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Working Papers
Working Papers
Abstract. This paper investigates the impact of openness to foreign firms on aggregate productivity in the context of Vietnam, a fast-growing economy. The analysis focuses on Vietnam's policy reforms between 2000 and 2015, aimed at reducing barriers for foreign firms in the manufacturing sector. I use firm-level data and develop a multi-sector model of structural transformation and production heterogeneity in which domestic and foreign firms make decisions on entry and technology investment while facing different institutional distortions. Consistent with the reforms' objective, I find that measured distortions affecting foreign firms were initially larger but substantially decreased to domestic levels over time. The model shows that this reduction in measured distortions to foreign firms substantially increases manufacturing productivity by 64 percent via two channels: (1) improving resource allocation across foreign and domestic firms and (2) incentivizing technology upgrades and more entry of higher-productivity foreign firms. Using difference-in-differences estimation leveraging staggered policy rollouts across locations, I also find significant indirect positive effects of the reforms on agricultural and service productivity. These indirect effects further amplify economy-wide productivity gains through structural transformation.
Heterogeneous Paths of Structural Transformation [SSRN], reject and resubmit at International Economic Review
Heterogeneous Paths of Structural Transformation [SSRN], reject and resubmit at International Economic Review
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.
The Micro and Macro Productivity of Nations [NBER Working Paper], submitted
with Stephen Ayerst and Diego Restuccia
The Micro and Macro Productivity of Nations [NBER Working Paper], submitted
with Stephen Ayerst and Diego Restuccia
Abstract. We examine aggregate productivity differences across nations using cross-country firm-level data and a quantitative model of production heterogeneity with distortions featuring operation decisions (selection) and productivity-enhancing investments (technology). Empirically, less developed countries feature higher distortions and larger dispersion in firm-level productivity, mostly resulting from the higher prevalence of unproductive firms. Quantitatively, measured cross-country differences in the elasticity of distortions with respect to firm productivity generate the bulk of empirical patterns and over two-thirds of cross-country labor productivity differences. Both selection and technology channels are important. Variation in static misallocation also plays an important role, albeit smaller.
Abstract. We study the impact of firms lobbying activities on innovation and aggregate productivity in the United States. We build a quantitative model where firms make decisions about lobbying and R&D investments to grow. Lobbying can either complement R&D by increasing its returns or substitute for R&D as an alternative way to boost profits, making the net effect theoretically ambiguous. To determine which effect dominates on average, we use firm-level lobbying data and a shift-share instrumental variable strategy to estimate the causal effect of lobbying on R&D expenditure. We find that lobbying significantly reduces R&D expenditure at the firm level. We calibrate the model to the U.S. economy and find that eliminating lobbying would lead to a 3.5% increase in aggregate productivity. The gains are primarily driven by improvement in firm-level productivity distribution, through an increase in firm-level innovation. We then use the model to evaluate the impacts of U.S. Senator Elizabeth Warren’s proposal to tax lobbying progressively and find that such a policy could increase aggregate productivity in the U.S. by 1.57%.
Work in Progress
Work in Progress
Resource Allocation, Technology Adoption, and Productivity: A Quantitative Analysis with Panel Data (draft coming soon)
with Diego Restuccia
Resource Allocation, Technology Adoption, and Productivity: A Quantitative Analysis with Panel Data (draft coming soon)
with Diego Restuccia
Abstract. We examine the role of resource allocation on technology adoption and productivity using a unique panel dataset of the universe of Canadian farms spanning 1986 to 2006 and a quantitative model. The period features the advent of a major new seeding technique known as zero tillage and its adoption and diffusion among Canadian farms. We document a substantial process of land consolidation, technology adoption, and productivity growth, supported by an economic environment of relatively high allocative efficiency in agriculture, whereby more productive farms operate larger amounts of land and capital. Empirically, we also show a significant positive effect of the adoption of zero-tillage on farm-level productivity. Using a quantitative model of production heterogeneity in agriculture and structural transformation, we find that the adoption of zero-tillage contributed to 40% of agricultural productivity growth and more than 50% of structural transformation. Low farm-level agricultural distortions are key in driving the massive technology adoption, which would have nearly disappeared with measured distortions in less developed countries.
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