Research

Research by Lieyuan Yang on fiscal policy, regional redistribution, economic growth, and GDP measurement.

Research

Working Papers

Growth with Regional Redistribution Job Market Paper · June 2026 Links. Draft | Slides

Abstract. This paper studies interregional fiscal redistribution and regional economic growth. In China, the central government takes substantial tax revenue from local governments and reallocates resources across regions. I model this redistribution as a progressive tax on local fiscal revenue and document a sharp rise in progressivity. Exploiting the 2002 tax reform in an event-study design, I show that the increased central tax claims reduced local infrastructure investment and slowed regional growth. To quantify the effects of increased redistribution, I develop a general equilibrium growth model featuring local fiscal policy under progressive redistribution. Rising progressivity accounts for 43% of the decline in the cross-provincial variance of log GDP per capita, while reducing aggregate TFP by 0.5 percentage points. Finally, I use this framework to characterize the determinants of optimal progressivity.

Presentations. Chinese Economists Society 2026 North America Annual Conference; 2025 Econometric Society European Winter Meeting (declined due to a scheduling conflict).

Keywords. Redistribution, tax progressivity, fiscal policy, regional economic growth, capital misallocation, and the Chinese economy.

A Politico-Growth Theory of Local Fiscal Policy and Regional Redistribution October 2025 Links. Draft

Abstract. This paper proposes a politico-economic theory of regional dynamics in an environment comprising a set of small open economies, where local governments allocate fiscal spending between public goods and investment without commitment and the central government persistently redistributes fiscal resources across regions. I analytically characterize local fiscal policy, aggregate dynamics, and the steady state under a progressive redistribution scheme. The framework is used to compute the time path of optimal progressivity subject to political implementability constraints.

Keywords. Fiscal policy, progressivity, regional redistribution, political economy, economic growth, local government, and public investment.

GDP Misreporting and Economic Convergence June 2026 Links. Draft

Abstract. I use nighttime lights and electricity consumption to detect GDP misreporting and reassess economic convergence. In China, official data imply an annual convergence rate of 2.1% after the 2000s, whereas the constructed measure implies 1.7%. After the 2002 tax reform, the central government expanded redistribution from high- to low-income regions, increasing the cost of overreporting and lowering GDP overstatement by rich provinces. This pattern accounts for artificially rapid convergence in official statistics. Extending the analysis globally, I find stronger evidence of convergence in Africa and the Americas once growth is better measured.

Keywords. Economic convergence, GDP misreporting, nighttime lights, electricity consumption, regional redistribution, and political incentives.