A critical barrier to labor mobility arises from institutional constraints that im-pose discriminatory costs on migrants. Using China’s hukou system as a case study,we construct a novel, outcome-based measure of mobility frictions that infers thesediscriminatory costs. We document a systematic relationship between our frictionmeasure, migrants’ decisions to leave behind families (“partial migration”), remit-tances, and expenditure patterns. Our estimated spatial general equilibrium modelencompasses these features and examines how mobility frictions interact with tradeliberalization to shape migration, inequality, and welfare. Trade-exposed regionsbenefft from attracting migrants, while high-friction regions experience muted laborreallocation and smaller welfare gains.

We study asset demand and price formation in a two-asset rational expectations equilibrium with narrow thinking, where traders imperfectly coordinate decisions across assets under non-nested price information. When the price of one asset increases, cross-asset inference from prices reduces expected demand for the other asset, which feeds back into the demand response for the original asset. Narrow thinking weakens internal coordination and amplifies reliance on price-based inference. As a result, more severe narrow thinking leads to higher own-price elasticities. The model delivers sharp implications for market liquidity and price informativeness in the presence of bounded rationality.

This paper introduces reinforcement learning to examine the effect of trading on noise in a dynamic limit order market equilibrium. It shows that intensive noise liquidity provision (consumption) increases speculators' liquidity consumption (provision), improving (reducing) market liquidity. Channeled by uninformed chasing and informed aggressive liquidity provision, the increasing noise liquidity provision and consumption, respectively, improve price efficiency, generating a U-shaped price efficiency to the noise trading uncertainty on liquidity provision and consumption. Associated with a hump-shaped (U-shaped) profitability for the informed (uninformed) at a U-shaped noise trading cost in the noise trading uncertainty, this implies that, at increasing noise trading cost, intensive noise liquidity provision improves market liquidity, price efficiency, order profitability of informed traders, and reduces the loss, even makes profit, for uninformed traders.

In this paper, we present a rational expectation equilibrium model in which fundamental and ESG traders hold heterogeneous valuations towards the risky asset. Trading occurs based on private information and price signal which is determined by a weighted combination of these diverse valuations. Our findings indicate that higher level of ESG rating disagreement increases ESG information uncertainty, thereby reducing trading intensity among ESG traders and attenuating the price informativeness about ESG. We further discover that allowing fundamental traders access to ESG information increases the coordination possibilities in the financial market, leading to multiple equilibria exhibiting characteristics of strategic substitutability and complementarity. Additionally, through measuring the ESG rating disparities among four prominent agencies in China, we deduce that ESG rating disagreement negatively impacts price informativeness by decreasing stock illiquidity.

We combine a new collection of microdata from China with a natural policy experiment to investigate the extent to which reductions in rural-urban migration barriers affect flows of trade and investments between cities and the countryside. We find that increases in worker eligibility for urban residence registration (Hukou) across origin-destination pairs increase rural-urban exports, imports, capital inflows and outflows, both in terms of bilateral transaction values and the number of unique buyer-seller matches. To quantify the implications at the regional level, we interpret these estimates through the lens of a spatial equilibrium model in which migrants can reduce buyer- seller matching frictions. We find that a 10% increase in a rural county’s migration market access on average leads to a 1.5% increase in the county’s trade market access and a 2% increase in investment market access. In the context of China’s recent Hukou reforms, we find that these knock-on effects on market integration were on average larger among the urban destinations compared to the rural origins, reinforcing incentives for rural-urban migration.

This paper develops an SOE (small open economy) dynamic general equilibrium model to study the impact of climate change on the current account. By calibrating the model to Chinese economy, we find the following results. First, the current account-output ratio improves in the first decade following an increase in global temperature caused by climate change. It then deteriorates in the following next three decades. Second, the overall current account-output ratio dynamics in response to climate change is neither affected by the types and stringency of climate policies, nor by the levels and growth rates of temperature increases. Third, the impact of an increase in temperature from 1.28 ℃ to 1.5 ℃ relative to the pre-industrial periods (1850-1900) on the current account-output ratio is equivalent to that of an approximate 0.14% permanent decline in TFP. Finally, although the current account-output ratio is likely to deteriorate in the first year when temperature increases instantly, it might not be true if the coefficient of relative risk aversion, or interest rate premium is larger, or debt sensitivity to interest rate is smaller.

We develop a model economy with active financial markets in which a policymaker's adoption of a gradualistic approach constitutes a Bayesian Nash equilibrium. In our model, the ex ante policy proposal influences the supply side of the economy, while the ex post policy action affects the demand side and shapes market equilibrium. When choosing policies, the policymaker internalizes the impact of her decisions on the precision of the firm-value signal. Moreover, financial markets provide a price signal that informs the government. The policymaker learns about the productivity shocks not only from firm-value performance signals but also from financial market prices. Access to information through both channels creates strong incentives for the policymaker to adopt a gradualistic approach in a time-consistent manner. Smaller policy steps yield more precise information about the productivity shock. These results hold robustly for both exogenous and endogenous information models.

We leverage machine learning to introduce belief dispersion measures to distinguish different opinion (DO) and information asymmetry (IA). Our measures align with the human-based measure and relate to economic outcomes in a manner consistent with theoretical prediction: DO positively relates to trading volume and negatively linked to bid-ask spread, whereas IA shows the opposite effects. Moreover, IA negatively predicts the cross-section of stock returns, while DO positively predicts returns for underpriced stocks and negatively for overpriced ones. Our findings reconcile conflicting disagree-return relations in the literature and are consistent with Atmaz and Basak (2018)’s model. We also show that the return predictability of DO and IA stems from their unique economic rationales, underscoring that components of disagreement can influence market equilibrium via distinct mechanisms.

We (re)evaluate the general-equilibrium effects of (environmental) policies from the perspectives of input-output networks and firm dynamics and heterogeneity. Using China’s carbon emission trading system (ETS) as an example, we find that ETS leads to more patent applications, especially the ones associated with low-carbon technologies in the targeted sectors. The effects are muted at the firm level due to selection effects, whereby only larger firms are significantly and positively affected. Meanwhile, larger firms occupy a small share in number but a large share of aggregate outcomes, contributing to the discrepancy between the effects of ETS at the individual firm and aggregate sector levels. The effects also diffuse in input-output networks, leading to more patents in upstream/downstream sectors. We build and estimate the first firm dynamics model with input-output linkages and regulatory policies in the literature and conduct policy experiments. ETS’s effects are amplified given input-output networks.

The e-CNY, with its information transparency and financial inclusion, activates an innovative solution to cure the financing obstacles among the small and medium enterprises in China. The research establishes a game model between enterprises and commercial banks embedded in information asymmetry, and incorporates the e-CNY payment choice within the framework to analyse the cure effect of e-CNY on enterprise financing obstacles. With equilibrium results calculated, it simulates the outcomes of changing parameters on the behaviours of enterprises and banks. The findings involve that, based on the incremental utility of e-CNY and subsidies attached, e-CNY is preferred in transaction, reducing the bad debt risk caused by misalignment when both achieving excess returns. The People’s Bank of China must strengthen a more transparent publicity of e-CNY and structure an inclusive system of financial regulation to well use digital currency and realise high-quality socio-economic development.