Research

Working Papers

Uneven Firm Growth in a Globalized World [Draft] [SSRN] New 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 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 costs and increasing international knowledge spillovers, creates heterogeneous firm responses based on technological distance from competitors. The estimated model predicts that both forces of globalization boost innovation by OECD leaders more than their domestic 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.

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] [SSRN]

Abstract: Recent studies on the U.S.-China trade dispute suggest that the increases in U.S. import tariffs were completely borne by U.S. importers. However, using firm-level data from the U.S. Census, we find that tariff pass-through is incomplete for firms that continue importing the same product from the same country. Large importers experience higher pass-through and account for a greater share of import. Firms that import new products or source from different countries pay higher prices than those maintaining existing relationships. Thus, the observed complete pass-through in prior studies reflects import reallocation toward firms with higher pass-through or more costly new supplier relationships. To explain these patterns, we incorporate a firm-specific import price with two-sided market power into a standard importer model. We show that fixed import costs, an elastic foreign export supply, and the greater bargaining power of large U.S. importers help account for the empirical findings.

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 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.

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

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.

Selected Works in Progress

Conglomerate Market Power, with Min Fang and Yulin Wang

Discussions

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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