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:  Firms spend substantial resources on marketing to differentiate from competitors and gain market power. Using aggregate and firm-level data, I document that (i) aggregate marketing intensity in the US increased sharply around the mid-1990s, (ii) there is a positive correlation between the firm-level Marketing-Production Cost Ratio (MPCR) and the markup, and (iii) the cross-sectional MPCR-markup elasticity co-moves closely with aggregate marketing intensity. To explain these facts, I develop a model with heterogeneous firms and endogenous markups in which firms engage in marketing to signal their quality. The existence of information frictions generates a positive correlation between MPCR and markup. Technical changes that increase the returns to marketing fuel the signaling competition and generate co-movement between MPCR-markup elasticity and aggregate marketing intensity. I use a calibrated version of the model to quantify the impact of information frictions and marketing on aggregate productivity. I find that quality information revealed by marketing is valuable and access to marketing cannot undo the information frictions completely.