Research
Working Papers
Uneven Firm Growth in a Globalized World [Draft] [Technical note] [SSRN]
Abstract: I develop a two-country endogenous growth model with strategic innovation in domestic and international markets to study how globalization affects uneven firm growth and its implications for industrial concentration and productivity growth in OECD countries. Globalization, characterized by decreasing trade iceberg costs and increasing international knowledge spillovers, creates heterogeneous firm responses based on technological distance from competitors. I estimate the model using patent data, which shows that firms innovate less when lagging behind domestic or global competitors. The model predicts that globalization boosts innovation by domestic leaders more than followers via a market size effect, increasing short-run growth and domestic concentration. However, the induced weaker domestic competition eventually depresses long-run growth: followers and leaders reduce innovation because of discouragement and a diminishing escape-competition motive, respectively.
Financial Development, Firm Growth, and Aggregate Productivity Divergence in Europe [Draft] [SSRN] New draft!
Abstract: Recent advancements in digitisation and green transition have amplified ICT's (information and communications technology) role in productivity growth. To optimise ICT's potential for future growth, it is crucial to identify and address factors hindering its progress. My study examines the historical disparity in productivity growth between Southern and developed European countries since the ICT revolution. I document Southern European firms, particularly small ones in high ICT intensity and high external financial dependence industries, have experienced lower productivity growth, intangible capital growth, and patent creation compared to their counterparts in more developed European countries. To rationalize these findings, I build a model featuring endogenous firm productivity growth through innovation investment and size-dependent financial frictions. Financial frictions reduce aggregate productivity growth through two channels: innovation investment and misallocation. Quantitatively, the former is the dominant factor. 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.
Incomplete Tariff Pass-through at the Firm Level: Evidence from U.S.-China Trade Dispute, with Chengyuan He, Chang Liu, and Soo Kyung Woo Draft coming soon!
Innovation, Financial Development, and Aggregate Productivity Gap across Countries Draft coming soon!
Abstract: I provide a new set of facts on innovation and firm growth in both developed and developing countries, considering heterogeneous firm types and innovation types. In developed countries, firm type, innovation frequency, and innovation quality are mostly determined at birth. In developing countries, there are fewer (radically) innovative firms, and firms have lower radical innovation frequency but higher incremental innovation frequency. The cross-country difference is largely explained by the less developed financial markets in developing countries. To explain these facts, I build an 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.
Work in Progress
Conglomerate Market Power, with Min Fang, Yulin Wang, and Qilin Zhang
Discussions
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]
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]