Research Papers
“Foreign Entry, Competition and Heterogeneous Growth of Firms: Do We Observe 'Creative Destruction' in China? ”
Job Market Paper, with Gary Jefferson, submitted to Journal of Comparative Economics
Abstract: In the face of foreign entry, domestic firms may exhibit heterogeneous pattern of responses depending on their technological distance from foreign firms. Domestic firms closer to the foreign technology frontier may choose to compete, while firms that are further down on the technology ladder may suffer a “discouragement effect” and lag further behind. In this paper, we test the Schumpeterian idea of “creative destruction” using firm-level data from China’s Large and Medium-Size Enterprise (LME) dataset. We find that foreign entry indeed has a heterogeneous impact on the productivity growth of domestic incumbents. Furthermore, we offer evidence that foreign-entry also induces a similar heterogeneous pattern in domestic firms’ innovation-related activities.
“Research Centers and Technology Diffusion”
Abstract: Much of the debate over income convergence hinges on whether technology diffusion is global or local. This paper addresses the question in a developing country setting and focus on the role of research centers in the domestic diffusion process. I identify three de facto research centers in China and investigate whether the effect of R&D spillovers from research centers is related to both geographic and technological distance. I find that firms’ productivity gains from R&D spillovers decline with (i) increasing geographic distance away from research centers, and (ii) the technological gap between technology senders and recipients. The latter finding provides another empirical evidence that development traps impede technology diffusion.
Research Papers in Progress
“Is Inequality Harmful for China’s Sustained Growth?” (with Gary Jefferson)
Abstract: The recent 25 years of China's economic transformation have been marked by rising income inequality. During much of this time, China's coastal industry has served as the prime driver of China's robust economic growth, while areas outside coastal industry have lagged in their productivity growth. This paper shows that since coastal industry has substantially narrowed its productivity gap with the international frontier, its productivity growth and contribution to China's overall growth have slowed. If China is to sustain its robust growth, the relatively backward areas and sectors will need to improve their relative contribution to Chinese growth. The implication is that, in accord with the Kuznets Curve, income inequality may be beginning to moderate.
“Value Investing or Value Trap?”
Abstract: Past research on contrarian investing focused on the mean-reversion nature of stock returns and a simple buy-low and sell-high strategy is often advocated. However, not all contrarian investments worked out and strategies that are simply based on lower valuation often put investors into “value trap”, where stocks go down even further or their values get completely wiped out. This paper tackles the question of what makes a sensible contrarian investment. I first use a multinomial model to estimate what characteristics contribute to a successful turnaround of the undervalued stocks. Next, I investigate how the probabilities change over different time horizons for successful reversals. This research contributes to the deeper understanding of a very popular investment strategy.