Multinational Production and Innovation in Tandem (updated June 2026)
Awarded FREIT-EIIT Best Graduate Student Paper Prize
Multinational firms often colocate production and innovation by offshoring them to the same or nearby host countries. This paper studies the determinants of their production and innovation locations. Using plausibly exogenous tariff variation, I show that reductions in offshore production in a host country lead firms to reduce innovation both in that country and in nearby countries, revealing complementarities between the two activities within and across locations. To quantify the sources and policy implications of these complementarities, I develop a dynamic model of firms' joint offshoring location choices, and prove supermodularity to solve this otherwise NP-hard combinatorial problem. A synergy effect, by which innovation is more efficient when colocated with production, accounts for three-quarters of the colocation incentive. Counterfactuals show that bilateral production-side policies reshape the global geography of innovation, with effects that depend crucially on the choice of policy instrument and accumulate dynamically.
CES Working Paper 24-64, Georgetown CBPP News
with Jie Bai, Maggie Chen, Xiaosheng Mu, and Daniel Yi Xu, Revision and Resubmit at the Review of Economics and Statistics
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, conditionally accepted at the Economic Journal
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
Tariffs and Production Relocation in a Multiproduct Oligopoly
with Juanma Castro-Vincenzi, Eduardo Morales and Alejandro Sabal
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 in inefficient, outdated, or polluting equipment by restricting firms' equipment choices or even mandating divestment of such 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.
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