We study the impact of China’s new rural pension program on promoting migration of labor and off-... more We study the impact of China’s new rural pension program on promoting migration of labor and off-farm employment. We use this new pension program for a regression discontinuity analysis. The results reveal a perceptible difference in household behavior at the age of pension eligibility: after the older parent receives a pension, the adult children are more likely to take an off-farm job and to migrate to other areas in search of such jobs. The pension’s effect on migration is greater among adult children with a parent in poor health; pension-eligible elderly are also more confident that they will be able to be hospitalized if recommended by a doctor, even though self-assessed health and health insurance coverage do not change at the pension-eligible age threshold. These abrupt changes in household behavior at the cutoff suggest that these households are credit constrained. JEL classification: H23, H31, H55, I38, J22, O15
We propose the double robust Lagrange multiplier (DRLM) statistic for testing hypotheses specifie... more We propose the double robust Lagrange multiplier (DRLM) statistic for testing hypotheses specified on the pseudo-true value of the structural parameters in the generalized method of moments (GMM). The pseudo-true value is defined as the minimizer of the population continuous updating objective function of Hansen et al. (1996) and equals the true value of the structural parameter in the absence of misspecification. The (bounding) χ limiting distribution of the DRLM test is robust to both misspecification and weak identification of the structural parameters, hence its name. Weak identification robust tests are size distorted in case of misspecification while misspecification tests are virtually powerless under weak identification, see Gospodinov et al. (2017), so the DRLM test removes an important obstacle for conducting reliable inference in these empirically relevant settings. To emphasize its importance for applied work, we use the DRLM test to analyze data from Card (1995), Adrian...
Mimicking portfolios of macroeconomic factors are commonly constructed by projecting these factor... more Mimicking portfolios of macroeconomic factors are commonly constructed by projecting these factors on a set of base assets. Current understanding is that compared to macroeconomic factors, their mimicking portfolios contain more relevant information and less noise for asset pricing. In this paper, we show that when factors are in fact useless, their constructed mimicking portfolios may still be spuriously favored by asset pricing tests in the Fama and MacBeth (1973) two-pass procedure. Our findings imply that empirical results based on mimicking portfolios of macroeconomic factors need to be taken with caution, since mimicking portfolios of useless or nearly useless factors may similarly yield such results. JEL Classification: G12
We study the impact of China’s new rural pension program on promoting migration of labor and off-... more We study the impact of China’s new rural pension program on promoting migration of labor and off-farm employment. We use this new pension program for a regression discontinuity analysis. The results reveal a perceptible difference in household behavior at the age of pension eligibility: after the older parent receives a pension, the adult children are more likely to take an off-farm job and to migrate to other areas in search of such jobs. The pension’s effect on migration is greater among adult children with a parent in poor health; pension-eligible elderly are also more confident that they will be able to be hospitalized if recommended by a doctor, even though self-assessed health and health insurance coverage do not change at the pension-eligible age threshold. These abrupt changes in household behavior at the cutoff suggest that these households are credit constrained. JEL classification: H23, H31, H55, I38, J22, O15
We propose the double robust Lagrange multiplier (DRLM) statistic for testing hypotheses specifie... more We propose the double robust Lagrange multiplier (DRLM) statistic for testing hypotheses specified on the pseudo-true value of the structural parameters in the generalized method of moments (GMM). The pseudo-true value is defined as the minimizer of the population continuous updating objective function of Hansen et al. (1996) and equals the true value of the structural parameter in the absence of misspecification. The (bounding) χ limiting distribution of the DRLM test is robust to both misspecification and weak identification of the structural parameters, hence its name. Weak identification robust tests are size distorted in case of misspecification while misspecification tests are virtually powerless under weak identification, see Gospodinov et al. (2017), so the DRLM test removes an important obstacle for conducting reliable inference in these empirically relevant settings. To emphasize its importance for applied work, we use the DRLM test to analyze data from Card (1995), Adrian...
Mimicking portfolios of macroeconomic factors are commonly constructed by projecting these factor... more Mimicking portfolios of macroeconomic factors are commonly constructed by projecting these factors on a set of base assets. Current understanding is that compared to macroeconomic factors, their mimicking portfolios contain more relevant information and less noise for asset pricing. In this paper, we show that when factors are in fact useless, their constructed mimicking portfolios may still be spuriously favored by asset pricing tests in the Fama and MacBeth (1973) two-pass procedure. Our findings imply that empirical results based on mimicking portfolios of macroeconomic factors need to be taken with caution, since mimicking portfolios of useless or nearly useless factors may similarly yield such results. JEL Classification: G12
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