural households respond to both aggregate and idiosyncratic shocks and the role of migration in the risk-transmission process. 60.9% of risk insurance occurs during the transmission of agriculture income shock to total labor income, while the transmission of income shock to consumption accounts for 39.1%. This confirms that rural households respond to agricultural shocks by adjusting local labor allocation. We further support the results using annual fluctuations in weather as an exogenous agricultural productivity shock. Based on the empirical findings, we develop a dynamic model of location choice, sectoral labor allocation, and asset accumulation with borrowing constraints. We use the model to study the welfare effects of reducing moving barriers and relaxing borrowing constraints.
  4. Trade Liberalization and Intergenerational Education Mobility: Evidence from China (with Jingxuan Du)[slides]
    • presented: 2023 CES Annual Conference*; 2023 China Economics Annual Conference; 2023 CES North American Conference*; 2022 International Conference on The Chinese Economy*
    Abstract This study examines the impact of trade liberalization on intergenerational education mobility, focusing on China’s accession to the WTO. The negative impact of export tariff reduction on educational outcomes is greater for children from low-educated families than for those from high-educated families, resulting in reduced intergenerational education mobility. Estimations of intergenerational education elasticity also support this finding. This study proposes that the opportunity cost of education alone cannot explain the results and documents another non-negligible mechanism: parents’ time inputs. Parents may reduce their time and effort on children’s education to take new job opportunities created by trade liberalization, negatively affecting children’s early childhood development.


Selected Work in Progress

  1. Job Dynamics and Life-Cycle Wage Growth (with Naijia Guo and Ben Zou)
  2. Growing without Divergence: The Impact of Innovation on Low- and High-skilled Migration in China (with Suqin Ge, Naijia Guo, Zibin Huang, and Junsen Zhang)
    • presented: 2024 AASLE


Publications

  1. Across a Few Prohibitive Miles: The Impact of the Anti-Poverty Relocation Program in China (with Lunyu Xie and Xinye Zheng). 2023. Journal of Development Economics, 160, 102945.
    • previously circulated as "Moving to Opportunity: The Effects of the Targeted Poverty Alleviation Relocation Program in China"
    • presented: 2021 Asia Impact Evaluation Conference; Invited seminar at Beijing Normal Univ.; 2020 AAEA Virtual Meeting; 2019 Symposium on Contemporary Labor Economics; 2019 Sustainable Development Goals
    Abstract Many households are confined to remote rural villages in the developing world. This study examines the Anti-Poverty Relocation Program in China, considering the village-to-town relocation from agricultural to non-agricultural sectors induced by the program. While exploring a novel administrative data set on impoverished people in a Chinese county, we discovered that the program significantly increased the participants’ income by 9.61%, driven mainly by the increase in wage income. The empirical findings are consistent with the Roy-model perspective, which states that rural households with comparative advantage in non-agricultural sectors could benefit from relocation to nearby towns. This study provides new evidence that mobility barriers across sectors exist even on a small geographic scale in rural areas. The results of the cost–benefit analysis suggest that relocation of households in remote rural areas is a feasible policy tool for overcoming such mobility barriers.


Pre-Doctoral Publications

  1. Zheng, Xinye, Yucheng Wang, and Li Zhang. Coordination between Government Departments and the Allocation of Public Resources: Theory and Empirical Evidence (In Chinese). 2019. Economic Research Journal, 10, 24-40.
  2. Zheng, Xinye, Li Zhang, and Yangyang Zhang. Global Tax Competition and China’s Policy Choices (In Chinese). 2019. Economic Perspectives, 2, 31-46.
  3. Zheng, Xinye, and Li Zhang. The Possibilities in the Impossible Trinity of Fiscal Policy (In Chinese). 2017. Exploration and Free Views, 9, 108–116.
* presented by coauthor(s).