Research

Working Papers:

• Misallocation and Technology Upgrading under Trade Liberalization (Job Market Paper)
  
  This paper examines the influence of resource misallocation on firms' technology investment decisions and its impact on trade gains in developing countries. Literature finds that trade liberalization in distorted economies could result in limited gains or even losses due to worsening resource misallocation. However, trade can also promote technology upgrades and innovation. To explore whether the innovation channel can enhance the gains from trade, I construct a two-country Melitz model with firm-specific distortions and introduce the choice of research and development (R&D) investments. A quantitative assessment using Chinese manufacturing data shows that allowing firms to upgrade technology further reduces welfare gains from trade in this second-best environment. This is because misallocation distorts firms' R&D decisions, therefore trade liberalization encourages the growth of less productive but subsidized firms. This drives up costs for more productive yet taxed firms, resulting in a further reduction of trade gains. Even with additional R&D subsidies aimed at correcting distortions in innovation decisions, results remain unchanged. The paper emphasizes the importance of structural reforms to maximize trade gains in developing countries.

• High-Skill Immigration Restriction and Multinational Talent Offshoring
  
  This paper examines the impact of restrictions on high-skill immigration by introducing a novel dimension: multinational (MNE) talent offshore. In response to restrictions on hiring foreign high-skilled workers at their U.S. headquarters, MNEs can engage foreign researchers in their overseas affiliates. I construct a dynamic model incorporating trade, MNE activities, innovation, and immigration. A critical assumption is that MNEs can segment their innovation process and deploy researchers to foreign affiliates. Calibrating to U.S. aggregate data on trade and MNE activities, the results show the existing immigration restrictions can explain 47.8 percent of observed MNE talent offshore. By eliminating the restriction, the overall economy benefits from more efficient process innovation and higher product innovation, which leads to a gain in total productivity and aggregate welfare.

Work in Progress:

• The Return of a Two-Bloc World? Endogenous Decoupling in the Age of Geoeconomic Fragmentation

with Marijn A. Bolhuis, Benjamin Kett