Working Papers

  • Uneven Firm Growth in a Globalized World (Job Market Paper) [draft]

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 study how globalization contributes to uneven firm growth and its implications for industrial concentration and productivity growth in OECD countries. I document new facts showing that industry leaders grow faster in sales and patenting than followers, particularly in industries with increasing export intensities; sales divergence is mainly driven by exports rather than domestic sales. To rationalize these facts, I develop a two-country endogenous growth model with strategic domestic and international competition and a 'disadvantage of backwardness' that captures how firms innovate less when left behind. Globalization, modelled as decreasing trade iceberg costs and increasing international knowledge spillovers, triggers a stronger innovation response among leaders than followers via the market size effect, inducing an increase in domestic concentration that depresses firm innovation via weaker domestic competition: followers and leaders reduce innovation due to the disadvantage of backwardness and decreasing returns to innovation, respectively. The globalization-induced harsher foreign competition also reduces innovation via lower profits. In the calibrated model, globalization explains 80% of the rise in industrial concentration and 50% of the productivity growth slowdown in the data, mainly due to weaker domestic competition. The increasing international knowledge spillover force of globalization dominates.

  • Financial Development, Firm Growth, and Aggregate Productivity Divergence in Europe [SSRN] [draft]

Abstract: Since the information and communications technology revolution, productivity growth in Southern European countries has been substantially lower than in developed European countries. I document that Southern European firms have lower productivity growth, lower intangible capital growth, and lower leverage than developed European firms. The disparity is larger among smaller firms. To rationalize these findings, I build a model featuring endogenous firm productivity growth through innovation investment and size-dependent financial frictions. Financial frictions lower productivity growth via two channels: innovation investment and misallocation. The model finds that financial frictions account for at least 11% of the aggregate productivity growth difference in the data, mainly via the innovation investment channel. The model also highlights that fast capital and output growth may coexist with slow productivity growth due to firms' tradeoffs in allocating a constrained amount of investment between capital and productivity.

Abstract: From aggregate bilateral trade data, recent studies have found that U.S. tariff increases during the U.S.-China trade war were entirely passed on to U.S. importers. Using confidential data from U.S. Census, we show that the pass-through on U.S. importers is incomplete at the disaggregated firm-product-country level. In order to reconcile the discrepancy at different levels of aggregation, we consider the firm and product heterogeneity in various aspects: sourcing countries, number of imported varieties, import intensity from China, inventories, upstreamness, order frequency, etc. We find firm heterogeneity, which is silent in the aggregate bilateral trade data, is the main driver for the incomplete pass-through, instead of product heterogeneity. We find that U.S. importers source away from China, although Chinese exporters decrease their export prices. As a result of sourcing away, importers with more sourcing options or larger import shares face higher foreign export prices charged by other sourcing countries, which drives the complete pass-through at the aggregate level.

Work in Progress


  • 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) [slides]