Misspecified Learning in Technology Adoption: Experimental Evidence from Fertilizer Use in China
with Binkai Chen and Ao Wang
This paper investigates agents' simultaneous learning about multiple interacting technologies in the context of fertilizer application in China. We first present experimental evidence that, relative to the personalized fertilizer recommendations based on plot-level soil analysis, farmers simultaneously overuse nitrogen fertilizers and underuse phosphorus and potassium fertilizers. Our first-phase interventions that provide customized fertilizer recommendations lead to reduced nitrogen application and increased phosphorus/potassium use. Average yields and revenues are 5-7% higher and greenhouse gas (N2O) emissions are lower, while total fertilizer costs remain unchanged. Survey data suggest that farmers overestimate the return to nitrogen because it produces a salient signal on crops by increasing greenness, but they underestimate the effectiveness of phosphorus and potassium because their effects are barely observable during the growing stages. Motivated by these facts, we then propose a model of misspecified learning in which agents face two technologies. In learning about the effectiveness of both technologies, the overestimation of the return to the first technology causes an undervaluation and underuse of the second technology. To further test the model, we design a second-phase intervention that distributes leaf color charts to farmers to correct their overestimation of the return to greenness. Consistent with the model prediction, the intervention not only reduces farmers’ nitrogen use immediately, but also induces gradual learning of phosphorus and potassium; the proportion of farmers using phosphorus and potassium both increase by 6 percentage points, relative to 4% and 9% in the control group.
The Long Run Impacts of Land Endowment and Market Formation on Labor and Education Misallocation
with Qianmiao (Michelle) Chen and Shaoda Wang
This paper investigates how initial land endowment affects short-term household labor allocation and long-term human capital investment in the absence of a perfect market. The village-level and family size-based land redistribution scheme before 2003 in China shale initial land endowment. Using a rich rural fixed point survey data tracing roughly 20,000 households during 1986 - 2015, we compare the development of households that had a population change before- and after the last redistribution, which is barely predictable. The empirical findings suggest that, consistent with the Stone-Geary utility framework, in the short run, households with low initial land endowment input more intense labor per unit of land to maintain consumption at subsistence level. Conversely, households getting more land endowment experienced a non-agricultural salary increase and no other crop production changes. In the long run, low initial land endowment leads to lower educational attainments of younger generations, suggesting the existence and persistence of intergenerational inequality. We then examine the impact of land rental market formation on alleviating such distortion, and find that the labor misallocation disappears.
The causal impact of economics education on decision-making: Evidence from a natural experiment in China (with Binkai Chen and Ao Wang). Journal of Economic Behavior & Organization (2021), 188, pp.1124-1143.
Work in Progress
Effects of Referring Business Partners on Firm Networks and Performance (RCT intervention complete)
with Jing Cai and Adam Szeidl
Business partner relationship - suppliers and clients - are central to the efficient functioning of firms. However, two main barriers ---1) information frictions and 2) low trust make it difficult for firms to find good partners. We first present survey evidence that, about one third of all transactions take place between suppliers and clients who are related by kin, even though in a random matching of suppliers to clients the share of kinship ties would be only one tenth. To understand the barriers that impede firm growth, we then conduct a field experiment with 800 writing-brush firms in Jiangxi province, China. We refer potential suppliers or clients to the firms in our sample based on rich network data and a new algorithm. This paper answers three questions. (1) What is the impact of access to new partners on firm transaction networks and performance? We look at both direct effects on the firm getting the recommendation, and business stealing effects on other firms from whom the treated firm may substitute to the new partner. (2) What is the underlying mechanism? We experimentally vary whether we only provide information about the partner or also a subsidy, to distinguish between lack of information versus lack of trust as the barrier limiting firm-to-firm matching. (3) How difficult is it to identify good candidate partners? We cross-randomize a screened referral based on supplier-client characteristics, or a random referral, to learn the data requirements necessary to find good partners. The results inform us about the inefficiency in existing supplier-client matching, the role of the information and trust mechanisms, and policy implications to reduce these frictions.
Labor Market Integration, Growth and Inequality: Evidence from China's Hukou Reforms
with Binkai Chen and Dennis Egger
Successive reforms to China's local registration system, the Hukou, provide variation in group-specific migration costs across time and space. Using machine learning techniques and text analysis, we compile a novel dataset of the universe of over 8,000 worker-type specific Hukou reforms across between 1995 and 2015. We then use this variation, together with an event-study design and triple-difference identification strategy, to quantify the reforms' contribution to the increase in internal migrant labor over the past 20 years in China. Using policy-induced exogenous by-group bilateral migration flows, we estimate the impact of increased labor market integration on aggregate Chinese productivity growth, as well as inequality across types of workers and different regions between 1995 and 2015. In the process, we develop a new methodology and provide new estimates of the migration elasticity for different types of workers, between-group substitutability of workers, and across-group productivity and amenity spillovers.
Effects of E-commerce on Suppliers and Clients (RCT intervention and data collection complete)
with Jing Cai and Adam Szeidl
Using Social Learning to Tackle Inappropriate Use of Technologies (Network data collection complete)
Policy Work/Pre-Doctoral Publications:
Regulatory Protection and the Concentration of Trade: Evidence from Chinese Customs Data (wiith Robert Gulotty, Xiaojun Li, and Lizhi Liu)
Does the Implementation of Reference Pricing Result in Reduced Utilization? Evidence from Inpatient and Outpatient Procedures (with Holly Elser, Ralph A. Catalano, and Timothy Brown). Medical Care Research and Review (2020), p.1077558720971117.
Residential electricity consumption after the reform of tiered pricing for household electricity in China (with Gang Du, Chuangwang Sun, and Dingzhong Zhang). Applied Energy (2015), 157, pp.276-283.
The Incentive for Firms' Innovation: Evidence from China's Rising Labor Cost, Management World (管理世界) (2013), (10), 95-105, 2013.