"Fiscal Incentives and Political Budget Cycles in China." 2014. Job market paper. Abstract：Political budget cycles in democracies have been extensively analyzed, but few studies of non-democracies exist. This paper explores political budget cycles in China’s provinces. The structural component of political decision making in China is actually similar to its democratic counterparts, even with an absence of general democratic elections, in that they share the motivation of politicians to stay in office or be promoted. A simple theoretical model suggests that, in order to increase the odds of being promoted, politicians have an incentive to treat current expenditures and capital expenditures differently. Using data of Chinese provinces from 1980 to 2006, the analysis finds that two years prior to the National Congress of the Communist Party (NCCP), politicians are likely to shift public spending toward capital expenditures, such as innovation funds and capital construction, and away from current expenditures, such as agricultural subsidies, social expenditures and government administration. The opposite pattern occurs during the year of the NCCP, when politicians increase current expenditures and decrease capital expenditures. The increased capital expenditures two years prior to the NCCP is accompanied by an increase in taxation and total aggregate spending. However, the effects of a provincial leader’s tenure on political budget cycles are minimal, implying a weak causal relationship between the mobility of political turnover and politicians’ time in office at the provincial level.
"The Politics of Ambition: Intra-Party Advancement and Party Unity." 2013. (with Weiwei Hu) Abstract : Party unity is a key feature of the political landscape; it is also an important element of the strength of the party label. Consequently, we highlight the importance of intraparty politics and argue that party rank-and-file support is essential for party leaders to wield influence over party policy-making. Whether and when rank-and-file members who would like to change their party’s position can gain the influence to put their desires into practice depends on how and to whom the party organization provides opportunities for influence over. We model the incentives for the party rank-and-file personnel who might like to change their party’s position to nonetheless support leadership decisions. The model suggests that when party discipline is a function of the structures and processes of internal party organization, a high level of party unity is associated with changes in individual members’ behavior or shifts in their policy positions.
"Why Go to Court? Bargaining Failure under the Shadow of Trial with Complete Information." 2013. (with Michael McBride and Stergios Skaperdas) Abstract: Why do legal disputes ever go to trial? Prior research emphasizes the role of mistakes, irrationalities, or asymmetric information because rational litigants with complete or symmetric information should choose pre-trial settlements over the costs and risks of trial. Using a dynamic incomplete-contracting framework, we provide an overlooked rationale for going to court. Even though risky and costly, going to court can be both rational and socially efficient when a court decision enhances property rights and deters future costly litigation. Experimental evidence supports these predictions. Our findings provide new insights into the incidence of litigation and trial.
"Incumbency Advantage and Disadvantage." 2013. Abstract: This paper first summarizes the sources of incumbency advantage and disadvantage. Then by incorporating both effects, it constructs a simple unified probabilistic voting model and uses candidates’ policy positions and time allocation between the electoral campaign and legislative work as choice variables to determine their effects on the candidates’ strategic decision-making, voters’ behavior and the electoral outcome. The model suggests that two office-motivated candidates will choose the policy position equal to the median voters’ ideal point. In addition, the returns from campaigning will diminish over the career of the candidate. The longer-term incumbent will prefer to spend more time on legislative work and less time on electoral campaigning. Finally, compared to developed countries, voters in developing countries suffer from higher individual endemic discontent, causing distrust between voters and incumbents. Incumbency intensifies the effect of negative economic shocks on the incumbent’s share of votes, leading to higher vote share losses. Yet, in developed countries, voters on average enjoy higher living standards; incumbency dampens the effect of negative economic shocks and dominates the electoral results.