Research

Working Paper

In a firm heterogeneity and trade framework, this paper develops a “market access” approach to studying the distribution of firm productivity and production in a network of geographic locations. We distinguish between two competing effects of trade cost changes, namely import competition and export access, and derive consumer market access (CMA) and firm market access (FMA) measures respectively to capture each effect. This approach allows us to investigate the effect of trade cost changes in general equilibrium, taking into account inter-location spillovers. Empirically, this paper examines how China’s dramatic expansion of its highway system from 1998 to 2007 shaped the geographic distribution of domestic manufacturing firms. We show that this highway expansion reduced inter-regional trade costs and affected the selection of firms and resource allocation among firms. For the manufacturing sector on aggregate, the highway expansion contributed to 24% of the observed productivity growth, 40% of the decline in productivity dispersion, and 16% of the output growth, but these effects differ substantially across industries and locations, highlighting the distributional impact of trade cost changes.

geo-prod_paper_180118.pdf
Xiong, Wentao. Working Paper. “Pension Fund Liabilities and Risk-Taking”. Abstract

This paper analyzes the risk-taking incentives of U.S. pension funds and examines how such incentives shape their asset allocation. Defined-benefit pension funds facing asset-liability mismatch have competing incentives when choosing how much risk to carry with their portfolios. Both public and private funds may engage in risk management to avoid costly financial distress, yet they may also exhibit risk shifting behavior due to limited liability. This paper highlights how a major difference in accounting standards related to discount rate can encourage public funds to invest more in risky assets than their private counterparts when their funding status deteriorates. Consistent with this discount rate channel, empirical evidence suggests that, while risk management incentives dominate for private funds, public funds have much stronger incentives to shift risk.

2017
Cole, Shawn, and Wentao Xiong. 2017. “Agricultural Insurance and Economic Development.” Annual Review of Economics 9: 235–262. Publisher's Version Abstract

This article provides a review of recent research on agricultural insurance (AI) in developing countries. Agricultural producers face a variety of significant risks; historically, only government-subsidized products have achieved widespread adoption. A recent contractual innovation, which links insurance payouts to realized weather rather than farmer indemnity, has spurred substantial research in the past decade. This review begins by describing the experience in developed economies and then turns to developing countries, covering the following topics: farmers’ adoption of AI, how AI affects their decision to invest in risky assets, and the extent to which AI helps farmers smooth income and consumption. We conclude with suggestions for future research and practice related to AI in developing countries.

Glaeser, Edward, and Wentao Xiong. 2017. “Urban Productivity in the Developing World.” Oxford Review of Economic Policy 33 (3): 373-404. Publisher's Version Abstract

Africa is urbanizing rapidly, and this creates both opportunities and challenges. Labour productivity appears to be much higher in developing-world cities than in rural areas, and historically urbanization is strongly correlated with economic growth. Education seems to be a strong complement to urbanization, and entrepreneurial human capital correlates strongly with urban success. Immigrants provide a natural source of entrepreneurship, both in the US and in Africa, which suggests that making African cities more livable can generate economic benefits by attracting talent. Reducing the negative externalities of urban life requires a combination of infrastructure, incentives, and institutions. Appropriate institutions can mean independent public authorities, public–private partnerships, and non-profit entities, depending on the setting.

2014
2014. “HIV Prevention and Risk Compensation.” Journal of Development Economics 106: 78-91. Publisher's Version Abstract

Risk compensation has been called the “Achilles’ heel” of HIV prevention policies (Cassell et al., 2006). This paper examines the behavioral response to male circumcision, a major HIV prevention policy currently being implemented throughout much of Sub-Saharan Africa. Contrary to the presumption of risk compensation, we find that the response due to the perceived reduction in HIV transmission appears to have been a reduction in risky sexual behavior. We suggest a mechanism for this finding: circumcision may reduce fatalism about acquiring HIV/AIDS and increase the salience of the tradeoff between engaging in additional risky behavior and avoiding acquiring HIV. We also find what appears to be a competing effect that does not operate through the circumcision recipient's belief about the reduction in the risk of acquiring HIV.

2013
Kologlu, Murat, Gene Kopp, Steven Miller, Frederick Strauch, and Wentao Xiong. 2013. “The Limiting Spectral Measure for Ensembles of Symmetric Block Circulant Matrices.” Journal of Theoretical Probability 26 (4): 1020-1060. Publisher's Version Abstract

Given an ensemble of N × N random matrices, a natural question is whether the empirical spectral measures of typical matrices converge to some limiting spectral measure as N → ∞. It has been shown that the limiting spectral distribution for the ensemble of real symmetric matrices is a semi-circle, and that the distribution for real symmetric circulant matrices is a Gaussian. This paper proves, as a transition from the general real symmetric matrices to the highly structured circulant matrices, the ensemble of symmetric m-block circulant matrices with toroidal diagonals of period m exhibits an eigenvalue density as the product of a Gaussian and a certain even polynomial of degree 2m-2. The paper further generalizes the m-circulant pattern and shows that the limiting spectral distribution is determined by the pattern of the i.i.d.r.v. elements within an m-period, depending on not only the frequency at which each element appears, but also the way the elements are arranged. For an arbitrary pattern, the empirical spectral measures converge to some nice probability distribution as N → ∞.