We present the first evidence of the positive causal impacts of research and development (R&D) tax incentives on a firm’s own innovation and that of its technological neighbors (spillovers). Exploiting a change in the assets-based size thresholds that determine eligibility for R&D tax relief, we implement a Regression Discontinuity (RD) Design using administrative data. We find statistically and economically significant effects of tax relief on R&D,(quality-adjusted) patenting and ultimately firm size that persist up to seven years after the change. We can rule out R&D tax price elasticities of under 1.1 at the 5% level and argue that our large effects are likely because the treated group are smaller firms that are more likely to be financially constrained. Using our RD Design, we also find causal impacts on technologically close peer firms, implying significant under-investment in R&D from a social perspective. 

We study patronage politics in authoritarian Vietnam, using an exhaustive panel of ranking officials from 2000 to 2010 to estimate their promotions’ impact on infrastructure in their hometowns of patrilineal ancestry. Native officials’ promotions lead to a broad range of hometown infrastructure improvement. Hometown favoritism is pervasive across all ranks, even among officials without budget authority, except among elected legislators. Favors are narrowly targeted toward small communes that have no political power, and are strengthened with bad local governance and strong local family values. The evidence suggests a likely motive of social preferences for hometown. 

This paper provides evidence on the effect of trust on innovation within firms. I build a new matched CEO-firm-patent dataset covering 5,753 CEOs in 3,598 large US public firms and 700,000 patents during 2000-2011. To identify the effect of CEO's trust, I exploit variation in generalized trust across the countries of CEOs' ancestry, inferred from their last names using de-anonymized historical censuses, as well as variation in CEOs' bilateral trust towards inventors. First, one standard deviation increase in CEO's generalized trust following a CEO turnover is associated with over 6% increase in firm’s future patents. Second, changes in CEO's bilateral trust towards inventors in different countries (i.e., different R&D labs within multinational firms) or from different ethnic origins in the same firm have comparable effects on inventors' patenting, controlling for CEO and other stringent fixed effects. Trust-induced improvements in innovation are driven entirely by higher-quality patents, consistent with a model in which CEO’s trust incentivizes researchers to undertake high-risk explorative R&D. Finally, I show that across and within firms, CEO's generalized trust is strongly correlated with a broader corporate culture of trust, as measured from the text analysis of one million online employee reviews. The evidence provides a micro-foundation for the well-known macro relationship between trust and growth. 

Does higher office always lead to more favoritism? The usual affirmative answer overlooks scrutiny’s role in shaping the pattern of favoritism: It is possible that politicians who attain higher-powered positions under stricter scrutiny may reduce quid-pro-quo favors towards connected firms. Around close Congress elections, we find RDD-based evidence of this adverse effect that a politician’s win reduces his former classmates’ firms stock value by 1.9% after a day and 3.2% after a week. As predicted, this effect varies by cross-state level of scrutiny, politician’s power, firm size and governance, and connection strength. It diminishes as a politician’s career concern fades over time.

This paper investigates the real consequences of religious beliefs without the usual company of religious norms and organization. We focus on religious beliefs on matrimonial fortune in Vietnam in terms of predictions on a couple's auspiciousness based on their birth years by Tu Vi, a pervasive system of religious beliefs based on Taoist astrology. First, we estimate a structural model of assortative marriage matching market, and show that such beliefs in marriage fortune matter to people's marriage matching, playing a role equivalent to 6%-8% of that of the entire age and education profile. Second, building on the structural estimation, we derive a control function for selection into marriage to estimate the effect of auspiciousness on household outcomes free of the selection bias. Auspiciousness increases household expenditure and income by 2-3%, likely through a mechanism such that, when in hardship such as health shocks, an auspicious couple enjoys 25% more transfer from their extended family. Such effect helps reduce children's dropouts, without affecting family composition. Survey data on beliefs further show auspicious couples' stronger first-, and especially second-order beliefs (about their relatives' beliefs) that auspicious couples are more harmonious and luckier, rather than other mechanisms based on discrimination or conformation to club norms.

This paper shows that from 2001 to 2008, the gradual privatization program in Vietnam has strong positive spillovers on firms' total factor productivity through backward linkages. A firm gains on average 4 percentage points in TFP if private firms in all of its downstream industries increase their market share by 10%. This effect comes mainly from privatized domestic firms within local markets. It is stronger for upstream industries under more competition from imports, and weaker for those that export more. The effect on allocative efficiency is imprecisely negative and mitigates the overall effect on industry TFP index, as new entrants but not incumbents capture very large gains in TFP. I present evidence that the effect works through elevated pressure from privatized client firms. Furthermore, the spillovers are stronger when provincial institutions favor state-owned firms and create higher entry costs, suggesting that good governance and privatization spillovers are substitutes.