Research

Abstract:  E-commerce sales have grown rapidly worldwide, massively increasing the availability of new products. We examine data from the largest digital platform in China and find that the number of book titles almost doubled, prices fell somewhat, and most new books are sold to consumers with unusual tastes. Demand for these niche products was significantly more inelastic than that of mass products. Embedding the estimates of demand elasticity into a two-segment CES framework, we find the welfare gain from increased variety was about 40 times the gain from lower prices and that rural consumers enjoyed the largest gains. 

Abstract: Using firm-level data from the manufacturing sector in China, I document that zombie firms are larger, less productive, and receive a higher subsidy rate on average. The difference in average subsidy rate between zombies and non-zombies reflects both the selection criterion of zombies and the underlying joint distribution of subsidy rate and productivity. I develop a model with heterogeneous firms to quantify the impact of zombies on aggregate productivity. Quantitative exercises show that while both policies—reducing subsidy dispersion and facilitating zombie exits—effectively reduce the zombie rate, the former yields greater productivity gains.

Abstract:  Since the mid-1990s, the United States has experienced a joint rise in aggregate marketing intensity and in the correlation between firms’ marketing-to-production cost ratios (MPCR) and markups. I develop a dynamic general equilibrium model with heterogeneous firms and endogenous markups in which marketing serves as a signal of unobserved product quality. The model shows that more scalable marketing technologies—such as those enabled by the Internet—intensify signaling competition, raising both the MPCR–markup correlation and aggregate marketing intensity. Calibrated to U.S. data, a 40% increase in the scalability of marketing technology accounts for these patterns but generates welfare losses of about 1.7% of steady-state consumption. Comparing the market equilibrium with the constrained-efficient allocation, I show that information frictions and variable markups jointly depress entry and productivity. Targeted policies—such as size-dependent subsidies and entry support—can mitigate these distortions and deliver substantial welfare gains.