Working Papers

Joint work with Junjie Xia

Job market paper

This paper quantifies the impact of input distortions on the labor and capital shares in Chinese aggregate income where the economy is allowed to have rich variations in productivity, technology, and demand elasticities. Under the nested constant elasticity of substitution demand, we decompose the share changes into changes due to within-nest distortions and between-nest distortions. We use firm-level data to estimate industry-specific production elasticities, nest-specific demand elasticities when the nest structure is not perfectly observed, and firm-specific input distortions. We find that removing input distortions in China will raise the labor share by 7 percentage points and lower the capital share by 1 percentage point. Removing between-nest distortions doubles the increase in the labor share but offsets 90% of the decrease in the capital share caused by removing within-nest distortions.

The paper is available here and the slides are here.

Optimal Subsidies for the Product Upgrading of Battery Electric Vehicles in China

Presented at the virtual IO CEPR event.

The paper is coming soon and the slides are available here.

Joint work with Junjie Xia

Predicted TFP gains under Hsieh and Klenow (2009)'s framework are sensitive to demand elasticities and returns to scale, but simultaneously estimating them is difficult. We solve this problem by developing a framework allowing for an arbitrary distribution of firm-level markups and use microdata to estimate industry-specific production elasticities, within-industry type-specific demand elasticities when types are not observed, and firm-specific distortions. We apply our model to 2005 Chinese firm-level data and find that the predicted Total Factor Productivity (TFP) gains are 44% which is half of the previous findings.

Presented at Tilburg Structural Econometrics Group, the GSS seminar at Tilburg University, the IO seminar at KU Leuven, the ENTER Jamboree, China International Conference in Macroeconomics, the IAAE annual conference, the AMES China meeting, and China Center for Economic Research’s Summer Institute, the NSE International Annual Workshop, the EEA-ESEM summer meeting.

The paper is available here.