Junkai(Kai) Wang

Performance-Based Assessment of Strategic Reasoning: A Recombinant Estimator Approach

Working paper · With Maria Cubel and Santiago Sánchez-Pagés

Abstract. We propose a performance-based measure of strategic sophistication in two-player games. Rather than assigning a decision rule or depth of reasoning to observed choices, the measure evaluates how well players respond to the empirical distribution of opponents’ strategies. Using recombinant estimation, we calculate the expected payoff loss from a player’s chosen strategy relative to the optimal response. This approach supports comparisons across games and offers a practical tool for studying strategic decision-making and game design. We apply the measure to experimental data from more than 60 studies involving approximately 11,000 unique participants. We validate it through its association with established measures of cognitive performance and its portability across games.

When Does Uncertainty Help or Hurt Trade?

Working paper · University of Oxford · 2026
Supervisor: Prof. Banu Demir Pakel

Abstract. This paper examines when trade-related uncertainty helps or hurts bilateral trade. I develop a dynamic extension of the Melitz model with two opposing channels: pessimistic expectations about future trade costs discourage exporting, while greater dispersion can increase expected profits through convex firm payoffs. The dispersion channel becomes relatively more important in sectors with higher substitution elasticities. Combining UN Comtrade data, Economic Policy Uncertainty indices, and sectoral elasticities, I find that trade responds more positively to uncertainty in high-elasticity sectors, with the most robust evidence on the importer side; higher tariffs attenuate this relationship. A calibration to the 2025 U.S. tariff cycle yields trade-flow and tariff-revenue implications quantitatively consistent with the observed data.

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Intergovernmental Fiscal Relations and Expenditure Assignment in China

Internal policy report · China Finance 40 Forum · 2025

Abstract. This report examines the mismatch between expenditure responsibilities and fiscal resources across levels of government in China. Drawing on Ministry of Finance and OECD data, fiscal federalism theory, and cross-country panel analysis, it argues that China’s high share of local government expenditure cannot be fully explained by population or institutional structure. It identifies reliance on intergovernmental transfers as a challenge to local fiscal sustainability and budget autonomy. The report proposes reallocating responsibilities in nationally strategic areas and those with substantial spillovers across regions towards the central government, while preserving local discretion over services that depend on local needs. Reform scenarios covering economic affairs, education, and social security illustrate how expenditure reassignment and corresponding financing adjustments could strengthen fiscal sustainability and national coordination.

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