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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 the aggregate revenue of Chinese industry with heterogeneous productivity, technology, and demand elasticities. The input distortions include anything that prevents firms from using production factors at their market prices or from freely adjusting the usage. Using parameters estimated from firm-level data, we find that removing the input distortions in Chinese industry would raise the industrial labor share by 20 percentage points, and lower the capital share by 1 percentage point. This implies that improving allocation efficiency through removing input distortions can create socioeconomic shocks such as a massive inflow of labor to industry. The distributional impact of input distortions also suggests that removing the input distortions may not always be beneficial for the Chinese growth perspective.

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.

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