Origins of Papers

Recently, I came up with several unexpected links between the books or newspapers I am (or have been) exposed to and some fascinating papers published in top economic journals. In this blogpost, I will record the main ideas of those economic papers and their respect highly relevant alternative information sources. As such links are highly likely to accumulate in the future, this blogpost will be updated now and then.

By summarizing the information sources which might motivate or inspire top journal articles, one might learn not only how to discover innovative research topics but also how to transfer his/her eureka moment to a solid economic paper.

Please note that the so-called “origin” in this blogpost is not necessarily the actual sources that motivated the papers. What I am trying to do is just to find out the link between the papers and alternative information sources which have conveyed similar insights before the papers are published.

1. Shrink of Upward Mobility and Would-be Elites’ Revolution Participation

Paper: Bai and Jia (2016, Econometrica)

This paper studies how the abolition of an elite recruitment system - China’s civil exam system that lasted over 1,300 years - affects political stability. The authors found the revolution participation probability is higher in prefectures with higher quotas on the entry-level exam candidates. Patterns in the data appear most consistent with the interpretation that in regions with higher quotas per capita under the exam system, more would-be elites were negatively affected by the abolition. These would-be elites could have been negatively affected in two major ways: abolition changed their prospect of upward mobility and/or gave them more time to rebel (e.g., decreased their opportunity costs). Although both channels could be at work, analysis of the variation in prefecture-specific returns from the exam suggests that the impact of quotas post abolition was amplified when these returns were higher, which is more consistent with the prospects channel.

Origin: The May Fourth Movement (Chow, 1960)

“The abolition of the traditional civil service examination system in 1905 left the youth uncertain regarding their postgraduate professional prospects of which the major goal had been and still was conventionally, to enter government as officials. The fact that this personal frustration was offset by the opportunity of being powerful as leaders of mass action tended to make Chinese students, as Bertrand Russell observed, reformers or revolutionaries instead of, as was the case with some highly educated youths of the West, cynics”.¹

Figure 1: The May Fourth Movement (Chow, 1960)

2. Credit Crunch and Social Unrest

Paper: Braggion, Manconi, and Zhu (2020, JFE)

Employing the 1933 U.S. Silver Purchase program acts as a shock to Chinese bank lending, this paper got a pretty exogenous setting for credit crunch. Empirical results suggest that the exogenous credit crunch could lead to material social unrest. Specifically, firms borrowing from banks with higher exposure to the Silver Purchase shock and thus more reluctant to issue debts are more likely to experience labor unrests and anti-regime political penetration among their workers.

Origin: China during the Great Depression (Shiroyama, 2009)

" The Great Depression (1929-1933) was a watershed in modern China. China was the only country on the silver standard in an international monetary system dominated by the gold standard. Fluctuations in international silver prices undermined China’s monetary system and destabilized its economy. "

In her book, Shiroyama firstly explains the intricacies of the silver standard, which China did not abandon until late 1935, whereas other Asian countries had switched to gold-based currencies by the 1910s. Shiroyama then argues persuasively that the depreciation of world silver prices during the 1920s greatly improved China’s terms of trade and was a boon to its farmers and emergent industrialists. However, the price of silver began to appreciate on world commodity markets as of 1931, and spiked up sharply in the lead-up to Roosevelt’s Silver Purchase Act in 1934. By then, dearer silver and slumping demand in the West had hit Chinese exports and dampened the price of domestic produce. The skyrocketed silver price is the direct driving force for the situation where Chinese banks continuingly lose silver reserves and thus become significantly more conservative to issue credits.

Figure 2: China during the Great Depression (Shiroyama, 2009)

3. Culture and Self-Control

Paper: Chen (2013, AER)

Based on whether a language grammatically mark future events, the author classify world languages into two categories: weak-FTR and strong-FTR. FTR refers to future-time reference.

This paper documents that people speaking in a distinct way about future events from present ones (proxied by the grammar of people’s native language) are less likely to take future-oriented actions (e.g., save more, retire with more wealth, smoke less, less obese, etc).

The main argument is that strong FTR languages induce people to feel more distant about the future and thus have bigger discount rates, which makes them to place more weights on their current utility rather the future utility. Using the economic language, the author phrases the above idea as strong FTR languages leads to:

• Higher discount rates
• and Less precise beliefs about the profits of saving

Origin: The Willpower Instinct (McGonigal, 2011)

“To what extent current happiness is more important than future happiness for you? People who discount more on their future rewards are more likely to encompass problems with self-control. They are more likely to smoke, drink, consume drugs, have drunk driving, but less likely to save for retirement. They also have a higher tendency to procrastinate. They seem to care more about the present - if the present is more important than the future, there is no need to delay gratification.”

Figure 3: The Willpower Instinct (McGonigal, 2011)

To be continued

References

Bai, Y., Jia, R. (2016). Elite recruitment and political stability: the impact of the abolition of China’s civil service exam. Econometrica, 84(2), 677-733.

Braggion, F., Manconi, A., Zhu, H. (2020). Credit and social unrest: Evidence from 1930s China. Journal of Financial Economics, 138(2), 295-315.

Chen, M. K. (2013). The effect of language on economic behavior: Evidence from savings rates, health behaviors, and retirement assets. American Economic Review, 103(2), 690-731.

Chow, Tse-Tung. (1960). The May Fourth Movement: Intellectual Revolution in Modern China. Harvard University Press.

McGonigal, K. (2011). The willpower instinct: How self-control works, why it matters, and what you can do to get more of it. Penguin.

Shiroyama, T. (2009). China During the Great Depression: Market, State, and the World Economy, 1929–1937.

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