Professor Zhao’s Article in VoxChina

Kai ZhaoAn article by Professor Zhao and his coauthor Ayse Imrohoroglu (USC Marshall) has been posted on VoxChina.org, an independent, non-partisan and nonprofit platform recently initiated by Princeton together with a group of scholars from other institutions including UPenn and CUHK (Shenzhen).

In this article, they discuss their research on the determinants of the Chinese saving rates. They focus on the paper “The Chinese Saving Rate: Long-Term Care Risks, Family Insurance, and Demographics”, in which they find that the combination of the risks faced by the elderly and the deterioration of family insurance due to the one-child policy is an important cause of the increase in China’s saving rate since 1980. This paper is the first major paper growing out of their research agenda on the Chinese economy and its implications for the rest of the world.

Professor Zhao’s article can be found at: http://www.voxchina.org/show-3-43.html

Professor Zhao publishes his research in JEDC and JEoA

Kai ZhaoProfessor Kai Zhao has had his paper titled “Social Insurance, Private Health Insurance and Individual Welfare” accepted for publication in the Journal of Economic Dynamics and Control. In this paper, he develops a quantitative dynamic general equilibrium model to evaluate social insurance policies. The main findings of the paper are that means tested social insurance does not only distort saving and labor supply decisions, but also has a large crowding out effect on the demand for private health insurance. However, despite the distorting effects, the net welfare consequence of eliminating social insurance is still negative. In addition, this paper finds that the existence of social insurance as a last resort is a quantitatively important reason why many Americans choose to be uninsured.

Professor Zhao and his coauthor Ayse Imrohoroglu (USC Marshall) have their paper titled “Intergenerational Transfers and China’s Social Security Reform” accepted for publication in the Journal of the Economics of Ageing. This paper grew out of their research agenda on the Chinese economy and its implications for the rest of the world. In it, they find that a model with two-sided altruism is preferred to a standard pure life-cycle model for studying social security reforms in China due to the prevalence of intergenerational links. They show that the implications of several reforms are quantitatively different from what have been found in existing studies using pure life-cycle models.

Professor Zhao’s research can be found at his personal webpage: https://sites.google.com/site/kaijackiezhao/research

Professor Zhao a Panelist on China’s Macroeconomy, Urban Growth and Policy Analysis

Kai ZhaoProfessor Zhao was a panelist at The 9th Annual Conference on China’s Economic Development and the U.S.-China Relationship, held at The George Washington University. The panel was on China’s Macroeconomy, Urban Growth and Policy Analysis.

In it, Professor Zhao discussed his recent research on the Chinese Saving Rate.

The full schedule of the conference can be found online at:


Professor Zhao Presents His Research at the St. Louis Fed

Kai ZhaoProfessor Zhao presented his research on the impact of health insurance policies on aggregate labor supply as part of the 2016 Seminar Series at the St. Louis Fed, on May 4, 2016.

In his research, he investigates whether or not the different health insurance policies in the United States and Europe can explain the fact that Americans work more hours than Europeans.

For more information, see the St. Louis Fed website.

Professor Kai Zhao publishes in Journal of Monetary Economics

Professor Kai (Jackie) Zhao has had his paper “Social Security and the Rise in Health Spending” accepted for publication in the Journal of Monetary Economics.

In a quantitative model of Social Security with endogenous health, I argue that Social Security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high. I show by using computational experiments that the expansion of US Social Security can account for over a third of the dramatic rise in US health spending from 1950 to 2000. In addition, Social Security has a spill-over effect on Medicare. As Social Security increases health spending, it also increases the payments from Medicare, thus raising its financial burden.

Congratulations, Professor Zhao!

Prof. Kai Zhao has paper accepted for publication

sealProfessor Kai Zhao has had his article titled “War Finance and the Baby Boom” for publication in Review of Economic Dynamics.

The abstract of the article is below.

In this paper, I extend the Barro-Becker model of endogenous fertility to incorporate specific fiscal policies and use it to study the effects of the fiscal policy changes following WWII on fertility in the United States. The US government went through large changes in fiscal policy after the beginning of WWII. The marginal income tax rate for an average American jumped from 4% on average before 1940 to approximately 25% during the war and stayed around 20% afterwards. The government debt-GDP ratio jumped from approximately 30% on average before WWII to 108% in 1946 and then dropped gradually in the following two decades to about 30% again at the end of 1960s. I find that the dramatic increase in the marginal income tax rate was an important cause of the postwar baby boom in the US because it lowered the after-tax wage and thus the opportunity cost of child-rearing. I also find that the differential change in taxes by income was an important reason why the baby boom was more pronounced among richer households (as documented by Jones and Tertilt (2008)). Furthermore, I argue that the government’s debt policy may also matter for understanding fertility choices because government debt implies a tax burden on children in the future and thus affects their utility, which is a key determinant of current fertility choice in the Barro-Becker model. The results of a computational experiment show that the US government’s postwar debt policy also contributed to the baby boom, but its quantitative importance is relatively small.

The article in its entirety may be read on the Economics Department’s Working Paper Series.


Kai Jackie Zhao joins Economics Department

Jackie Zhao will be joining the department this Fall as an assistant professor. He graduated with a Ph.D. in Economics from the University of Western Ontario in 2010, and has taught in the Management Program at Western Ontario since that time. He is a macroeconomist who specializes in examining the linkages between the health care market and the macroeconomy. Professor Zhao has published articles in the BE Journal of Macroeconomics and Applied Economic Letters and has several papers under re-submission in the Review of Economic Dynamics and the Journal of Monetary Economics. He won the T. Merritt Brown Thesis Prize for best doctoral dissertation in Economics at Western Ontario and was a visiting scholar at the Federal Reserve Bank of Atlanta in December of 2012.