- International Trade and Economics, Spatial/Urban Economics, Development Economics, Chinese Economy.
- "Trade Costs beyond Iceberg and Quality Choices: Evidence and Implications", (November 2018), Job Market Paper.
-Top PhD Submission Award, 2018 FREIT Rocky Mountain Empirical Trade Conference
-Presented at: 2018 MEA Annual Meeting, 2018 FREIT RMET Conference, 2018 WEAI Annual Meeting, 2018 ETSG Annual Meeting
Abstract: Trade theories usually think of trade costs as iceberg costs, as if goods partially disappear during trade. In reality, a sizable part of trade costs is not iceberg but specific, meaning that they are additive and per-unit. However, these specific costs are difficult to measure and quantify. In this paper, I argue that the specific costs can be inferred from the observed quality variations of trade since higher specific costs make it relatively cheaper to ship higher-quality goods. I develop a model in which a firm chooses product quality as a lever to balance production costs and specific trade costs for each market. The model features a within-firm "Alchian-Allen" effect causing a firm to raise quality and price as specific costs increase, and a selection effect allowing firms with high quality and price to export when the export hurdle is high. Conditional on the selection effect, higher average prices imply higher specific costs. Specific trade costs and other trade costs can thus be inferred using micro-level trade data. I infer massive declines in specific trade costs of Chinese textile and clothing exports due to the Multi Fibre Arrangement quota removal. The analysis indicates inefficient quota allocation across Chinese firms, especially for the non-state sector.
- "Market Interdependence through Shared Suppliers: Theory and Evidence from Chinese Textile and Clothing Exporters" with Daisy Chen Sun, (October 2018), Working Paper.
-Best Graduate Student Paper, 2018 FREIT Empirical Investigation in International Trade Conference
-Presented at: 2018 FREIT EIIT Conference
Abstract: If trade liberalization negatively affects trade flows to non-participating countries through shared suppliers, its gains can be lower than expected. In this paper, we explore the impact of an exogenous trade policy event, the quota elimination of textiles and clothing when the Multi Fibre Arrangement expired, on China’s exports to countries that never imposed import quotas. We document strong evidence in favor of market interdependence: The quota removal leads to a significant decrease in the exports of the previously-capped products to the policy-free destinations. The suppliers with dampened sales are found to be new entrants to the previously capped markets. We interpret these findings in a multi-country firm heterogeneity trade model with increasing-marginal-cost production in the short run possibly arising from fixed production inputs. The model also features endogenous sales strategies that match the empirical findings at the extensive margin. The studied circumstance highlights that gains of trade liberalization in some countries may be at the expense of the others and that the welfare changes given by canonical “sufficient statistic” may be biased.
- "Judicial Quality, Incomplete Contract, and Quality of Trade" with Xiaomin Cui and Miaojie Yu, (March 2018), Working Paper.
Abstract: We study how a country’s judicial quality affects its quality of exports and imports. Our theoretical analysis predicts that better judicial quality yields an ambiguous effect on the relative average export quality of contract-intensive industries due to two opposite forces: quality upgrading of incumbent exporters and increased entry of low-quality exporters. In contrast, better judicial quality encourages entry and competition in the domestic market, raising the relative average import quality of contract-intensive industries due to selection. Using bilateral trade data, we empirically confirm these predictions. Our results are robust to potential confounding factors and endogeneity.
- "China Quality Shock: Indonesian Firm Productivity under Global Quality Competition from China" with Lili Yan Ing and Miaojie Yu, (February 2018), Working Paper.
Abstract: We study how Indonesian firms’ productivity react to changes in qualities of their Chinese competitors. We highlight firm’s quality choice as the outcome of the trade-off between production cost and per-unit trade cost interacted with consumer’s taste for quality, and develop a procedure to measure firm-destination-product-year-level export quality. We use disaggregated data from Indonesia and China to measure Indonesian firms’ exposures to quality competition from China in the global market. We find that increasing quality competition leads to increased productivity of Indonesian firms, and this effect mainly exists in less concentrated industries, multi-product firms, and continuing firms.
- "Road Infrastructure, Market Integration, and Productivity: Evidence from China's Manufacturing Sector" with Ruochen Dai and Xun Zhang, (December 2017), Working Paper.
Abstract: This article explores how improvement of road infrastructure affects firm-level productivity in China’s manufacturing firms. We propose a stylized model to illustrate that better road infrastructure facilitates market integration by lowering transportation costs. When there is increasing marginal cost of innovating in improving productivity, the optimal innovation investment and thus productivity increases with the market access of a firm, suggesting that better road infrastructure could affect firm-level productivity through market expansion and pro-competitive effects. The empirical evidence confirms the existence of the two effects when we address endogeneity issues and use China’s firm-level information and cross-sectional variation in road information. This article sheds light on the channels underlying infrastructure’s spillover effect and thus contributes to the literature by providing mechanisms for the endogenous growth theory.
Journal Articles in English:
- Tian, W., Yu, M., & Zhang, R. (2017). International Trade and Firm Innovation: Patterns and Evidence from the Chinese Employer-Employee Survey Data. China Economic Journal, 10(1), 4-17.
- Zhang, R., & Zhang, X. (2016). Capital Structure Premium in Multinational SOEs: Evidence from China. Review of Development Economics, 20(1), 283-293.
Journal Articles in Chinese:
- Ing, L. Y., Yu, M., & Zhang, R. (2018). The Evolution of Export Quality: China and Indonesia. In World Trade Evolution: Growth, Productivity, and Employment (pp. 261-302). Routledge.