Research

We analyze the segregation in college admission system of China by linking data of all college admitted students between 2006 and 2011 to county level income and population data. We exploit geographic variation of income and test performance to estimate with in-county inequality. We found college admission rate is very equal across all income groups. Students from low income regions are disadvantaged in going to the several top colleges, but the disadvantage nearly disappears if we extend coverage to all elite colleges (around top 100). For the several top colleges, the income segregation is largely driven by preference towards local students. The updated estimates of inequality is very close to that using county level data directly, implying that most inequality arises from differences across geographic regions.

We examine the role of green finance in an economy with both political and financial frictions. Investors with heterogeneous preferences for carbon reduction (“green” and “brown” investors) voluntarily contribute to environmentally-focused financial intermediaries (“green” funds) and also participate in political bargaining over environmental policy. Firms with heterogeneous production technologies choose carbon emission and output levels to maximize their market value. Green funds increase the transparency of firm emission levels, improve coordination amongst investors, and ultimately segment investor portfolios along their environmental preferences. This can increase demand for green stocks and so may incentive firms to reduce carbon emissions. However, it also potentially reduces political cooperation because green investors have a better outside option and brown investors are more exposed to environmental regulation. Risk in the political bargaining process leads to complex hedging behaviour by investors in the green finance market.