NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Xiao Yu Wang

Department of Economics
Duke University
213 Social Sciences Building
Box 90097
Durham, NC 27708
Tel: 919/660-1814

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NBER Program Affiliations: DEV
NBER Affiliation: Faculty Research Fellow
Institutional Affiliation: Duke University

NBER Working Papers and Publications

February 2016The Limits of Meritocracy: Screening Bureaucrats Under Imperfect Verifiability
with Juan Carlos Suárez Serrato, Shuang Zhang: w21963
Does bureaucratic ability predict promotion in governments? We show that self-reported performance in enforcing the One Child Policy predicts mayoral promotion in China. However, misreporting handicaps screening—a non-manipulated performance measure does not predict promotion. We show that this is consistent with a model where a government has a meritocratic objective but underestimates the imperfect verifiability of performance, rather than a model where a government is only interested in the illusion of meritocracy. Thus, despite meritocratic intentions, we challenge the notion that a successful promotion system effectively substituted for democratic institutions in explaining Chinese growth.
August 2014Risk Sorting, Portfolio Choice, and Endogenous Informal Insurance
w20429
Heterogeneously risk-averse individuals who lack access to formal insurance build and use relationships with each other to manage risk. I study the formation of these relationships. I show that the composition of equilibrium groups under pairwise matching and when group size is endogenous is determined by a trade-off in expected return and variance of return (captured by the coefficient of variation) across differentially risky productive opportunities, even when output distributions are skewed and have infinitely-many nonzero cumulants. This has important policy implications. For example, a policy which ignores the equilibrium response of informal institutions may exacerbate inequality and hurt most those it intended to help: a reduction in aggregate risk may lead to an increase in risk b...
 
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