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.

Abstract: This report presents evidence on the scale, destinations, and expenditure patterns of Hong Kong travelers in Mainland China. Official statistics indicate that the number of trips by Hong Kong residents to Mainland China, as well as their expenditures outside Hong Kong, have merely returned to pre-COVID levels. We then use aggregate statistics from AlipayHK for a more detailed investigation of consumption patterns. Our analysis reveals a growing integration of crossborder consumption markets, reflected in the increasing number of trips to Mainland China, a broader range of destinations, and a more balanced distribution of expenditures across Mainland cities. Furthermore, aggregate statistics from AlipayHK users highlight distinct differences in consumption patterns between Mainland China and Hong Kong. Notably, among AlipayHK users who have made transactions in Mainland China, services account for approximately half of total expenditures, whereas retail—which dominates spending in Hong Kong—represents only 26%. Using a simple model, we construct a relative competitiveness index from the perspective of Hong Kong residents. The results indicate that life services in Mainland China hold the greatest competitive advantage over Hong Kong, while Hong Kong remains more competitive in retail and the food and beverage sectors.

Abstract: This paper studies how transportation and payment infrastructure jointly shape cross-border consumption using a novel, large-scale panel of transactions by Hong Kong residents in mainland China from the Alipay platform. Exploiting the staggered opening of high-speed rail (HSR) connections between Hong Kong and mainland cities, together with cross-city variation in mobile payment usage, we show that HSR access increases the number of visits and transactions while reducing average spending per transaction, with these effects driven by cities with more developed mobile payment systems. The increase in transactions is more pronounced among consumers with lower expenditure levels and less frequent purchases in Hong Kong, as well as among mainland merchants such as retailers, non-chain stores, and QR-code–reliant firms. Together, these findings reveal a strong complementarity between transportation and mobile payment infrastructure: improved connectivity facilitates travel, while interoperable digital payment systems lower transaction frictions and convert visits into more frequent, smaller-value purchases—yielding broadly inclusive gains from infrastructure expansion.