DATE May 18, 2024
LOCATION Wuhan University
ORGANIZERS Yang Zhou
Format: 45 mins per paper, 30 mins for presentation and 15 mins for Q&A.
Saturday, May 18, 2024
The Effect of Digital-Coupon Stimulus Programs on Businesses
Presenter: Yuan Ren, Zhejiang University
Abstract
Since the recent COVID pandemic, many governments have initiated a new instrument to stimulate the economy that distributes large-scale conditionally applicable digital coupons to households. In this study, we study the effects of such programs on merchants, using administrative transaction-level data of a representative sample of merchants from a leading mobile platform in China. Exploiting the sector-specific redemption restrictions of the coupons, we show that the policy significantly boosted merchant sales and customer traffic under a difference-in-differences analysis framework, with no evidence of intertemporal substitution following the conclusion of the program. The sales increase is substantial, amounting to RMB 17,748 during the 15-day event period, or 338% of the pre-event weekly average. Smaller merchants, merchants with lower revenue-per-transaction, or older merchants benefited more on a percentage basis. The coupon program is highly cost-effective: for each ¥1 of government subsidy, the incremental increase in sales (net of coupon redemption) is ¥1.9. Increasing the minimum spending requirements generally lowers the coupon redemption rates and rates of return on government subsidies.
Does Borrowers’ Cultural Norms Matter in Marketplace Lending? Evidence from Local Confucianism
Presenter: Bo Zhang, Shandong University
Abstract
We examine the role of borrowers’ cultural norms in online lending markets. Using data from one of the largest marketplace lending platforms in China, we show a positive relation between the prevalence of Confucian cultural values in borrowers’ residential areas and the probability of their loan applications being funded and campaign funding proceeds. Moreover, the positive relation is more pronounced with higher information asymmetry between borrowers and lenders, scarcer local social capital, a more stringent local environment, or a weaker local impact from cultural shocks. Ex-post analysis suggests that borrowers from regions with stronger Confucian culture have less default, and their lenders enjoy higher returns. Taken together, our findings reveal the unique role of cultural norms in mitigating the adverse selection and moral hazard problems in marketplace lending by signaling borrowers’ creditworthiness and stability and disciplining their unethical behaviors.
Housing Speculation and Investment in Children’s Education
Presenter: Geng Niu, Southwestern University of Finance and Economics
Abstract
Housing and human capital represent two important assets for a household. This paper investigates the potential for housing speculation—an appealing practice in house market booms—to crowd out household investment in children’s education, an endeavor that only pays off in the long run. To address endogeneity concerns, we exploit the spillover effects arising from the unintended and staggered implementation of house purchase restrictions in China. The implementation of this restriction has resulted in an unexpected increase in housing prices in the neighboring unregulated areas compared to those farther away. By analyzing microdata from a comprehensive household survey and employing a difference-in-difference estimation approach, we find that house purchase restrictions decrease education investment for households located in nearby unregulated cities. We examine the speculation channel by showing that house purchase restrictions increase expectations of future housing price growth and housing investment intentions for households in nearby unregulated cities. Notably, the crowd-out effect is more pronounced for households with lower wealth and education levels and in regions with lower levels of education culture and returns to education. Our findings shed light on an underexplored aspect of the repercussions of housing market booms.
Household Decisions under Pollution-Induced Health Risk
Presenter: Yapei Zhang, ShanghaiTech University
Abstract
Air pollution has a large detrimental effect on human health. Pollution-induced health risk incentivizes households to adjust their life-cycle consumption-saving decision. Using the Chinese Household Finance Survey data, we provide causal evidence that households facing high air pollution consume less but increase the proportion of safe asset. They also invest more in health and exhibit higher demand for insurance. We quantify the welfare cost of the air pollution-related health hazard using a stochastic dynamic overlapping generation model with endogenous health accumulation in a partial equilibrium framework. Our numerical results show that facing air pollution-induced multi-dimensional health hazard, consumption declines due to the crowding out effect of higher health investment and the fall in labor productivity. The overall welfare loss is around 20% in terms of consumption equivalence, over 85% of which is attributed to the more persistent health shock at polluted region.
How Does Bankruptcy Reform Affect Collateral Investment
Presenter: Yunqi Zhang, Nankai University
Abstract
Bankruptcy abuse prevention has been criticized for increasing foreclosure rates, imposing negative impacts on housing markets, and aggravating the financial crisis. By contrast, this paper documents that bankruptcy abuse prevention reduces household debt overhang, a phenomenon harmful to home values and housing markets. Using a difference-in-difference analysis, we find that households in recourse states increased their home improvement and maintenance expenditures after the Bankruptcy Abuse Prevention and Consumer Protection Act, a period during which the general population became more pessimistic about the housing market (Mian and Sufi 2021), and that the effects vary by home equity levels. The results remain unchanged with alternative specifications and cannot be explained by credit changes, judicial and nonjudicial foreclosures, homestead exemption, house sales, or heterogeneous expectations. Last but not least, we use entropy balancing to eliminate the differences between the treatment and control groups and get similar results.
Sea level rise, collateral constraints, and entrepreneurship
Presenter: Yang Zhou, Wuhan University
Abstract
Sea level rise (SLR) is one of the most salient climate risks. Using very granular variations in SLR exposure and disaggregated geographic information on households in the United States, we find that households exposed to SLR are less likely to engage in entrepreneurship than their unexposed counterparts within the same zip code. This effect is driven by long-run SLR risks rather than short-run flood risks and is amplified when attention to or belief in climate change is high. We also show that SLR exposed households are less likely to extract home equity and extract lower amounts of home equity. For cash-out refinancing loans, lenders are more inclined to deny applications, impose higher interest rates, and originate lower loan amounts if the properties in question face a higher SLR risk. These findings suggest that collateral constraints are likely the mechanism underlying the negative impact of SLR exposure on entrepreneurship.