Research

Working Papers

Firm-Level Origins of Tariff Pass-Through: Importer Heterogeneity and Welfare Decomposition [Draft] [SSRN] with Chengyuan He, Chang Liu, and Soo Kyung Woo New draft coming soon!

Abstract: We develop a decomposition framework and use confidential U.S. Census data to show that pass-through to U.S. import prices during the U.S.–China trade dispute is incomplete among firms that continue importing the same products from the same countries. Previous findings of complete pass-through reflect a reallocation of imports toward higher-price firms and costlier new supplier relationships within product–country markets. We then build a model with firm-level import prices and sourcing strategies and estimate that most welfare losses arise from extensive-margin effects on the import price index, driven by sourcing adjustments of importers.

Innovation Potential, Firm Life Cycle, and Cross-Country Productivity Differences [Draft] [SSRN]

Abstract: I provide new facts on firm type, innovation quality and innovation frequency across countries. In developed countries, firm type, innovation quality, and innovation frequency are mostly determined at birth. In developing countries, there are fewer innovative and radically innovative firms. Additionally, these firms have lower radical innovation frequency but higher incremental innovation frequency. The cross-country difference is mainly observed in high external financial dependence industries. To explain these facts, I build a semi-endogenous growth model with financial frictions and firm heterogeneity and demonstrate that collateral constraints combined with limited liability conditions impede innovative firm creation and distort firms' choice between radical and incremental innovation in developing countries. I offer new policy implications for countries at different development stages.

Uneven Firm Growth in a Globalized World [Draft] [SSRN] , Revise and Resubmit at Journal of Monetary Economics

Best Paper Award for Ph.D. Students, Australasia Meeting of the Econometric Society, 2022 Runner-up for Best Student Paper, China Economist Society Annual Conference, 2022 Finalist for Best Paper Awards, International Network for Economic Research Annual Conference, 2022
Abstract: I develop an open-economy endogenous growth model with strategic domestic competition to study how globalization has affected OECD productivity growth since the 1990s. I show that once strategic domestic competition is accounted for, the long-run growth gains from globalization are smaller than previous models predict, and under certain conditions they turn negative. The estimated model predicts that two forces of globalization—falling trade costs and rising international knowledge spillovers—boost innovation by OECD leaders more than domestic followers via a market size effect, increasing short-run growth. However, the induced weaker domestic competition depresses long-run gains, as followers become discouraged and leaders face diminishing returns from escaping competition. The model also implies that globalization correlates with broad macroeconomic trends in OECD countries and emerging markets, including a declining global output share of the OECD, rising industrial concentration, and higher R&D-to-GDP ratios.

Financial Development, Firm Growth, and Aggregate Productivity Divergence [Draft] [SSRN]

Abstract: Recent advancements in digitisation and the green transition have amplified the role of ICT (information and communications technology) in productivity growth. To optimise ICT's potential for future growth, it is essential to identify and address barriers to its progress. My study examines the historical disparity in aggregate productivity growth across countries since the ICT revolution. I find that firms in less developed financial markets, particularly small ones in industries with high ICT intensity and high external financial dependence, have experienced relatively slower growth in productivity and patents. To rationalize these findings, I build a model featuring endogenous firm productivity growth through innovation investment, capital investment, and financial frictions. Financial frictions reduce aggregate productivity growth through two channels: innovation investment and misallocation, with the former being the dominant factor. The model also provides conditions under which rapid capital and output growth can coexist with slow productivity growth due to firms' non-linear trade-offs in allocating constrained investment between capital and productivity.

Selected Works in Progress

Conglomerate Market Power, with Min Fang and Yulin Wang
Trade Wars with Export Controls, with Haishi "Harry" Li and Sifan Xue
Unpacking the Green Innovation Slowdown, with Yeju Chen

Discussions

Discussion of "Trade Wars with FDI Diversion" by Sifan Xue (2024) [slides]
Discussion of "Slack and Economic Development" by Michael Walker, Nachiket Shah, Edward Miguel, Dennis Egger, Felix Samy Soliman, and Tilman Graff (2024, NBER Working Paper No. 33055) [slides]
Discussion of "Foreign Technology Adoption as a Flying Propeller" by Yunfang Hu, Takuma Kunieda, Kazuo Nishimura, and Ping Wang (2023, NBER Working Paper No. 31159) [slides]
Discussion of "The Plant-Level View of an Industrial Policy: The Korean Heavy Industry Drive of 1973" by Minho Kim, Munseob Lee, and Yongseok Shin (2021, NBER Working Paper No. 29252) [slides]

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