Research
Working Papers
Abstract. I establish new facts and explanations on the heterogeneous paths of structural transformation across countries. First, many countries exhibit flat-manufacturing profiles without noticeable signs of deindustrialization, which differ from the conventional steep-manufacturing hump-shaped profiles in advanced economies. Second, substantial heterogeneity exists in the labor allocation within services sector as flat-manufacturing countries tend to allocate substantially more labor into low-skilled services compared to steep-manufacturing countries. Third, heterogeneous structural transformation paths are prevalent among both earlier and later developers and not subject to the timing of development. Using a standard model of structural transformation, I find that observed differences in sectoral productivity growth are not quantitatively sufficient to generate the heterogeneous paths of structural transformation across countries. Instead, differences in relative productivity levels between manufacturing and low-skilled services account for around the majority, around 70%, of the heterogeneity, suggesting that country-specific factors are key. I show that the observed heterogeneous paths of structural transformation contribute substantially to economic growth outcomes across countries.
Abstract. We examine the disparity in aggregate productivity across nations using cross-country firm-level panel data and a quantitative model featuring production heterogeneity with distortions and entry, operation, and productivity-enhancing investment decisions by firms. Empirically, we find that less developed countries feature higher distortions and larger dispersion in firm-level productivity, mostly resulting from the prevalence of unproductive firms compared to developed countries. Quantitatively, variation in firm-level productivity accounts for one-third of the variation in allocative efficiency across economies and 60% of the variation in aggregate output. Both technology and selection channels are important in these results. Variation in static misallocation also plays a quantitatively important role, albeit smaller. Differences in aggregate labor productivity in the model represent between 67% and 75% of the variation in the cross-country data. Measured differences in correlated distortions across countries, the elasticity of distortions with respect to firm productivity, generate the bulk of the empirical patterns.
Openness to Foreign Firms, Industrialization and Growth (Draft coming soon)
Abstract. This paper examines the impact of openness to foreign firms on resource misallocation, structural transformation, and aggregate productivity in Vietnam. Focusing on major policy reforms in the manufacturing sector over the past three decades, I document empirical evidence of reduced distortions towards foreign firms alongside these reforms. By exploiting the staggered rollout of openness policies through the establishment of industrial zones (IZs), I estimate the causal impact on local outcomes using staggered difference-in-difference estimation. I find causal evidence on the direct effect of reforms on foreign firm entry at local levels. I also find significant spillover effects on domestic firms in services and household income. Next, I build a multi-sector model with entry and exit of domestic and foreign firms to assess the quantitative impact of the reforms on manufacturing productivity, structural transformation, and aggregate productivity. The findings suggest the crucial role of removing distortions towards foreign firms in Vietnam's industrialization and growth experiences.