Working Paper:
Targeted Subsidy and Capital (Mis)Allocation
Abstract: This paper investigates the welfare implications of targeted subsidy in a financially constrained economy. A model is built to show that while such policy can relax the targeted firms' financial constraints, it may cause misallocation. Moreover, the effects of industry-specific policies are likely to spill over into the other industries and be propagated through production networks. Guided by the model, I study the compulsory import delegation policy of iron ore in China, which was a de facto targeted subsidy favoring large steelworks. The structurally estimated model implies that removing this policy would increase aggregate output by 0.93% in five years.
Learning by Exporting: Evidence from Patent Citations in China (With Yousha Liang, Kang Shi and Juanyi Xu), R&R at Journal of International Economics.
Abstract: This paper investigates the effects of firms' exporting status on innovation outcomes by exploring a matched firm-level data on firms' operation, trade and patenting in China. Using patent-based metrics, we find that access to the foreign markets improves firms' innovation outcomes. Firms’ exporting to foreign markets not only increases the scale of innovation, but also improves the quality of innovation. We further find that a new effect, namely, knowledge absorbing effect, plays an important role in explaining this phenomenon. By constructing a measurement of knowledge flows, which is based on backward citations, we show that there exist knowledge transfers from destination markets to exporters and the knowledge transfers help exporting firms to improve their innovation outcomes.
Abstract: This paper investigates the effects of firms' exporting status on innovation outcomes by exploring a matched firm-level data on firms' operation, trade and patenting in China. Using patent-based metrics, we find that access to the foreign markets improves firms' innovation outcomes. Firms’ exporting to foreign markets not only increases the scale of innovation, but also improves the quality of innovation. We further find that a new effect, namely, knowledge absorbing effect, plays an important role in explaining this phenomenon. By constructing a measurement of knowledge flows, which is based on backward citations, we show that there exist knowledge transfers from destination markets to exporters and the knowledge transfers help exporting firms to improve their innovation outcomes.
Work in Progress:
Land Price Discrimination and Capital Misallocation (With Wen-Tai Hsu and Zheng (Michael) Song)