Multinational Production and Innovation in Tandem (Job Market Paper)
Awarded FREIT-EIIT Best Graduate Student Paper Prize
Multinational firms colocate production and innovation by offshoring them to the same host country or region. In this paper, I examine the determinants of multinational firms' production and innovation locations. Exploiting plausibly exogenous variations in tariffs, I find complementarities between production and innovation within host countries and regions. To evaluate manufacturing reshoring policies, I develop a quantitative multicountry offshoring location choice model. I allow for rich colocation benefits and cross-country interdependencies and prove supermodularity of the model to solve this otherwise NP-hard problem. I find the effects of manufacturing reshoring policies are nonlinear, contingent upon firm heterogeneity, and they accumulate dynamically.
with Jie Bai, Maggie Chen, Xiaosheng Mu, and Daniel Yi Xu, Under submission
We investigate how market congestion and information friction affect firm dynamics and market efficiency in global e-commerce. Observational data and self-collected quality measures from AliExpress suggest significant demand frictions and potential misallocation in the online market. A randomized experiment that offers new exporters exogenous demand and information shocks demonstrates the limited ability of existing platform mechanisms to help small sellers overcome the demand frictions. We show theoretically and quantitatively that having a large number of market participants undermines the functioning of existing online mechanisms and hinders the discovery of high-quality sellers. Policy counterfactuals highlight that blanket-wide onboarding initiatives can aggravate market congestion, slow down the resolution of the information problem, and result in market misallocation.
NBER Working Paper No.w28100, HKS Working Paper No. RWP20-037, VoxEU, VoxDev.
with Martin Rotemberg and Sharon Traiberman, Under submission
We characterize sabotage, exemplified by recent U.S. policies concerning China's semiconductor industry, as trade policy. For some (but not all) goods, completely destroying foreigners’ productivity increases domestic real income by shifting the location of production and improving the terms of trade. The gross benefit of sabotage can be summarized by a few sufficient statistics: trade and demand elasticities and import and production shares. The cost of sabotage is determined by countries' relative unit labor costs for the sabotaged goods. We find important non-monotinicities: for semi-conductors, partially sabotaging foreign production would lower US real income, while comprehensive sabotage would raise it.
with Deepak Hegde and Boyan Jovanovic
We develop a model of strategic disclosure in which patenting inventors possess private information about their invention’s quality. We show that under certain conditions, high quality inventors signal their private information by disclosing their patents sooner. We test the model’s predictions by analyzing inventors’ disclosure choices after the American Inventors’ Protection Act of 1999, which allowed inventors to accelerate the disclosure of their patent applications. The empirical results are consistent with the model’s predictions and suggest large industry-level variation in inventors’ disclosure strategies and competitors’ learning from disclosures.
Protectionism on the Screen: Endogenous Preferences, Learning, and Investment
with Yulu Tang
Impacts of the U.S. Sanction on Huawei: Perspectives from the Global Smartphone Industry
with Jie Bai, Daniel Yi Xu, Xu Yang, and Yingyan Zhao
Automating Services: Artificial Intelligence in the US Legal Industry
Presented at NYU
How do AI technologies affect lawyers' work, law firm productivity and competition, and access to affordable legal services?
Strategic Competition and Innovation for Multiproduct Firms
with François Miguet, Presented at NYU
A framework of oligopolistic competition and innovation for multiproduct firms to think about the rising concentration and the speed and direction of product innovation.
Do Industrial Policies Lead to Excess Capacity? Empirical Evidence from China
Joint with Zonglai Kou and Xueyue Liu, Fudan Journal (Social Sciences Edition), 59(5), 2017: 148-161.
Industrial policies on capital investment in China come in two types—those that incentivize firms to purchase more equipment, and those that discourage investment by restricting firms' equipment choices or even mandating divestment of existing equipment. The encouraging policies effectively induce more investment and lead to rising excess capacity, especially in state-owned firms. However, the restrictive policies have little effect on reducing excess capacity.
Policy Suggestions to Dissolve Excess Capacity
Joint with Zonglai Kou and Xueyue Liu, Review of Economic Research, 66 (2017): 20-21.
Industrial Policy and Overcapacity: Empirical Research of China
A book chapter in C. Zhao & Z. Xu (Eds.), Industrial upgrading in China in the era of new industrial revolution (pp. 47–80). Springer Singapore. https://doi.org/10.1007/978-981-97-6907-0_1
Discussion on Combinatorial Discrete Choice Problems
@ Princeton IES 2025 Summer Trade Workshop, slides