Job Market Papaer:
Tax Competition with Population Growth
This paper analyzes the pattern of strategic interaction on capital tax rates among states in the U.S. This paper is the first to apply MLE estimation of the SAR panel data model with fixed-effects to study tax competition behavior. Through a joint investigation into both tax competition behavior and the capital allocation decision, I demonstrate the existence of capital tax competition among states in the South and West, but competition is less significant in the Midwest and Northeast. I continue to apply a high-order SAR panel data estimation with fixed-effects to study the impact of population growth on tax competition, and the estimation results suggest that faster population growth significantly relates to stronger reaction to changes in neighbors' tax policy. I also apply two weighting schemes of neighbors to validate the findings. A two-period structural model with a saving decision is developed to explain this result. The model features a capital dilution effect which is also tested empirically in this paper.
Tax Competition with Population Growth
This paper analyzes the pattern of strategic interaction on capital tax rates among states in the U.S. This paper is the first to apply MLE estimation of the SAR panel data model with fixed-effects to study tax competition behavior. Through a joint investigation into both tax competition behavior and the capital allocation decision, I demonstrate the existence of capital tax competition among states in the South and West, but competition is less significant in the Midwest and Northeast. I continue to apply a high-order SAR panel data estimation with fixed-effects to study the impact of population growth on tax competition, and the estimation results suggest that faster population growth significantly relates to stronger reaction to changes in neighbors' tax policy. I also apply two weighting schemes of neighbors to validate the findings. A two-period structural model with a saving decision is developed to explain this result. The model features a capital dilution effect which is also tested empirically in this paper.
Working Papers:
History-Dependent Capital Taxation
This paper analyzes the tax policy of each individual state government. Empirical evidence implies that tax rates are history-dependent. This paper provides an alternative explanation for a nonzero tax rate on capital, reexamining Ramsey's (1927) rule. Due to a lack of commitment power from government, households form adaptive expectations on the capital tax rate. The equilibrium capital tax rate is thus history-dependent with a balanced-budget requirement on state governments. The investment decision combines income and substitution effects, and the U.S. states differ on investment sensitivity to capital tax rates. This paper then provides empirical findings on investment sensitivity for each state, and then a structural model is applied to replicate the empirical findings of both the level and pattern of historical capital tax rates at the state level. The simulated results qualitatively match the empirical evidence observed across 50 states.
Foreign Direct Investment Cycles and Intellectual Property Rights in Developing Countries (coauthored with Huanxing Yang)
This paper develops a quality ladder model in which the technology gap between the North and the South is endogenously determined. Foreign direct investments (FDI) occur cyclically: New FDI arrives if and only if the technology gap reaches some threshold. Stronger intellectual property rights (IPR) in the South discourage imitation and reduce the FDI cycle length. A smaller market size and more imitating firms in the South tend to enlarge the FDI cycle length. The social welfare of the South is decreasing in the FDI cycle length, but is decreasing in IPR strength given cycle length. The optimal IPR strength balances these two effects, and it is non-monotonic in market size and increasing in the number of imitating firms.
History-Dependent Capital Taxation
This paper analyzes the tax policy of each individual state government. Empirical evidence implies that tax rates are history-dependent. This paper provides an alternative explanation for a nonzero tax rate on capital, reexamining Ramsey's (1927) rule. Due to a lack of commitment power from government, households form adaptive expectations on the capital tax rate. The equilibrium capital tax rate is thus history-dependent with a balanced-budget requirement on state governments. The investment decision combines income and substitution effects, and the U.S. states differ on investment sensitivity to capital tax rates. This paper then provides empirical findings on investment sensitivity for each state, and then a structural model is applied to replicate the empirical findings of both the level and pattern of historical capital tax rates at the state level. The simulated results qualitatively match the empirical evidence observed across 50 states.
Foreign Direct Investment Cycles and Intellectual Property Rights in Developing Countries (coauthored with Huanxing Yang)
This paper develops a quality ladder model in which the technology gap between the North and the South is endogenously determined. Foreign direct investments (FDI) occur cyclically: New FDI arrives if and only if the technology gap reaches some threshold. Stronger intellectual property rights (IPR) in the South discourage imitation and reduce the FDI cycle length. A smaller market size and more imitating firms in the South tend to enlarge the FDI cycle length. The social welfare of the South is decreasing in the FDI cycle length, but is decreasing in IPR strength given cycle length. The optimal IPR strength balances these two effects, and it is non-monotonic in market size and increasing in the number of imitating firms.