Welcome to my site! I am a Ph.D. candidate in the Department of Economics at U.C. Berkeley. My research focuses on the interaction between the government and firms, with an emphasize on R&D and innovation. I received a Msc. in Econometrics and Mathematical Economics from LSE and a Bachelor in Economics from Nankai University.

I am on the job market in 2020-2021. I am available for interview during the NABE TEC2020 meeting and 2021 ASSA meeting.

Here are my cv and resume


email: junyi.hou [at] econ.berkeley.edu; linkedin


Resource Misallocation in the R&D Sector: Evidence from China (Job Market Paper) (pdf)

Despite the rapid expansion of the R&D sector in China, factor market wedges create considerable welfare loss by misallocating R&D inputs across Chinese firms. Specifically, private firms have worse factor market access than state-owned firms. This disadvantage reduces private innovators' profits when they compete with state-owned incumbents. Thus, the wedge distorts incentives to invest in R&D, lowers aggregate innovation, and leads to slower productivity growth. I develop and structurally estimate an endogenous growth model with a factor market wedge to capture this effect. Removing the wedge increases annual productivity growth by 1.2 percentage points and total welfare by 23%. Compared with the static loss from cross-sectional markup dispersion, the dynamic loss from misallocation in the R&D sector accounts for 90% of the total welfare loss. Distortions to R&D incentives are the primary cause of misallocation in the R&D sector. These distortions are quantitatively important in explaining the welfare loss.

Political Connections, Financial Frictions, and Allocative Efficiency (draft available upon request)

I estimate the effect of the 2004 Chinese banking reform on allocation of credits. Before the reform, connections to the government give unproductive state-owned firms preferential access to credit from state-owned banks. The banking reform changes the incentive structure of the banks, making them profit-oriented and thus limits the role government connections play in loan allocation. Using exogenous variations in the numbers of state-owned firms resulting from a high-profile national defense project, I find that the banking reform improves allocative efficiency more in cities with more state-owned firms. This improvement is driven by extending credit access to more productive private firms who lack access to credit prior to the reform. With the newly acquired credit, they invest more and grow faster. A back-of-the-envelope calculation shows that the banking reform leads to 4% gain in sectoral TFP among the most affected cities.

Redistribution Policy in Authoritarian Regimes: Evidence from China (draft available upon request)

This paper provides causal evidence on the relationship between political power and redistribution policies in China. Specifically, I exploit the spatial discontinuity at the boundaries of Soviet Zones that separate regions controlled by the Chinese Communist Party (CCP) and the rivaling Kuomintang during the First Chinese Civil War. I find that counties controlled by the CCP in the past receive 20% more targeted fiscal transfers from the central government today. Since Soviet Zone boundaries are determined by uncertain results of military operations, I can attribute the difference in fiscal support from the central government to differences in counties' Soviet Zone status. I argue that supporting Communist-controlled counties helps the CCP to maintain its political legitimacy as the ruling party of China, while supporting Kuomintang-controlled counties do not. Therefore, favoritism towards Soviet Zones originates from constraints and incentives the CCP faces. Furthermore, this favoritism generates efficiency loss: despite receiving extra resources from the central government, favored counties do not exhibit faster economic growth. The lackluster outcome is driven by misallocation of local fiscal resources: local government in the favored counties have higher per-capita administrative expenditures and have more people on government payrolls. On the other hand, they do not spend more to support infrastructure, education, or agriculture. My results suggest that political favoritism can be an important source of resource misallocation.