Three Essays on Development in China

This dissertation studies two important fields of development economics in China, including agriculture (chapters 1 and 3) and education (chapter 2). Guided by theories in learning and decision-making literature, I exploit randomized controlled trial (RCT), lab experiment, and natural experiments to causally estimate the impact of learning (failure) on the productivity-related outcomes./nIn Chapter 1 (coauthored with Binkai Chen and Ao Wang), we investigate agents' simultaneous learning about multiple interacting technologies in the context of fertilizer application in China. We first present experimental evidence that farmers overuse nitrogen fertilizers and underuse phosphorus and potassium fertilizers, relative to the personalized fertilizer recommendations based on plot-level soil analysis. Our first-phase intervention that provides customized fertilizer recommendations leads to reduced nitrogen applications and increased phosphorus/potassium uses. Average yields and revenues are 5-7% higher, while total fertilizer costs remain unchanged. These results are also consistent with a meaningful reduction in greenhouse gas (N2O) emissions linked to nitrogen overuse. Survey data suggest that farmers overestimate the return to nitrogen because it produces a salient signal on crops by increasing greenness, but they underestimate the effectiveness of phosphorus and potassium because their effects are barely observable during the growing stages. Motivated by these facts, we then propose a model of misspecified learning in which agents face two technologies with unknown returns. In learning about the effectiveness of both technologies, the overestimation of the return to the first technology causes an undervaluation and underuse of the second technology. To further test the model, we design a second-phase intervention that distributes leaf color charts to farmers to correct their overestimation of the return to greenness. Consistent with the model prediction, the intervention not only reduces farmers’ nitrogen use immediately, but also induces gradual learning of phosphorus and potassium; the proportion of farmers using phosphorus and potassium both increase by 6 percentage points, relative to 4% and 9% in the control group./nChapter 2 (coauthored with Binkai Chen and Ao Wang) intends to investigate the causal impact of collegiate economics courses on individual learning and decision-making under a development context. By exploiting a Chinese college-admission system that quasi-randomly assigns students to economics/business majors given students' preferences and the College Entrance Exam's cutoff scores for economics/business majors, we are able to isolate the treatment effects of an economics education on students' responses to a decision-making survey. Specifically, we compare the survey responses of students who narrowly meet the cutoffs for the economics/business majors to those who do not and find that students educated in economics/business courses are more likely to be risk neutral and less prone to common biases in probabilistic beliefs. While students in economics/business majors do not show significant changes in social preferences, they appear more inclined to believe that others behave selfishly./nChapter 3 is joint with Qianmiao Chen and Shaoda Wang. We investigate how initial land endowments affect household short/long-term decision-makings on labor allocation when land and labor markets are incomplete. The village-level and family size-based land redistribution scheme before 2003 in China exogenously allocated households with differentiate initial land endowment. Using a rich rural fixed point survey data which tracks roughly 20,000 households during 1986 - 2013, we compare the decision-making of households that had population change before and after the last redistribution, the timeline of which is barely predictable by households. The empirical findings suggest that most of households oversupplied labor in agriculture, which led to the marginal product of labor deviate the optimum. Households with fewer initial land endowments decided to input more intense labor in agriculture, which exacerbated the labor misallocation given pre-existing over-employment issues. After forming the land rental market, households with fewer land endowments per capita rented more land, though more land did not influence household agricultural labor allocation. We then examine the impact of labor market reform on alleviating over-supply of labor. The overall agricultural labor input was reduced by 50-70%./nThe findings in this dissertation can deepen our understanding of agricultural development and education system in China and shed lights on the research on individual decision-making process in other fields of development economics and other countries.

Advisor: Gonzalez-Navarro, Marco