Shihe Fu

The Effect of Beijing’s Driving Restrictions on Pollution and Economic Activity

We evaluate the environmental and economic effects of Beijing’s driving restrictions. Based on daily data from multiple monitoring stations, air pollution falls 19% during every-other-day and 8% during one-day-per-week restrictions. Based on hourly viewership data, the number of television viewers during the restrictions increases 1.7 to 2.3% for workers with discretionary work time but is unaffected for workers without, consistent with the restrictions’ higher per-day commute costs reducing daily labor. Causal effects are identified from both time-series and spatial variation in air quality and intra-day variation in viewership. We provide possible reasons for the policy’s success, including evidence of high compliance based on parking garage entrance records. Our results contrast with previous findings of no pollution reductions from driving restrictions and provide new evidence on commute costs and labor supply.

Wage Premia in Employment Clusters: How Important Is Worker Heterogeneity?

This article tests whether the correlation between wages and concentration of employment can be explained by unobserved worker productivity. Residential location is used as a proxy for unobserved productivity, and average commute time to workplace is used to test whether location-based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census find that estimates of agglomeration wage premia within metropolitan areas are robust to comparisons within residential location and that estimates do not persist after controlling for commuting costs, suggesting that the productivity differences across locations are due to location, not individual unobservables.

Searching for the Parallel Growth of Cities in China

Based on the parallel growth implications of the four urban growth theories (endogenous growth theory, random growth theory, hybrid growth theory and locational fundamentals theory), this paper uses Chinese city size data from 1984 to 2006 and time-series econometric techniques to test for parallel growth. The results from various types of stationarity tests show that city growth is generally random. Conditioning on growth trend and structural change, certain groups of cities with common location-specific characteristics, such as a similar natural resource endowment or policy regime, grow parallel in the long run, suggesting that locational fundamentals may have a persistent impact on city growth.

Race-Specific Agglomeration Economies: Social Distance and the Black-White Wage Gap

We present evidence that benefits from agglomeration concentrate within race. Cross-sectionally, the black-white wage gap increases by 2.5% for every million-person increase in urban population. Within cities, controlling for unobservable productivity through residential-tract-by-demographic indicators, blacks’ wages respond less than whites’ to surrounding economic activity. Individual wage returns to nearby employment density and human capital rise with the share of same-race workers. Manufacturing firms’ productivity rises with nearby activity only when they match nearby firms racially. Weaker cross-race interpersonal interactions are a plausible mechanism, as blacks in all-white workplaces report less closeness to whites than do even whites in all-nonwhite workplaces.

Measuring the Stringency of Land-Use Regulation: The Case of China's Building-Height Limits

This paper develops a new approach for measuring the stringency of a major form of land use regulation, building height restrictions, and applies it to an extraordinary data set of land-lease transactions from China. Our theory shows that the elasticity of land price with respect to the floor area ratio (FAR), a building height indicator, is a measure of the regulations stringency (the extent to which FAR is kept below the free-market level). Using a national sample, estimation allowing this elasticity to be city-specific shows variation in the stringency of FAR regulation across Chinese cities. Single-city estimation for Beijing shows that stringency varies with site characteristics.

Commute Costs and Labor Supply: Evidence from a Satellite Campus

Whether, and how much, increased commute costs decrease labor supply is important for transport policy, city growth, and business strategies. Yet empirical estimates are limited and biased downward due to endogenous choices of residences, workplaces, commute modes, and wages. We use the transition of undergraduate teaching from a Chinese university’s urban to suburban campus and ten years of complete course schedule data to test how teachers’ labor supply responds to a longer commute. Exogeneity is ensured because few faculty change residences, nearly all faculty ride a free shuttle bus, and we control for wage changes. Employing a regression discontinuity design, the 1.0 to 1.5-hour (40-kilometer) increase in round-trip commute time reduces annual undergraduate teaching by 56 hours or 23%. Consistent with higher per-day commute costs annual teaching days decrease by 27 while daily teaching hours increase by 0.49. Difference-in-difference estimates using faculty-specific changes in commute time corroborate these results ruling out aggregate confounders. Faculty substitute toward graduate teaching but decrease research output. The university accommodated the reduced teaching time primarily by increasing class sizes implying that education quality declined.

Sexual Orientation and Neighborhood Quality: Do Same-Sex Couples Make Better Communities?

This study provides an initial empirical analysis on identifying the general relationship between housing values and the spatial distribution of same-sex couples across the U.S. The paper uses the 1990 and 2000 census 5% Public Use Microdata Samples and introduces the gay index into the social-amenity-based hedonic housing models. The results show significant correlation between the spatial concentration of same-sex couples and housing values; furthermore, housing values are higher in a city where the proportion of same-sex couples was higher a decade ago, suggesting that same-sex couples make better communities.

Corporate equality and equity prices: Doing well while doing good?

Two competing hypotheses, value enhancing and value discounting, state that implementing socially responsible corporate policies can have positive or negative effects on firm value. This paper tests how a specific type of social responsibility–corporate equality–affects firm value. Corporate equality is measured by the corporate equality index (CEI). This index quantifies how companies treat their gay, lesbian, bisexual, and transgender employees, consumers, and investors. Using a sample of CEI-rated, publicly traded firms in the U.S., we find that, between 2002 and 2006, firms with a higher degree of corporate equality have higher stock returns and higher market valuation (Q). We provide suggestive, causal evidence that corporate equality enhances firm value through better performance in product markets and labor markets: Firms with a higher degree of corporate equality also tend to have larger sales, higher profit margins, higher employee productivity, and attract more employees. These results are robust to the inclusion of unobserved firm-heterogeneities. Overall, our results support the value-enhancing effects of corporate social responsibility.

Searching for the Parallel Growth of Cities

Three urban growth theories predict parallel growth of cities. The endogenous growth theory predicts deterministic parallel growth; the random growth theory implies that city growth follows Gibrat’s law with a steady-state distribution; and the hybrid growth theory suggests the co-movement of random city growth. This paper uses the Chinese city size data from 1984-2006 and time series econometric techniques to test for parallel growth. The results from various types of stationarity tests on pooled heterogeneous cities show that city growth is random. However, once growth trend and structural change are taken into account, certain groups of cities with common group characteristics, such as similar natural resource endowment or policy regime, grow parallel.

Air Quality and Manufacturing Firm Productivity: Comprehensive Evidence from China

An emerging literature estimates air pollution’s effects on productivity but only for small groups of workers of particular occupations or firms. To provide more comprehensive estimates necessary for nationwide policy analysis, we estimate effects for a nationally representative sample of all of China’s manufacturing firms from 1998 to 2007 and capture all channels by which pollution influences productivity. We use thermal inversions as an instrument to estimate the causal effect of pollution on productivity. A one μg/m3 decrease in PM2.5 increases productivity by 0.82% with an elasticity of -0.44. Firms respond by hiring more workers attenuating the elasticity of output with respect to pollution to -0.17. Using the differential effect of China’s accession into the WTO on coastal versus inner regions, we estimate the causal effect of output on pollution (elasticity of 1.43) to simulate the dynamic, general-equilibrium effects of PM2.5 yielding an elasticity of -0.31. Lowering PM2.5 by 1% nationwide through methods other than reducing manufacturing output would generate annual productivity increases of CNY 39.7 thousand for the average firm and CNY 6.3 billion or 0.043% of GDP across all firms.