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Pricing the priceless: the financing cost of biodiversity conservation
With Fukang Chen, Lin William Cong, Haoyu Gao, Jacopo Ponticelli.
Selected by various conferences, including:
2024 NBER Chinese Economy Working Group Meeting (Fall)
2024 PRI Academic Network Conference
2024 SFS Cavalcade Asia-Pacific
Abstract: The pace of biodiversity loss requires drastic shifts in conservation efforts that carry substantial costs. We investigate how the financial market prices such conservation costs exploiting the "Green Shield Action," a major regulatory initiative launched by the Chinese central government in 2017 to enforce biodiversity preservation rules in national nature reserves. We document that, while improving local biodiversity, the initiative led to a significant increase in bond yields for Chinese municipalities with national nature reserves. Evidence suggests that these effects are driven by expected increases in transition costs resulting from shutting down illegal economic activities within reserves and local public spending on biodiversity following the initiative. Overall, our results indicate that investors show little consideration beyond financial payoffs towards endeavors counteracting biodiversity loss.
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Regulating Fishing in the Yangtze for Biodiversity Unintentionally Benefited Science Research
With Lin William Cong, Haoyu Gao, G. Andrew Karolyi, Hui Wang.
Abstract: The first strict seasonal fishing ban along the Yangtze River in 2003 has since successfully preserved fishery resources as originally intended. Its broader socioeconomic implications, however, remain unknown. Exploiting the setting with a difference-in-differences design, we provide the earliest causal evidence of how local biodiversity conservation policies affect scientific research, which hinges on having abundant and diverse natural resources as research materials. Specifically, the ban led to a drastically greater increase in inquiry and public funding for research about Yangtze River fish, relative to that about non-Yangtze-River (which also trended up), with scientific outputs manifold greater in both quantity (i.e., number of publications) and impact (i.e., citations, books, patents, awards, and public attention). We demonstrate that the relative increase of biological research materials, rather than other attention-based or policy-based channels, drives the results. Preserving nature turns out to be not only ecological deliberation and duty but also a strategic investment in the future of science and innovation.