Faculty & Research

Zheng Michael Song

Associate Professor of Economics

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5807 South Woodlawn Avenue
Chicago, IL 60637

Zheng (Michael) Song is Associate Professor of Economics at Booth. Prior to joining Booth he served as Assistant Professor in the department of economics at the Chinese University of Hong Kong and as a research fellow in the school of economics at Fudan University in Shanghai, China.

Song studies macroeconomics, Chinese economy, and political economy. He has published papers on leading journals including American Economic Review and Econometrica.

With experience teaching at both the undergraduate and graduate levels, Song has taught courses such as Advanced Macroeconomics, Chinese Economy, and Dynamic Optimization. At Booth he teaches a course on China.

Song is an associate editor of Journal of European Economic Association and serves as a guess editor of China Economic Review.

Song earned his PhD in economics from the Institute for International Economic Studies, Stockholm University. He also holds an MPhil in economics from the University College London, a MA in economics from Fudan University and a BA in economics from Shanghai Institute for Foreign Trade.


With Kjetil Storesletten and Fabrizio Zilibotti, "Growing like China," American Economic Review (2011).

"Persistent Ideology and the Determination of Public Policies over Time," International Economic Review (2012).

"The Dynamics of Inequality and Social Security in General Equilibrium," Review of Economic Dynamics (2011).

With Kjetil Storesletten and Fabrizio Zilibotti, “Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt,” Econometrica (forthcoming).

For a listing of research publications please visit ’s university library listing page.

New: Sharing High Growth across Generations: Pensions and Demographic Transition in China
Date Posted: Jun  06, 2013
Intergenerational inequality and old-age poverty are salient issues in contemporary China. China’s aging population threatens the fiscal sustainability of its pension system, a key vehicle for intergenerational redistribution. We analyze the positive and normative effects of alternative pension reforms, using a dynamic general equilibrium model that incorporates population dynamics and productivity growth. Although a reform is necessary, delaying its implementation implies large welfare gains

New: Precautionary Corporate Liquidity
Date Posted: Feb  20, 2010
We develop a theory of corporate liquidity demand, capturing the fact that a firm's borrowing capacity depends on news on future investment profitability. In our model, bad news on future investment profitability reduces a firm's borrowing capacity and therefore increases the need for internal finance. Consequently, the firm's cash savings respond negatively to news on future profitability. This negative correlation is strongly supported by our empirical evidence using a combined data set of Com

New: Financial Frictions on Capital Allocation: A Transmission Mechanism of TFP Fluctuations
Date Posted: May  14, 2009
This paper provides a theory of financial frictions as a transmission mechanism for primitive shocks to translate into aggregate TFP fluctuations. In our model, financial frictions distort existing capital allocation across different production units, rather than investment in new capital. News shocks on future technology improvement are introduced as a device to identify TFP fluctuations originating from this mechanism. Our simulation shows that variations in financial frictions in response to

New: Growing Like China
Date Posted: Apr  02, 2009
This paper constructs a growth model that is consistent with salient features of the Chinese growth experience since 1992: high output growth, sustained returns on capital investments, extensive reallocation within the manufacturing sector, falling labor share and accumulation of a large foreign surplus. The theory makes only minimal deviations from a neoclassical growth model. Its building blocks are financial imperfections and reallocation among firms with heterogeneous productivity. Some firm

New: Markovian Social Security in Unequal Societies
Date Posted: Mar  24, 2009
In this paper, we develop a dynamic politico-economic theory of social security to address two questions. First, how is social security sustained? Second, how does inequality affect the size of social security, and can the theoretical predictions be consistent with the observed puzzling relationships between inequality and the size of social security? As a stark framework, our model economy features the absence of altruism, commitment, reputation mechanism and electoral uncertainty. We character

New: The Dynamics of Inequality and Social Security in General Equilibrium
Date Posted: Mar  24, 2009
This paper analyzes the dynamic politico-economic equilibrium of a model where repeated voting on social security and the evolution of household characteristics in general equilibrium are mutually affected over time. In particular, we incorporate within-cohort heterogeneity in a two-period Overlapping-Generation model to capture the intra-generational redistributive effect of social security transfers. Political decision-making is represented by a probabilistic voting a la Lindbeck and Weibull (

New: Persistent Ideology and the Determination of Public Policy over Time
Date Posted: Mar  24, 2009
This paper investigates how public policy responds to persistent ideological shifts in dynamic politico-economic equilibria. To this end, we develop a tractable model to analyze the dynamic interactions among public policy, individuals' intertemporal choice and the evolution of political constituency. Analytical solutions are obtained to characterize Markov perfect equilibria. Our main finding is that a right-wing ideology may increase the size of government. Data from a panel of 18 OECD countri

New: Financial Friction, Capital Reallocation and News-Driven Business Cycles
Date Posted: Jul  11, 2007
In this paper, we show that news on future technological improvement can trigger an immediate economic expansion in a model with financial friction on capital allocation. The arrivial of good news on future technology reduces such frictions and generates significant increase in current Total Factor Productivity via capital reallocation. This triggers an immediate boom in output, consumption, investment and hours worked. Our empirical evidence using firm-level data supports strongly the above mec

New: Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt.
Date Posted: Jun  28, 2007
This paper proposes a dynamic politico-economic theory of debt, government finance and expenditure. Agents have preferences over a private and a government-provided public good, financed through labor taxation. Subsequent generations of voters choose taxation, government expenditure and debt accumulation through repeated elections. Debt introduces a conflict of interest between young and old voters: the young want more fiscal discipline. We characterize the Markov Perfect Equilibrium of the dyna