Abstract: Standardization ensures compatibility but potentially shapes innovation by locking in certain technologies. Unlike other countries, the Chinese government coordinates its firms to advance specific domestic technologies in international standard-setting organizations (SSOs). This paper studies the impact of this policy on global innovation in 5G. In the SSO for 5G, which is an economically and geopolitically significant arena in which this policy is implemented, firms compete to have their patented technologies adopted as part of the 5G standards. Using a large language model, I build a new database linking SSO technical documents, 5G policy documents published by the Chinese government, and 5G patents. I show that the policy promotes Chinese technologies in areas where China lags behind foreign competitors. If adopted as standards, these lagging technologies become the basis for subsequent 5G innovation across countries, as measured by 5G patents in close textual alignment with the SSO documents describing these technologies. These follow-on patents account for two-fifths of total 5G patents filed worldwide after standardization. In addition, many of the promoted technologies span both civilian and military applications. China's objectives in 5G extend beyond commercial interests.

Abstract: I develop a trade model that incorporates cross-country differences in cost and risk profiles to analyze how supplier risks influence firm's sourcing decisions. The model considers multi-sourcing as a risk diversification strategy by risk averse firms, with supplier risks modeled as stochastic production costs. It addresses the prevalence of homogeneous goods imported to the U.S. from multiple countries, with significant price variations despite similar quality. Calibrated to U.S. firms' sourcing decisions, the model implies a risk premium of 19% for the average firm. Structurally recovered cost shocks exhibit bilateral covariance that falls with geographical distance and lower variance for higher-income countries. I use the model to assess the role of risk diversification in three exercises. First, the model suggests that diversification explains 30% of the observed variation in import shares across countries for intermediate inputs. Second, I replicate the 2018-2019 U.S. tariff increase on Chinese inputs and show that, compared to the risk-neutral case, China's share of U.S. imports declines 60% more, with risk diversification as an additional motive driving the larger decline. Third, in a counterfactual transition from autarky to the observed trade equilibrium, firms diversify partly through higher-cost countries resulting in higher marginal costs which are not fully offset by lower markups charged for risk-taking.

Extended Abstract: In this paper, we study the effect of Chinese state-sponsored 5G standards on international trade in 5G-enabled products. Specifically, we examine how competition in the standard-setting process between Chinese firms with state-sponsored technologies and non-Chinese firms leads to “winners” who leverage their success to expand exports and gain market share. We document the causal impact of Chinese state-sponsored standards on China’s export levels and shares in 5G products. Additionally, we examine differential impacts based on whether standards span dual-use applications; for instance, while dual-use standards might lead to lower overall Chinese exports, they could potentially boost exports to authoritarian regimes and reduce exports to democracies (e.g., Beraja, Yang, Yuchtman, 2023). Recent trade concerns filed at the World Trade Organization (WTO) point to national security risks associated with imported 5G equipment and services.

Our study focuses on the 3rd Generation Project Partnership (3GPP), the organization responsible for setting 5G standards. Within the 3GPP, firms propose technical specifications, often necessitating the use of their patented technologies, and negotiate their adoption as industry standards. Unlike other countries, the Chinese government coordinates its firms to advance specific domestic technologies in the 3GPP. The foundation of our empirical analysis is a database we build based on: (1) 3GPP technical documents detailing technologies adopted as standards and the contributing firms; (2) 5G policy documents detailing specific technologies promoted by the Chinese government; (3) 5G patents; and (4) trade data in HS products. Our plan is to link 5G technologies including the ones promoted by the Chinese government to HS products using synthetic text descriptions of them, generated by a large language model (LLM). The LLM will leverage a knowledge base built from 5G patents, 3GPP technical documents, and HS descriptions. For each HS product, we measure the level of Chinese government influence. To identify the causal impact of standards adoption, we exploit quasi-random locations of 3GPP meetings to instrument the adoption of technologies as standards, promoted by firms based in different regions.

Kim (2024) finds that China’s intervention in the 3GPP leads to a biased selection of 5G technologies, questioning the ability of an international standard-setting organization (SSO) to produce standards aligned with the multilateral principles of the WTO (e.g., Grossman and Sykes, 2024). Our study extends this line of inquiry.

Abstract: This paper studies how spatial diversification of foreign suppliers and buyers mitigates the impact of extreme weather shocks abroad on domestic firms and their local economies. Using a new Canadian dataset connecting plant-level information on merchandise trade flows by partner region with production data for all plants in private-sector firms, we characterize the spatial distribution of export, import, and production activities and the geography of trade diversification across Canadian firms and regions. By linking this database with data on the paths and severity of hurricanes that pass over the U.S., we investigate how diversification of trade across U.S. states affects the economic resilience of Canadian firms and their local economies following hurricane shocks. We plan to develop a spatial general equilibrium model to quantify the costs and benefits of trade diversification and the scope for place-based policies to increase welfare. 

Abstract: This paper distinguishes between different models of wage setting for thinking about how a persistent increase in import competition affects firm-level wages. Do firm owners take advantage of exit by other firms in the relevant labor market to exercise stronger labor market power, exacerbating wage markdowns as in modern oligopsony models, or do these owners partially absorb lost revenue in the form of lower profit rates and/or wages paid to themselves to smooth wages for workers as one might expect from a model of implicit contracts (for example)? Using linked administrative individual-firm data for Canada during the period 2001-2011, we first confirm that increased exposure to imports from China led to increased exit and lower revenue for more affected Canadian manufacturing firms during this period. We then use accounting identities to decompose lower revenue into changes in net income, payroll, and non-payroll expenses. All components decline in levels, but labor's share of revenue increases, net income's share falls, and the share of non-payroll expenses is constant. We show that this is inconsistent with constant/growing markdowns predicted by basic models of monopsony/oligopsony and more consistent with models that treat labor as a quasi-fixed cost. Turning to the individual level, stayer employee wages do not respond to higher levels of import competition, but owner income at these firms declines dramatically, consistent with owners' absorbing goods market shocks themselves while insulating stayers.