Faculty Focus: Dr. Zheng Li

Dr. Zheng Li, Assistant Professor in the Department of Agricultural and Resource Economics (ARE), specializes in econometric theory and applied microeconometrics. His published research aims to provide the framework and background to real-world policy solutions. As an econometrician, his goal is to solve problems using economic and statistical models. This article highlights Zheng’s contribution to the field of econometrics at NC State University and beyond.

Econometrics combines the workings of statistics and economics to solve problems. Through economic concepts, researchers are able to compose multiple models to find the best fit. They analyze conditions, assumptions and conclusions in order to create the options that will be the most realistic. Econometric models are used to solve real-world problems, whether relating to production or cause/effect problems. It is crucial for researchers to produce models with little to no mistakes as this could cause problems in real decision-making.

The models that are produced are used to determine how a variable, or change, would affect the current status quo. Variables replace reality’s circumstances in order to create a translatable model. These variables can include housing prices, rainfall and corn yield. Statistic concepts and rules are then used to rate the models created. Rating the models can be complex because real-world situations must be taken into consideration. In econometrics, the goal is to find the highest quality rating model to be used by policymakers.

After the rating is complete, an inference is made. The inference tests if variable A affects variable B and the magnitude of the effect. This test will help in understanding the mechanism of the economic system. With this, a plan to intervene, or a policy implication, can be shaped. Inferencing and forecasting occur on a parallel track. Forecasting prepares scenarios of what can happen in the future; these predictions can help with preparations in the case that they happen.

Zheng works alongside three other econometrician specialists in the NC State Economics Graduate Program: Dr. Mehmet Caner, Dr. Denis Pelletier and Dr. Ilze Kalnina. There are also Ph.D. students in the program that participate in econometric research with Zheng.

Recently, Zheng has published work in the American Journal of Agricultural Economics with Dr. Roderick Rejesus and Dr. Xiaoyong Zheng. The paper focused on the process of evaluating production risk. Production risk is a factor that is considered in major decision-making. When creating the models using economics and statistics theories, a factor like production risk is not directly observed. An estimate of risk can be made by using observations and developing relationships between the variables. The research that they conducted uses this approach to improve the accuracy of this process which will lead to a more informed decision.

The paper uses a nonparametric approach to analyze any factors that affect production risk. This approach estimates any condition effects to the process of evaluating risk. By leading into this dynamic, the research can smooth continuous and categorical regressors. This is useful when determining the different kinds of variables that affect production risk. They combine estimation and comprehensive statistical inference procedures. Ultimately, the research has showcased how an innovative, residual-based nonparametric procedure can be used to assess production risk. It adds another tool available for economists when stochastic production functions need to be considered.

The team received funding from USDA-NIFA to continue research in the Raleigh-Triangle area.

Zheng Li continuously works to provide a better understanding of econometric models to help advance solutions to apply to real-world problems. His work in and outside of the field affects the progress of decision-making and the refinement of processes. By being active in the ARE research and teaching enterprises, Zheng has become an asset to the department.