Contact: Department of Trade Economics Business School Renmin University of China Beijing, China
Working Papers
Patent Financing, R&D Investment and TFP Dynamics, with Guanliang Huunder major revision
Financing Innovation with Innovation: A Quantitative Analysis of Patent Collateral in China, with Minjie Deng and Min Fang, under major revision
Vertical Connection by Data: Evidence from Job Postings in China , with Zexuan Liu and Yao-Yu Chih.
CO2 Emission Regulations and Optimal Generation Allocation across Heterogeneous Coal-Fired Generators , with Rong Luo and Li Su.
Identification and Estimation of Multiproduct Firms' Production Functions, with Faqiang Li, Moyu Liao and Jie Zhang, under major revision
Non-identification of Nonparametric Production Functions for Multiproduct Firms, with Moyu Liao, submitted
Identifying Treatment Effects on Productivity: Theory with An Application to Firms' Production Digitalization , with Moyu Liao and Karl Schurter. Revision requested by RAND Journal of Economics
We study the identification and estimation of treatment effects on the productivity
of firms. Our approach embeds standard methods of production function estimation into a dynamic potential outcome framework. This new framework clarifies the
necessary assumptions and potential pitfalls when quantifying causal effects on productivity. Our methods can be applied under weaker assumptions than those have
been previously employed in the literature and do not require a solution to the firm’s
dynamic optimization problem. We apply our method to study the effect of production digitalization on productivity growth. Our results robustly show that the average treatment effect of production digitalization is not significant in a window of five
years after production digitalization. However, we find substantial heterogeneity in
the impact of production digitalization on productivity across time and industries.
Importantly, firms with lower productivity before production digitalization tend to
receive less productivity gains as time evolves.
Trade Policy Uncertainty and Market Diversification by Risk-Averse Firms, with T. Zhu, Z.H. Wang and K.J. Gu, resubmitted to China Economic Review
The Impact of Digitalization on Productivity: Evidence from Chinese Manufacturing Firms, with H.X. Chen, J.T. Yi and J.Q. He, resubmitted to Management and Organizational Review
Bank Competition, Defaulting Risks and Innovation, with Mengbo Zhang, Aomeng Zhang, and Xinyang Li, resubmitted to Canadian Journal of Economics
How Does Banking Expansion Influence City Development and Synergy? —— A New Perspective from Government Debts, with Y. Wen and H. Yu, 2nd round R&R at Cities
This paper examines the main participants of China's processing trade regime – firms that engage in both processing and ordinary exports. By matching several datasets from China, including a unique sample of transaction-level customs data with firms' branding information, we uncover three stylized facts. First, these “mixed” firms exhibit superior performance in various margins such as revenue and physical productivity. Second, even within firms, there is a link between export mode choice and brand ownership – own-branded products are typically exported under ordinary trade while products under other firms' brands are exported under processing trade. Third, there is a price premium associated with selling one's own-branded products. To rationalize these findings, we present a simple theoretical framework where firms with multi-attributes (i.e., “making” and “creating”) endogenously determine their specialization within a production network. We find evidence for the model's main prediction that firms in China intensified their branding activities when faced with favorable processing trade policies upstream.
We argue that importing stimulates firms' learning-based R&D activities in the present and future periods. Our theory predicts that the strength of the learning effect depends on the type of imported materials, the industries, and the import destination. Using a dataset on Chinese manufacturing firms covering the episode of China's WTO accession, we employ the multiple-treatment propensity matching difference-in-differences method and find evidence supporting our hypotheses: (1) importing capital goods stimulates more R&D expenditures than importing intermediates; (2) R&D intensity increases more for capital goods importers in capital-intensive industries than those in labor-intensive industries; and (3) importers increase R&D intensity more by importing from high-income countries than low-income countries.
We study the impact of anti-corruption efforts on firm performance, exploiting an unanticipated corruption crackdown in China’s Heilongjiang province in 2004. We compare firms in the affected regions with those in other inland regions before and after the crackdown. Our main finding is an overall negative impact of the
crackdown on firm productivity and entry rates. Furthermore, these negative impacts are mainly experienced by private and foreign firms, while state-owned firms are mostly unaffected. We present evidence concerning two potential explanations for our findings. First, the corruption crackdown may have limited bribery opportunities that helped private firms operate. Second, the corruption
crackdown may have interfered with personal connections between private firms and government officials to a greater extent than institutional connections between state-owned firms and the government. Overall, our findings suggest that corruption crackdowns may not restore efficiency in the economy, but instead
lead to worse economic outcomes, at least in the short run.
We extend the empirical framework by Peters et al. (2017) to include both R&D and patents in the productivity evolution. We provide a decomposition of the benefits of R&D into the patent and non-patent components, and a novel measure of the patent value conditioning on the firm's R&D investment. Using a sample of Chinese high-tech manufacturing firms, we find that (1) 47.8% to 67% of the benefits of R&D investment comes from non-patent R&D activities; (2) On average an invention (a utility model) patent causes around 0.76 (0.66) percent increase in the firm value; (3) The start-up costs of R&D are around ten times as large as the maintenance R&D costs. The counterfactual analysis shows that the lump-sum subsidy is more effective than the proportional subsidy in increasing the expected firm value and innovation probability. R&D continuers respond more actively than the R&D starters to the R&D subsidy.
As a developing economy, China's unprecedented patenting surge is puzzling. We study China's patent surge and its driving forces using a novel and comprehensive merged dataset on patent applications filed by Chinese firms. We find that R&D investment, FDI, and patent subsidy have different effects on different types of patents. First, R&D investment has a positive and significant impact on patenting activities for all types of patents under different model specifications. Second, the stimulating effect of foreign direct investment on patent applications is only robust for utility model patents and design patents. Third, the patent subsidy only has a positive impact on design patents. The results imply that FDI and patent subsidy may disproportionately spur low-quality patents.
This paper investigates the relationship between imports and innovation by importing
firms. We first construct a theoretical model in which imports stimulate innovation
through cost-reducing knowledge spillovers. We then employ a combined micro dataset
of Chinese manufacturing firms to estimate the effects of imported intermediates on the
firm’s R&D investment. The dataset allows us to construct firm-year level instruments for
importing and exporting that are uncorrelated with the innovation decision of the firm.
Our estimations find that: (1) importing intermediates tends to increase importing firms’
R&D intensity; and that (2) exporting also increases importing firms’ R&D intensity. Examining
the channels through which importing affects innovation, we find that importing
from high-income sources has a greater impact on innovation. High-tech firms tend to
experience greater increases in innovation intensity, as do private firms. Our results are
supported by a series of robustness checks.
This paper asks whether banks help or grab the enterprise in the real economy. Using the firm-
level data on Chinese enterprises during 2001–2007, we find that interest payment of private
enterprises is negatively related to the return on sales (ROS) and asset growth, which implies a
detrimental effect of bank loans on private firms' performance. But this linkage is significantly
positive for state-owned enterprises. Focusing on private enterprises, the grabbing impact from
banks is strongest for firms without government subsidies, with low production values, with
small size, or with low capital intensity. Our results are robust to alternative estimation
approach and variable specifications. To conclude, the bank-centered financial system in China
has assisted in the development of state-owned enterprises, while the development of private
enterprises has been impeded by Chinese banks.
